Package To Lift 200,000 Children Out Of Poverty Is Welcomed

The budget’s package of measures for families and children has been welcomed as a important step towards the government’s 2010 target of halving child poverty. But more investment is vital if that target is to be met, say anti-poverty groups.

The package will mean 200,000 fewer children in poverty, according to the government. Households with children will be, on average, £200 a year better off, while those in the poorest fifth of the population will be, on average, £350 a year better off.

In April 2008, there will be an increase in the element of child tax credit (CTC) that is targeted at the poorest families. The child element of CTC, a benefit paid to the main carer for which nine out of 10 families qualify, will go up by £150 a year above earnings indexation to £2,080 a year.

Changes will also be made to working tax credit (WTC), the other main benefit paid to top up the earnings of low-income working households and help with the cost of childcare. From April 2008, the WTC income threshold, above which recipients start to have their tax credit withdrawn, will go up by £1,200 to £6,420. The rate at which tax credits are clawed back will go up from 37p to 39p in the £1. The combined effect of these two changes will make WTC more generous to all recipient families with children, says the government.

Child benefit, the universal payment to all parents regardless of income, will go up to £20 a week for the eldest child by April 2010. “This is good news because child benefit reaches all children, has a very high take-up and provides a stable income that parents can rely on whether they are in or out of work,” said Kate Bell, head of policy and research at charity One Parent Families.
Child Poverty Action Group’s chief executive, Kate Green, welcomed the increase in benefit for the oldest child but said: “Larger families that are at greater risk of poverty will be helped less, so future investment [in child benefit] must focus on the younger children in a family, who currently receive £6 less than the oldest child.”

The chancellor also said the £40 per week in-work credit paid for 12 months to lone parents going back to work would be extended until June 2008 and would go up to £60 a week in London. This tax-free credit, paid on top of wages and other tax credits, is worth just over £2,000 in the year an eligible lone parent returns to work and will be worth £3,120 in London, where 40% of jobless lone parents live.

The budget also pledged to provide free childcare places for up to 50,000 out-of-work parents undertaking training courses, to enable more parents to move back to work, and confirmed a previous pledge to increase the hours of free nursery provision for 3- and 4-year-olds .

Chris Pond, chief executive of One Parent Families, said: “Lone parents will warmly welcome a child-friendly budget which puts tackling poverty at its heart. Increases in the level of child benefit and child tax credit are vital steps that will be of real help to the 48% of children in lone parent families who are still poor. Lone parents will also welcome the extra support to help them stay in work, and the recognition of the additional challenges in London.”