By Alex Clegg, Economist at the Resolution Foundation
The Government will publish its Child Poverty Strategy later this year and has promised to bring about “an enduring reduction in child poverty” in this Parliament, while setting out a 10-year plan for lasting change.
This ambition is welcome. Recent official figures show 4.5 million children (31 per cent) were living in relative poverty after housing costs in 2023-24 – considerably higher than the 16 per cent of pensioners and 19 per cent of working-age adults. And the UK fares poorly in international comparisons: in 2018, the UK’s child poverty rate, after housing and utility costs, was higher than in any EU or EFTA nation bar Greece.
But the most pressing reason a Child Poverty Strategy is so needed is that in the absence of Government action, we project child poverty will rise significantly over the Parliament to 34 per cent in 2029-30 (4.8 million children), the highest rate since 1998-99 and the highest number of children on record. This is partly because the outlook includes £3 billion of scheduled welfare cuts through the ongoing roll out of the two-child limit and family element abolition, and real-terms cuts each year in the value of Local Housing Allowance and the benefit cap. So, considerable action is needed just to keep child poverty flat, let alone to achieve “an enduring reduction”.
There is, of course, plenty the Government can do to beat these forecasts. First, it is right that the Government should try to get more parents into work or working more, but it is important to consider the limitations here. The make-up of families in poverty has shifted: seven-in-ten families with children in poverty now have at least one adult in paid work, up from five-in-ten in 2000-01. And close to nine-in-ten of the remaining workless families with children in poverty face barriers to entering employment.
Second, action on housing costs could play a part in the Government’s plans: 1.1 million children in the UK today live in a household with an income that would not fall below the poverty line if housing costs were not taken into account. We estimate that a more optimistic scenario for parental employment and slower rent growth could cut the projected number of children in poverty by 130,000 by 2029-30. Important progress, but still not sufficient to prevent child poverty from rising over the Parliament.
So, if the Government wants to preside over meaningful reductions in child poverty it needs to increase income support for poorer parents. The biggest impact would come from abolishing the two-child limit and the benefit cap; this would lead to 500,000 fewer children in poverty by 2029-30. This would cost £4.5 billion in 2029-30 but is the most cost-effective option the Government could choose. Additionally, extending the coverage of Free School Meals to all families on Universal Credit would take an additional 100,000 children out of poverty at a cost of £1 billion. And an ambitious strategy could go further still: restoring the coverage and value of the family element in Universal Credit and repegging the Local Housing Allowance to local rents would cost a further £3 billion but would reduce child poverty by a further 140,000.
All these steps together would drive down the relative child poverty rate to 27 per cent in 2029-30 – its lowest since the 1980s. Instead of a projected rise of 130,000 children in poverty by the end of the Parliament, poverty numbers could fall by 740,000: a total difference of 870,000. The level of investment required is substantial, but this partly reflects a current baseline that is unsustainable; many of the measures outlined above would simply reverse cuts made over the last decade. Without a significant increase in spending to boost the incomes of poor parents the Child Poverty Strategy is likely to fail on its own ambitions.
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This article is featured in our 21 May newsletter.
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