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Welfare Reform - the impact on child poverty

Jon ShawNovember 2012

Overview

Headline figure:

UK child poverty is predicted to rise by 800,000 by 2020/21

Key questions:

• Why will this happen?

• What can we do to prevent it?

• What would it mean for children’s lives?

Some numbers

• 19% of children in Edinburgh are living in poverty(ECP, 2011 figures)

• £18 billion of welfare cuts set out by UK government by 2014/15 (2010 Emergency budget/CSR)

• A further £10 billion of cuts yet to be decided on (Budget 2012)

• In 2013/14, everyone in the bottom half of the income distribution will lose a higher percentage of their net income than 4 out of 5 in the top half (Budget 2012)

General

• Uprating of benefits switched from RPI to CPI

Children and families

• Health in Pregnancy grant abolished

• No more Child Trust Fund contributions

• Sure Start Maternity Grant limited to first child

• Baby element removed from child tax credit

A child born into a low income family in April 2011 was £1,500 worse off than their elder sibling born in 2010

• Second income threshold for child tax credit removed

• Child benefit frozen for three years

Welfare reforms already in place [1]

Housing

• Max. housing benefit in private sector cut− 4 bedrooms maximum size and national cap− Limited to 30th percentile of local rents− Most single people under 35 (was under 25) only eligible

for the rate for a room in shared accommodation

Disabled people

• Incapacity benefit claimants being reassessed under new tougher test for ESA

• Contributory ESA time-limited to a year for most claimants

Welfare reforms already in place [2]

Working Families

• More lone parents moved onto JSA

• Childcare costs covered by Working Tax Credit (WTC) cut

• WTC stopped for most couples with children working between 16 and 24 hours

• Backdating of tax credits cut from 3 months to 1 month

• First £2,500 of a fall in annual household income ignored for tax credits

Welfare reforms already in place [3]

• Child benefit clawed back from high rate taxpayers• Personal Independence Payment to replace

working age Disability Living Allowance (DLA)• Housing Benefit for working age tenants in social

housing cut if there is a spare bedroom• Local Housing Allowance uprated by CPI – link with

local rents broken• Community care grants and crisis loans abolished

and replaced with Scottish scheme• Benefit cap from April 2013• Council Tax Benefit replaced with new scheme

Welfare reforms coming in 2013

• Poor work incentives− Benefits mean going

back to work doesn’t pay

• Complex system− For claimants− To administer

Universal credit – the justification

• Introduced from October 2013

• A single means-tested benefit for working age people

• Paid in work or out of work

• Withdrawn at a constant rate as earnings rise

• Support for adults and children, rent and mortgages

• Claimed and managed online - ‘Digital by default’

• 8 million households transferred by 2017

Universal credit – the plans

• No more ‘hours rules’ for benefits

• Monthly assessment period and single household payment (including help with rent)

• Link to HMRC records of employee earnings

• ‘Claimant commitment’ sets out the conditionality and sanctions regime

• Capital limits apply to working families

• Extra financial support for disabled adults and children is very different

Universal credit – the key changes

Universal Credit – the solution?

• The cuts described earlier will have happened before it is introduced

• Increased conditionality and sanctions could undermine poverty reduction potential

• Interaction with devolved support (especially council tax benefit replacement and passported benefits) threatens work incentives

• Further cuts to childcare support

• Subject to the household ‘benefit cap’

• ‘Digital exclusion’

What can be done?

• Preventative spend and early intervention

• Affordable childcare; ‘passported’ services; Scottish living wage

• Advice and support to ensure that families claim what they are entitled to:− Council tax benefit 70% take-up− DWP estimates that it underpaid £1.2bn in 2010/11− HMRC estimate take up rates of 81% (CTC) and 61%

(WTC)− Cuts to one entitlement may be partially offset by

increase in another

CPAG resources

• www.cpag.org.uk

• Full welfare rights trainingprogramme

• Universal credit guide

• Factsheets

• Scottish handbooks:− Benefits for students− Children living away from home

CPAG advice line

• Poverty damages health – poverty kills− health compromised from birth – average birth weight 200g lower− More likely to suffer chronic illness as toddlers− Almost 3 times more likely to suffer mental disorders (age 5-15)

• Poverty undermines learning − 8 months behind by age 5− gap widens as children go through school

• Poverty undermines life chances− More likely to be unemployed as adults− More likely to be the parents facing poverty in the future

• Poverty damages childhoods

• “Relative” poverty has an absolute impact on children

• Child poverty costs us all – est. £1.5bn a year cost to Scotland

Impact of child poverty (in numbers)

Ann, 48‘I'll make sure that my son eats before I do. In the last fortnight before pay day I would say I skip meals maybe twice a week, just to make sure that he has enough’ Oxfam/IpsosMORI, Oct 2011

Mother, 30s‘The kids have had to give up so much because there’s not

been the money there. Couldn’t afford the brownies and Cubs and swimming because of the petrol money... I dinnae have the fuel, I dinnae have the money.’Poverty Alliance, EPIC project, 2011

Courtney,9

‘When I pick up my baby sister, she smells of mould.’‘What I hate…is you feel that you want to be sick when you

have visitors. I don't like having pals in my house, in case they bully me.’Poor Kids, www.truevisiontv.com, 2011

Impact of child poverty (in words)

Impact on local services

• Increased homelessness, demand for social housing and tenancy transfers

• Claimants not online need help to deal with UC, other groups need budgeting support

• Replacement social fund and council tax benefit will be delivered locally from April 2013; and increased role for discretionary housing payments

• Increased need for welfare rights advice• Impact of benefits sanctions on social work duty to

children, demand for food banks• Benefit cuts mean less money in the local

economy – knock on economic impacts

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