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IPPR - Boost child benefit by extra £20 and ditch benefit limits to lift 900,000 children from poverty, ministers urged

  • Joint call for ‘winter lifeline’ by TUC, Child Poverty Action Group and IPPR reflects alarm at scale of looming crisis 

  • Even if benefits are uprated by inflation, families will face hardship challenges comparable to the pandemic, report warns 

  • Ending cap on universal credit and legacy benefits and scrapping the two-child limit would mean children in larger families are no longer penalised 

The government is being urged to lift children across the UK from poverty this winter by making three key changes to the social security system. 

IPPR, the Trades Union Congress and Child Poverty Action Group are together calling on the government to increase child benefit by £20 per week per child, remove the two-child limit on universal credit and legacy benefits, and end the total family benefit cap. 

The three organisations say the increase is needed in addition to uprating benefits in line with inflation, to begin reversing the family poverty crisis that has afflicted children across the UK. 

Taken together the three measures would lift 900,000 children from poverty and a further 300,000 adults, meaning 1.2 million fewer in poverty than at present, according to a joint report published today. 

Raising child benefit would have the added advantage of helping millions of middle-income families who are increasingly squeezed, the report adds. 

After a decade of austerity, the number of children growing up in poverty has soared and hardship this winter will be compounded by high inflation, especially in food and energy prices. Due to the benefit cap, even if benefits were uprated by inflation an estimated 130,000 households would not receive a penny more. 

The report points out that families with children will face proportionately higher costs for food and heating over coming months – with financial pressures comparable to those during the pandemic, but without the £20 a week uplift in universal credit introduced at that time, which was later withdrawn by the government. 

IPPR argues that there is significantly more ‘fiscal space’ than the government has so far allowed, without fuelling inflation, and that additional taxes could further enlarge this, making it possible to broaden the household support package without cutting public services and driving growth even lower (see Note 3 on fiscal space below). 

The joint IPPR report with the TUC and CPAG argues that the two-child limit on universal credit is now the single greatest driver of child poverty, and says that abolishing this and the benefit cap would be highly progressive and targeted on those with the lowest household incomes. 

Combining this with an increase in child benefit, which is paid universally but clawed back from the highest earners, would provide a lifeline to more families with children - including many on middle incomes who will also face hardship this winter, the report says. Researchers found that: 

  • Increasing child benefit by £20 per week per child would reduce child poverty by 500,000, lifting a total of 700,000 people overall from poverty, at a cost of £9.9 billion 

  • Removing the two-child limit on universal credit and legacy benefits and ending the benefit cap would reduce child poverty by 300,000, lifting a total of 500,000 people overall from poverty, at a cost of £2.7 billion. 

  • Combining all three reforms would reduce child poverty by 900,000 and lift a total of 1.2 million people from poverty, at a cost of £12.9 billion. 

Rachel Statham, IPPR associate director for work and the welfare state, said: 

"The government faces a choice between inflicting a winter of deepening hardship on the UK, or offering a winter lifeline - investing in the economic security and wellbeing of families who are fraught with worry about the months ahead. 

“Even with normal benefit uprating confirmed, we can expect to see ever-longer queues at foodbanks and more families falling into debt and arrears this winter as rising living costs pull more families with children under water. This package of reforms would offer a lifeline to millions and deliver a long-term return on investment in children’s futures. 

“The government acted swiftly to support people’s incomes through the pandemic, and then to freeze the energy price cap; it must now move swiftly again to tackle the unacceptable scale of child poverty in this country.” 

Kate Bell, head of economics at the TUC, said:  

“Child poverty is a political choice. The government can watch from the sidelines as foodbanks run out of supplies and kids go hungry .Or it can step in and act. If we don’t strengthen social security now millions of families will remain locked in hardship and suffer a miserable winter. With living costs soaring – ministers have no excuse for not acting. No child in this country should be consigned to living below the breadline. This is about investing in children’s future.” 

Alison Garnham, chief executive of Child Poverty Action Group, said: 

“Children are already going hungry as costs soar, winter approaches and hardship intensifies. With families at breaking point and nothing to fall back on, there is no excuse for taking no action to reform social security. Unless families actually have enough money to live on, the price to be paid is more children with compromised health and stunted life chances. 

“That’s a recipe for disaster for a future generation and for our wider economy.  The Government has shown it can take bold protective action in a crisis. It must commit to doing so for the 4 million children already in poverty - including those far below the poverty line - and thousands more who are perilously close to it.” 
 

Rachel Statham, associate director for work and welfare state at IPPR, and Henry Parkes, senior economist at IPPR, the report’s authors, are available for interview 

NOTES TO EDITORS 

  1. The IPPR paper, A lifeline for families: investing to reduce child poverty this winter by Henry Parkes and Rachel Statham, will be published at 0001 on Wednesday November 16. It will be available for download at: http://www.ippr.org/research/publications/a-lifeline-for-families 

  2. FIGURE: Combined impact of all three measures (raising child benefit by £20 per child per week, removing two-child limit and total benefit cap) by income decile 

  3. Note on ‘fiscal space’: IPPR argues that the binding constraint for UK fiscal policy in the current macroeconomic environment is to avoid further fuelling inflation. We find that there will be £90-£120 billion fiscal space in 2023 (using August 2022 as a baseline). Taken alone, the measures recommended in this report would represent a low inflation risk. If the government chooses to use a greater share of this fiscal space by combining these measures with other spending increases – such as additional energy cost support, and protecting the value of departmental budgets – there are options to keep inflation in check while supporting household incomes, by ensuring that taxes play a bigger role in taking demand out of the economy (Ibid). Taxation measures that should be considered include equalising taxes on earnings from work and wealth, extending the windfall tax on oil and gas companies, or introducing an annual wealth tax on assets over £10 million – the latter alone could raise £16bn annually. 

  4. Full details of IPPR’s assessment were set out earlier this month in the IPPR paper, Spending and stability: How much fiscal space does the UK have? The paper is available here:  https://www.ippr.org/research/publications/spending-and-stability 

  5. IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence. www.ippr.org

Original article link: https://www.ippr.org/news-and-media/press-releases/boost-child-benefit-by-extra-20-and-ditch-benefit-limits-to-lift-900-000-children-from-poverty-ministers-urged

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