The facts about child poverty are stark enough

Tax credits are successful. But they are also expensive, now costing nearly as much as defence

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The Independent Online

We were all taken by surprise by the child poverty figures published last week. The Independent on Sunday carried a fine report two weeks ago that food charities were “braced” for a “summer of hunger”. We wrote: “Official figures are expected to show that child poverty is increasing for the first time since Tony Blair’s 1999 commitment to end it in a generation.” Even the Daily Mail wrote on Thursday: “Today official figures are expected to show thousands more youngsters falling into ‘poverty’.”

But they didn’t. The Households Below Average Income figures for 2013-14 showed no change in the numbers of children in poverty.

What is going on? The first thing to note is what is not happening. As has been pointed out in this column before, incomes have become (slightly) more equal since David Cameron has been Prime Minister. This is so counter-intuitive that many people will not accept figures that show it. People usually assume that inequality has increased and is increasing, or even “spiralling”. Assertions are sometimes made by distinguished people who should know better. Joseph Stiglitz, the Nobel laureate, told Andrew Marr last month: “Inequality has gotten much worse in the United Kingdom.” It hasn’t.

This is important because inequality and relative poverty are different ways of describing the same thing. The poverty line in this country has long been defined as 60 per cent of median income. Median income is currently around £20,000 a year for the average household, after housing costs. That means half of households have more than that and half have less (after adjusting for the numbers of adults and children in each). Which means poverty is defined as less than £12,000 a year, or £230 a week.

That was the definition adopted by Tony Blair when he made his promise to abolish child poverty by 2020, which then seemed the distant future but is now just the Olympics after next (Tokyo, if you are in a pub quiz soon). It was never a sensible way to define poverty, but there wasn’t, and probably isn’t, a better one.

One of the problems with trying to meet Blair’s target is that it encouraged Gordon Brown to expand tax credits as a way of transferring money to the working poor. Blair claimed after the event that he didn’t know what Brown was up to and wouldn’t have agreed with it if he had, but Brown was merely trying to make progress towards the target his Prime Minister had set. (And that target was set in haste: Blair decided to include it in his 1999 speech 40 minutes before he delivered it.)

Tax credits were successful. Largely because of them, about a million children are not in poverty who would otherwise be. But they are also expensive. Spending on them is now £30bn a year, which is nearly as much as on defence. No wonder they are likely to be cut in next month’s Budget, which is why Cameron gave a strange speech last week to prepare the ground for it. It was strange because the Prime Minister drove through Labour’s plate-glass windows in an excavator and stole large blocks of Ed Miliband’s language about how tax credits “subsidised” low-wage employers, how the Government wants less spending on tax credits and how it wants more employers to pay the living wage.

Which sounds lovely, but I criticised Miliband for wanting wages to rise by magic and the same criticism applies to Cameron, who is engaged less in wishful thinking than in a cynical attempt to cut public spending at the expense of people on low wages.

In other words, Cameron and George Osborne are finally threatening to do what everyone thinks they have already done. This is the problem about last week’s surprise non-rise in child poverty. So many of Cameron’s critics have spent so long accusing him of grinding the faces of the poor that, if and when it actually happens, they risk not being believed.

Which would be a bad thing, because poverty and inequality are serious problems. The numbers may not have increased last year, mainly because Brown’s reforms have been so successful and because the jobs miracle continues to take everyone (including Cameron and Osborne) by surprise.

But 3.7 million children are still in poverty on the official definition, which is a lot: that is 28 per cent of children in Britain. And certainly some people on low incomes are worse off than they were. Food bank use has not risen just because there are more of them. Delays in benefits payments do seem to be worse than they were, even if official figures don’t show it. And they do show that the poorest fifth of the population lost 2 per cent of their incomes from tax and benefit changes since 2010 – although the richest fifth lost 3 per cent.

Poverty is a serious problem that is likely to get worse, but we should wait for the evidence before we cry wolf.

Twitter.com/@JohnRentoul

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