Child Poverty – austerity and the impact of the recession

Jonathan Bradshaw

Truth and Lies Conference

York

31 January 2014

I will remind you of the world before austerity

The Coalition austerity strategy

The false claims of fairness

Consequences for poverty

The beastly rhetoric and lies (I will leave to others)

Austerity+Welfare reform=a perfect storm

The future

Outline

Labour did not “throw money at welfare with little effect”

Invested in education, health, child care, housing quality and neighbourhoods

Social spending as % GDP increased – but only to the middle of the international league table

Labour had reduced child and pensioner poverty and stabilized inequality

Improvements in almost all outcomes Then Faced with the banking crisis and deficit Response broadly anti cyclical and redistributive Economy growing in 2010

Before the Coalition in 2010 (CASE report)

Poverty rates after housing costs

Aspiration to reduce the deficit (£81 billion) by 2014 – far too fast

Crucial decision: 20% from increased tax and 80% from cuts in services and benefits. Actually now 15/85

300,000 public sector already jobs gone – plan to reach 1million by 2017

Unemployment 2.3 million – 18% youth unemployed Public sector pay limit £20 billion cut from transfers Working age benefits fall in real terms (CPI and 1% cap -

latter takes £3.8billion from poor) Prices rising faster than incomes = falling living standards Real incomes fall by 6% 2007/8-2013/14 (IFS today)

After 2010 election. Austerity rules

Distributional consequences unfair – between generations and incomes

Cribb, J., Hood, A., Joyce, R. & Phillips, D. (2013) Living Standards, Poverty & Inequality in the UK: 2013, London: Institute for Fiscal Studies: http://www.ifs.org.uk/publications/6759, p 78

Chart 2.D: Overall impact of public service spending, tax, tax credit, and benefit changes on households in 2015-16 (£ per year), in 2010-11 prices

-2,500

500

-930 -700 -390 -210

-880

0

-500

-1,000

-1,500

-2,000

Q2 Q3 Q4 Top All Quintile House-

holds

Bottom Quintile

Change in tax ___________________________ Change in tax credits and benefits Change in public service spending Net change

-2,160

Source: HM Treasury estimates based on a range of models and data sources

Chart 2.E: Overall impact of public service spending, tax, tax credit and benefit changes on households in 2015-16 as a per cent of 2010-11 net income (including households’ benefits in kind from public services)

-3.9 -4.0

2

-2.6

-1.2 -0.5

-2.5

1

0

-1

-2

-3

-4

-5 Q2 Q3 Q4 Top All

Quintile House- holds

Bottom Quintile

Change in tax ___________________________Change in tax credits and benefits Change in public service spending Net change

Source: HM Treasury estimates based on a range of models and data sources

Cuts loaded on poor families with children (Children’s Commissioner 2013) i.e. Educational Maintenance Allowance Future Jobs Fund scrapped Child Benefit frozen – lost 15% value Council tax Working aged benefits/tax credits increased by CPI and then

1% - unprecedented. Pensioners protected by triple lock 2013 budget - raising the tax threshold does not help the

poor with incomes below it That cut+fuel duty, beer and corporation tax cut = £28

billion given away Abolition of 50% tax rate Devastating cuts in services.

Why is it unfair?

Nearly triple dip Deficit targets missed, lost AAA rating Fresh round of (unfair) austerity in next spending round 500,000 helped by food banks Falling living standards 2008-2015 Absolute child poverty up 2% points 2011/12. Relative 17% now - 24% in 2020 (IFS). All gains lost. Majority of poor children (67%) now have a working parent Outcomes deteriorating – child subjective well-being,

suicide, relationship breakdown … Waste – the costs of child poverty £ 29 billion rising to £35

billion

Consequences

Misuse of statistics and evidence Bizarre attempt to redefine poverty concept Deeply wrong (about real nature of the Welfare

State), unpleasant and unforgiving Influences attitudes and beliefs –Benefit Street

Heroic churches, NGOs, academics and other “vested interests”

? Labour Party (bedroom tax, 50% tax rate)

Lies

Three elements Cuts

Bedroom tax affecting 600,000 Benefit cap affecting 75,000 Abolition of Social Fund Abolition/localisation of Council Tax Benefit – pensioners protected again Now PIP deliberately designed to save £2.2 billion (20%) Welfare spending cap – gimmick or disaster

Work programme and toughened conditionality, seven days waiting and weekly signing. Despite unemployment. Failing. Vicious sanctions regime.

Social Security reform Incompetent and flawed ESA reassessments – 60% win appeals in York Universal Credit – delayed ?disaster

Welfare reform (ugh!) – accumulates injury

Single person JSA and pension credit scales April 2012 prices

Take it more slowly - £25 billion cuts planned after 2015

£12 billion from social security pensions ring fenced

Must come from working age and children

A better way?

General Govt Spending as % GDP 2000-2018 IMF WEO database April 2013

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201830

35

40

45

50

55

60

CanadaFranceGermanyItalyJapanUnited KingdomUnited States

Take it more slowly

Anti cyclical policies – Australia, USA, Iceland

Maintain automatic stabilizers

Housing investment

Priority to poor children not rich pensioners (me)

Don’t trade-off expenditure on benefits for services

Take more from tax less from benefits/services

A better way?

Percentage of gross income taken in taxes 2011/12

Economy now growing thanks to housing boom and debt fuelled consumption – will it last?

Terrible and long term damage to our safety net.

Grossly unfair between income groups and generations.

Gleeful government. Cheered on by gutter press – deeply

depressing Irresponsibly wasteful and damaging.

Conclusion

SUBJECTIVE WELL-BEING 11-15

SUICIDES

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

2

4

6

8

10

12

14

16

18

UK 15-19 suicide rate UK 20-24 suicide rate UK total suicide rate

Attitudes changing?