Budget 2000: Winning the war against child poverty?
Press reports had suggested that the Chancellor would be stepping up the 'war on child poverty' in April's Budget ('Budget to focus on child poverty' – The Guardian 17 February). Expectations were therefore high, but did the Chancellor deliver?

In the event, the press headlines focused on the boost in spending for health and education. Although the Chancellor re-stated the commitment to end child poverty in his Budget speech, he did not mention it as a key aim in his televised address later that evening. Commentators would be forgiven for thinking that the priorities had shifted.

Budgets are of course carefully staged political events, designed to make good newspaper headlines. Journalists rush to meet copy deadlines, which is why the detail (unless deliberating 'spun' by the Treasury) can be overlooked. The small print is found in the full Budget Report (still referred to as the 'red book', although under New Labour it has acquired a glossy white cover).

The Treasury claims that the measures in the Budget will lift another 400,000 children out of poverty by the end of this Parliament (a total of 1.2 million children, up from the previous estimate of 800,000). But how will this be achieved?

The 'red book' reveals that the measures announced in the Budget will mean up to an additional £670 million a year in financial support for children this year, rising to nearly £1.5 billion a year in 2001/02. By the end of this Parliament, Treasury figures show that financial support for families with children will amount to an additional £7 billion a year.

The children's tax credit (which replaces the married couple's and additional personal allowance from April 2001) will also be increased in real terms by 50p a week. The most significant measure is an increase in means-tested benefits for children by £4.35 a week for each child from October 2000 (from June 2000 for working families' and disabled person's tax credits). The social fund maternity grant (renamed the Sure Start maternity grant) will be increased by £100 from the autumn to £300.

Many commentators were confused about other changes relating to maternity and the birth of a child, not least because of press reports that the Chancellor would announce a new 'baby premium' for parents receiving benefit. No new premium was announced, but from May 2001 parents receiving working families' and disabled person's tax credits will be able to make a new claim as soon as a child is born. Because under current rules tax credits are assessed at six-monthly intervals, there can be a delay of up to six months before an additional credit for the child can be paid. The change in rules also means that tax credits can be adjusted sooner to take account of any loss of earnings due to the birth of the baby.

A number of measures were announced to help the transition to paid employment. From Spring 2001 a job grant of £100 will be paid to people who move into work of 16 hours or more a week when they have been claiming jobseeker's allowance, income support, severe disablement allowance or incapacity benefit for at least 52 weeks. From Spring 2001 mortgage interest payments covered by income support will continue for four weeks after starting paid employment. The linking rules for mortgage interest payments will also be changed so that a person will re-qualify if they return to benefit within a year of starting a job.

Although the changes in housing cost rules are welcome, they fall far short of the help which the Chancellor appeared to signal in his 1999 Budget speech: '…over time I want this better deal for work to include help with housing costs, not just help with rent but also help for homeowners going back to work. Taking a job should not put them in danger of losing their homes.' This statement was followed by the announcement that mortgage tax relief would be ended. The Chancellor did, however, refer to housing costs in his speech to CPAG's conference on 15 May, indicating that further changes in support for housing costs may be under consideration.

CPAG was disappointed that the Chancellor did not announce a significant increase in child benefit. It is unclear whether the planned increase in child benefit of 50p for the eldest child and 35p for other children from April 2001 is an increase in real terms or merely the result of indexation in line with inflation.

Integrated child credit
A Treasury report [footnote 1] published on Budget day gave more information about the plans for an integrated child credit and an employment tax credit which will be payable to people in low-paid work without children. The intention is to bring together the different strands of support for children in tax credits, income support and the children's tax credit (no reference was made to means-tested jobseekers' allowance, but presumably it will be included). The integrated child credit will not be introduced until 2003, but the report gave some pointers as to the way the payment may be assessed and, in particular, administered. If there were any doubt, it is now clear that the proposals could amount to a far-reaching and radical change in the benefits system.

The Inland Revenue will have responsibility for assessment and administration. In light of the intention that the credit 'will build on the foundation of universal child benefit', this obviously raises a question as to how child benefit will be administered – perhaps responsibility will be transferred to the Inland Revenue.

One of the aims of the new payment is to simplify administration. The report suggests that there is a case for an annual award. This is significant, given the fact that working families' and disabled person's tax credits are awarded for six months and income support is currently paid as a weekly benefit. It is recognised that a longer award would require greater 'responsiveness' to ensure that payments can be adjusted to changes in income or family circumstances. Further, the report also states that there is 'an opportunity for a thorough review of the treatment of income and capital'. No decision has yet been taken on the level of the integrated payment.

The additional measures in the Budget, whilst welcome, further extend means-tested support for families with children. If, as the Treasury predicts, 1.2 million children are lifted out of poverty by 2002, the Government would be on target to achieve the goal of ending child poverty by 2019 if the rate of progress were maintained. However, this is a very big 'if'. As David Piachaud and Holly Sutherland have emphasised (see article on page 00), those raised out of poverty tend to be those closest to the poverty line: 'If the Prime Minister's declared aim of abolishing child poverty in a generation is to be achieved then it will not be enough to roll forward the policy initiatives taken so far, it will be necessary to maintain, indeed accelerate, the momentum of policy change and achieve further transfers of resources to families with children.' [footnote 2]

Footnotes
1. 'Tackling Poverty and Making Work Pay – Tax Credits for the 21st Century', The Modernisation of Britain's Tax and Benefit System No.6, March 2000 [back to text]
2. How Effective is the British Government's Attempt to Reduce Child Poverty? David Piachaud and Holly Sutherland, CASEpaper 38, p38 [back to text]

Poverty 106, Summer 2000