200,000 Children To Be Plunged Into Poverty Due To Lower Than Inflation Benefits Uprating

Chris Skidmore MP asked the Secretary of State for Work and Pensions what estimate has been made of the effect of Universal Credit and the Welfare Benefits Uprating Bill on child poverty.

Minister for Disabled People Esther McVey replied:

Minister For Disabled“The Government strongly believes looking at relative income in isolation is not a helpful measure to track progress towards our target of eradicating child poverty.

In times of economic growth, the relative poverty line tends to rise. While the economy grew from 2003-04 to 2008-09, the Government spent over £300 billion in working-age welfare and tax credits, yet the proportion of the population in relative income poverty remained broadly flat and the previous government’s target to halve the number of children in relative poverty by 2010-11 was not met.

In times of recession the relative poverty line tends to fall. In 2010-11, 300,000 children moved out of relative poverty largely due to reductions in median incomes. Absolute poverty remained unchanged. It cannot be right that we can move children out of poverty through a recession.

The Government is currently consulting on better measures of child poverty that will better reflect the reality of child poverty in the UK today.

In the autumn statement (2012), it was announced that in light of the national economic situation, certain working-age social security benefits and payments, certain elements of tax credits, and child benefit, would be uprated by 1% rather than by prices (as measured by the consumer prices index (‘CPI’)) for the tax years 2013-14, 2014-15 and 2015-16.

While it is not possible to accurately project the trajectory of household earnings, it is likely that in-work families with children will benefit from the steady earnings growth forecast by the Office for Budget Responsibility. Indeed for some families this increase in earnings may be enough that their income rises in real terms (i.e. after inflation is taken into account) even after the smaller increase in benefits.

Where subject to an uprating, rates of benefits and tax credits will rise in cash terms. For instance, an out-of-work lone parent with two children receiving income support, child tax credit and child benefit would see a cash increase of around £4 a week over the two years covered by the Welfare Benefits Up-rating Bill. However, because the relative poverty income line moves each year in cash terms, too, some families will move below this line over the period.

We estimate that the uprating measures in 2013-14, 2014-15 and 2015-16 will result in around an extra 200,000 children being deemed by this measure to be in relative income poverty compared to uprating benefits by CPI.”

[Source Hansard 15 Jan 2013 : Column 715W]

Disability Rights UK