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Matthew Oakley: Child poverty - Government should focus on outcomes as well as incomes.

Matthew Oakley is Head of Economics and Social Policy at Policy Exchange.  Follow Matthew on Twitter.

Screen shot 2013-02-08 at 14.14.56Child poverty matters. Few people would argue that the state does not have a role to play in ensuring that children do not grow up in poverty. The dilemma for policy makers is that “child poverty” means different things to different people. Ask the public to picture what it might mean and many of us will immediately picture famine in Africa or street-living closer to home. Recent polling certainly suggests that many people subscribe to this point of view: 70% of people thought that poverty is when you do not “...have a place to live, or enough to eat or live on”.

This view is in stark contrast to the current approach in the UK. The government is legislatively committed to significantly reducing the number of children living in households with less than 60% of the median household income. The approach is based on measuring relativities, or inequalities, in incomes. It has to change.

This is not because relativities do not matter. They do. In fact, measuring relative incomes should be one element of an effective approach to tackling child poverty. Take, for example, children born into families where parents are not expected to work. Whether they have a disability or illness or caring responsibilities which means they are unable to work, the state has explicitly committed to supporting these families financially. It should ensure that the income it provides is sufficient to both meet their needs and allow them to engage fully in society. As living standards in society rise, we should commit to ensuring that these families keep up, meaning that relative incomes matter.

Relativities also matter in other areas. Amongst other things, we should care that, on average, children from poorer backgrounds do significantly worse in school, have lower aspirations, have lower birth weight and are more likely to engage in criminal activity and more likely to die before they reach the age of one. These terrible outcomes are no less a feature of poverty than low relative income. They reflect a social poverty that we should be attempting to tackle. However, it is clear that simply redistributing income will not drive the improvements that we need.

In some of these areas progress has been made. The Pupil Premium has targeted resources at disadvantaged students, significant investment is being put into subsidising childcare and programmes like Sure Start and Healthy Start are trying to tackle broader health and social inequalities.

This progress should be applauded for the difference it could make to children’s lives in terms of improved education, health and life expectancy. It is also the key reason why the government’s measure of child poverty needs to change. By measuring progress against factors such as this, by measuring outcomes, not just incomes, the government can target policies at things that really make a difference to children’s lives.

Doing so would provide policy makers with a broader range of policies to target the full extent of child poverty. Over the last 7 years, £170 billion was spent on Tax Credits and the value of non-work contingent Child Tax Credit has risen by 63%. Net financial support to the poorest half of families with children has risen by some £4,000 since 1998/99. There is no doubt that this expenditure has made a difference to children’s lives. But it has also negatively impacted on work incentives and shifted the balance of responsibility for tackling poverty onto the state. The key question is whether this expenditure could have been more effectively spent on improving education, helping parents to enter work and earn more of their own income and on improving children’s health services and the care system. Replacing the current child poverty measure with one that focussed on outcomes as well as incomes would allow policy makers to assess those tradeoffs. It would also recognise that the state and households have a joint responsibility for tackling low incomes.

These are the key messages in a report Policy Exchange has published today. Replacing the current measure in this way would not be about falsely reducing our estimation of the size of the problem (indeed the numbers defined as being in poverty could rise) or saving money. It would be about ensuring that expenditure is directed on things that really make a difference to children’s lives both now and in the future. It would be about improving outcomes, not just incomes.


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