Child poverty targets could be met 'in months'... and without extra taxes

New report proposes diverting family credits to the very neediest. By Jane Merrick and Emily Dugan

The number of children living in poverty could be dramatically reduced in months under a blueprint published by a leading charity today.

The report, from Barnardo's and the accountants Deloitte, says the Prime Minister's cherished target of halving child poverty by 2010 can be met without any extra cost to the taxpayer. It is published on the eve of the Labour Party conference in Manchester, the city with the highest proportion of disadvantaged youngsters in the country.

Under current spending plans and with the UK facing the prospect of a recession, 2.2 million children will live below the poverty line in two years – 550,000 more than the Government's target. The report says £1.35bn a year could be raised by reducing the upper limit at which families are eligible for tax credits, from £50,000 to £40,000. The £2.7bn used to compensate families for the abolition of the 10p tax rate earlier this year could be diverted to helping the poorest households.

Barnardo's and Deloitte argue that those who gained most from the £2.7bn handout were middle-income families earning £35,000, who received an average of £3.31 a week. Those who gained the least were families earning less than £16,000, who received an average of 44p extra a week.

Barnardo's chief executive, Martin Narey, said: "When the Government invested £2.7bn to compensate losers of the 10p tax rate abolition, the benefit to families in poverty was, essentially, zero. Barnardo's recognises that it would be glib to demand additional money be spent to meet the target at a time of economic difficulty. This is why we are encouraging Gordon Brown to be prudent and redirect existing resources to achieve his goal.

"Spending decisions aren't easy, but surely, when it comes to children living in poverty in our country, there is no choice."

In the UK, 2.9 million children are currently living in poverty, defined as household income below 60 per cent of the median, before housing costs. The number actually increased by 100,000 in 2006 and 2007. A Treasury spokesman welcomed the report: "The Government is committed to eradicating child poverty. Our investment since 1997 has lifted 600,000 children out of relative poverty, and measures announced in the last two Budgets will lift a further 500,000 out of poverty as these changes take effect. In addition we are working across government to pilot new approaches to eradicating child poverty in the most disadvantaged communities."

Nevertheless, the report will add to pressure on ministers to take action. Delegates heading to the party's conference in Manchester next week will be surrounded by reminders of the Government's failure to make sufficient headway on child poverty. The Manchester Central constituency has the highest rate of child poverty in the country, with 53 per cent of children in households dependent on benefits. While the Government touts the city as a success story – pointing to its flashy new buildings and the millions pumped into regenerating the centre – many who live there are sceptical about the impact on poverty. A boy born in Manchester will still die on average seven years earlier than a boy born in north London because of poverty-related health differences.

Neill Cooper, co-ordinator for Church Action on Poverty, Manchester, said the vast sums spent on regeneration had yet to trickle down to the communities that most needs it. "You can see where the money has come in to transform buildings, but the problems of poverty are still endemic. I'm disappointed; it's not what you would hope from a Labour government".

Travelling east out of the city centre through Ancoats, Clayton and Abbey Hey, it is evident where pockets of money have been spent on fancy apartments, sports centres and shops. These are the marks of New Labour investment. But for most people, struggling to make ends meet among a backdrop of abandoned industry and boarded up terraces, this has had little impact.

Amy Pennington's childhood ended at 16. Growing up in Abbey Hey she was a talented gymnast, did well in exams and wanted to become a PE teacher. But the day after her last GCSE she was forced to abandon her dreams and take a job in a call centre to support her family. Because she is under 18, the call centre where she works is able to pay her less than others doing the same job, so she works long hours to raise just £11,000.

"For me there was no opportunity because I had to go straight to work to help mum pay the mortgage," explained Amy. Her father died of a stroke last year, and when her mother became ill with cancer there wasn't enough money coming in to support her four brothers and sisters. "The Government aren't doing enough to help families. We get some benefits, but they just said 'you have to cope' when we said we were struggling."

Nearby in Ancoats, a gleaming Sure Start children's centre makes it hard to believe that this is the same district that inspired Engels to write on the privation of the working class. But have all these expensive facilities made a noticeable difference to families? Melanie McGuiness, regional manager for Family Action Manchester, who is responsible for running three of the city's Sure Start schemes, isn't convinced.

Sitting in the new but empty crèche that lacks the funds to become a full-time daycare centre, she said that using Sure Start to pressurise families into taking low-wage work without providing affordable childcare was not making their lives any better. "The cost of childcare is astronomical," she said. "More people may be in jobs, but they are at the same level of poverty. I'm not sure many authorities could say, hand on heart, that they've brought kids out of poverty."

Tony Lloyd, MP for Manchester Central, insisted that the city has "changed beyond recognition in the last 10 years", but he admited that deprivation among children is still a big concern. "We've done a lot but we've not done enough, because otherwise there wouldn't be child poverty," he said.

The challenge for many children in Manchester is not financial poverty but a poverty of hope. Ricardo Williams, 14, lives in Moss Side and goes to school at one of Manchester's flagship city academies. He said teachers assume that if your postcode is M16 you are already doomed to failure. "They always refer to you as 'Moss Side this' and 'Moss Side that', and they don't give you a chance from the beginning," he said. "They say your cousin or your brother was naughty, and you'll be a failure just like them. They put you down before you've tried."

But there are people fighting to make things better. At Moss Side's Amani youth centre, staff work at building the confidence of young people who the system assumed would fail. Under their encouragement, Sasha Boyden, 19, is going to university next week, against the odds. Without support from her parents, who were out of work and often out of the picture, she was expelled from two schools for her behaviour. Many of her friends turned to drugs and gangs, but with support from the youth club she was determined to succeed.

"People said 'what's the point?', but I looked at how my mum and dad live and thought: 'I don't want that'."

'It's like being stuck on a desert island'

Single mother Nicola Hamilton is scared that her eight-year-old daughter, Leah, will – like her – become trapped in the confining poverty of Wythenshawe, in south Manchester. The area's rundown streets provide the location for the television series 'Shameless'. But this is not a fictional drama, and for many children their chances of escape seem slight.

"It's like being stuck on a desert island with just a few pennies, because there's so little here for her to do," explains Nicola, whose weekly budget is so tight that she cannot afford the bus fare to take Leah to the free activities on offer elsewhere in the city.

"I do worry what will happen when Leah leaves school," Nicola says. "I've seen other kids end up on benefits and stay in the area; it's a vicious circle. I try and tell her if she does well at school she can have more than this and get on in the world, but I'm scared I'm filling her with false hope."