Child Poverty

Work and Pensions written question – answered on 30th January 2004.

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Photo of Mr Andy King Mr Andy King Labour, Rugby and Kenilworth

To ask the Secretary of State for Work and Pensions if he will estimate (a) how many and (b) what percentage of children will be living in poverty in (i) 2004–05, (ii) 2010 and (iii) 2020, (A) before and (B) after housing costs, broken down by nation and region of the UK.

Photo of Mr Chris Pond Mr Chris Pond Parliamentary Under-Secretary, Department for Work and Pensions

Pre-Budget report 2003 announced that the child element of the Child Tax Credit would increase by £180 to £1,625 a year, equivalent to a weekly increase of £3.50. This increase will benefit 7.2 million children in 3.7 million families. As a result of this investment the Government are on track to meet or exceed its PSA target to reduce by a quarter the number of children in low income-households by 2004–05 on a Before Housing Costs (BHC) basis. The target is more challenging on an After Housing Costs (AHC) basis, although the nature of the target means there are uncertainties either way.

Forecasting how many children will be in relative low income in future years is problematic. Any estimate is dependent on forecasting median household income growth from 2001–02 (the latest available data). This itself is dependent on a number of factors, including the rate of earnings growth, demographic changes, changes in household composition and employment patterns, and changes to the tax and benefit system. Consequently, there is inherent uncertainty in any estimates produced, which is exacerbated the further into the future one attempts to model. For this reason, while our estimates allow us to provide a broad indication of progress towards the 2004–05 PSA target to inform policy decisions, point estimates are not sufficiently robust to be put in the public domain.

Independent analysis by the Institute for Fiscal Studies suggests that the increase in Child Tax Credit will enable the Government to make substantial progress on both elements of the PSA. This extra investment will also enable the Government to make progress step by step towards their goal to halve child poverty by 2010 and eradicate it by 2020.

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