Tackling rising child poverty

Good morning from New Economy Brief. 

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4.3 million children in the UK are living in poverty, according to the Joseph Rowntree Foundation (JRF). That equates to 30% of all UK children – nine in each classroom. 

The government has promised to publish a child poverty strategy this spring, with ministers saying that tackling the problem is “both a moral imperative and crucial to building a stronger society and economy”.

The Prime Minister has also promised to deliver “higher living standards in every part of the United Kingdom” through economic growth. But JRF’s analysis suggests that economic growth by itself will not be enough to reduce child poverty. 

So what will? This week we look at why child poverty is rising in the UK, and what can be done to fix it.  

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The state of child poverty in the UK

Child poverty has been increasing in the UK in recent years, and children have consistently experienced higher poverty rates than pensioners and working-age adults. Poverty levels for children in single-parent families are particularly high (44%). In fact, a third of all children in poverty live with a single parent. 90% of single-parent households are headed by women, as a new report on the links between child poverty and women’s poverty from the Women’s Budget Group (WBG) points out. 

Larger families – those with three or more children – have a higher poverty rate than the average too, at 45%. Children living in Bangladeshi, Pakistani and Black African households are also much more likely to be growing up in poverty (67%, 61% and 49% respectively). 

The level of child poverty varies between different UK nations and regions. 30% of children in England are living in poverty; in Wales it’s 29%. It’s noticeably lower in Scotland (24%) and Northern Ireland (23%). The End Child Poverty coalition has calculated that two thirds of parliamentary constituencies have a child poverty rate of 25% or higher. The picture is especially worrying in the North West of England, where 90% of constituencies have breached this threshold. 

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‍What’s behind the increase?

Cuts to social security. Last year Mel Stride, the Conservative Secretary of State for Work and Pensions, pointed to high inflation as one of the main reasons behind rising child poverty.

Stride did not, however, mention the impact of the Conservatives' changes to the social security system, which many charities, campaigners and think tanks argue have been a key driver of the increase in child poverty. Analysis from the Institute for Fiscal Studies (IFS) shows that overall, benefits now provide low-income households with children less support than they did in 2010. Indeed, benefits entitlements for the 7.6 million households in the UK with children have reduced by £2,200 a year on average. Meanwhile the Child Poverty Action Group (CPAG) calculates that “the government now spends £50 billion a year less on social security than it would have spent if cuts, freezes and other changes since 2010 had not happened.”

The two-child limit. Some policies have had a particularly significant effect. In April 2017 the “two-child limit” was introduced, whereby households in receipt of Universal Credit or Child Tax Credits can only claim support for up to two children. Research by the Resolution Foundation found that as of April 2024, 38% of all large families (those with at least three children) are affected by the policy – around 450,000 families and 1.6 million children. These families “are losing up to around £3,500 a year in support for their third and each subsequent child.” And while 41% of large families were in poverty in 2016/17 (before the two-child limit was introduced), this is predicted to reach 51% by 2028/29. It is this rise in child poverty among large families that is the main driver of the increase overall. 

Housing costs. The cost of housing is another important driver of child poverty, as new research from the Institute for Public Policy Research (IPPR) makes clear. While 3.2 million children live in poverty before housing costs are taken into account, that figure rises to 4.3 million after these are included in the calculation. The picture is particularly stark for children who live in the private rented sector, where the child poverty rate almost doubles once housing costs are factored in. In large part this has been down to the sharp increase in private rents in recent years alongside repeated cuts and freezes to Local Housing Allowance (LHA) - which sets the rate of housing benefit for private renters. This means the link between rents and the support low-income households receive to pay them has been broken.

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Tackling child poverty effectively

So how can the rise of child poverty be halted and reversed? Experts and campaigners agree that ending the two-child limit is a good place for the government to start. 

Ending the two-child limit. CPAG estimates doing this would lift 300,000 children out of poverty straight away. The IFS has calculated that reversing the policy would cost around £2.5 billion a year. But this cost is significantly less than the savings generated by scrapping it, according to the New Economics Foundation (NEF). Its analysis suggests that doing away with the two-child limit “would reduce the economic cost of child poverty by £3.2 billion a year by the end of the current parliament”. Save the Children has gone further, calling on the government to introduce a ‘child lock’ to ensure that children’s social security payments increase by whichever is higher of earnings or inflation. 

‍Addressing the housing crisis. In order to provide low-income private renters with more support, both JRF and IPPR recommend unfreezing LHA and relinking it to the actual cost of local rents. The Renters’ Rights Bill, currently progressing through Parliament, should give private tenants greater security. However, groups representing private renters, such as the Renters’ Reform Coalition, have been calling for the government to go further on affordability, arguing that the bill should include stronger mechanisms for limiting rent increases. 

Supporting parents. The Women’s Budget Group has a host of recommendations for lifting children out of poverty by supporting mothers. These include ensuring that childcare is high-quality, affordable and accessible; improving transport; providing better training opportunities; and making changes to social security payments so mothers aren’t discouraged from working more hours or taking better jobs.

Scotland’s example. The UK government could look to Scotland for ideas. One of the reasons why child poverty is lower there is that the Holyrood government introduced the Scottish Child Payment in 2021. Eligible children now receive an extra £26.70 a week, and there is no limit to the number of children within a qualifying family who can receive the payment. This means that it is still paid for a child affected by the two-child limit. 

‍Structural change. Ultimately though, more systemic reform of the social security system is needed. JRF and the Trussell Trust have called for the UK government to implement an 'essentials guarantee' to make sure the basic rate of Universal Credit actually covers life’s essentials. NEF’s plan is for a Living Income: an income floor which no-one can fall below. 

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‍All eyes on the government

Details of what this spring’s child poverty strategy will include are still light, although a decision on the future of the two-child limit is likely to feature. This has already been politically controversial: Ministers have resisted pressure to abolish it since the general election, with seven Labour MPs suspended in July 2024 for voting for an opposition amendment to end the policy. The whip has now been restored to four of the rebels, but many Labour MPs remain deeply unhappy with the two-child limit.

Former Labour Prime Minister Gordon Brown has called rising child poverty “a stain on the soul of our country”. It also does enormous, long-lasting and ever-growing economic and social damage. The longer we wait to address the problem, the larger these costs will grow. 

The government itself has acknowledged that “ensuring millions of children and young people are not held back is also crucial to economic growth.” Yet so far, the Government’s growth mission has not focused on tackling child poverty. For some years there has been widespread agreement that scrapping the two-child limit is an effective and economical way to start addressing the problem. It is hard to see how the government will drive down child poverty if the policy is left in place.