A decade of increased child poverty

Child poverty is one of the major challenges that the UK is facing, not only because it is putting children in disadvantage at the moment but also because it is risking their future prospects if they will not receive enough support to thrive as they grow up. This new series of blogs on child poverty will explain what is the current situation, what are the causes of child poverty in Britain and what will be the impact of different policies on the livelihood of children. This blog explains the causes of increased child poverty over the last decade.

(for how child poverty is measured in the UK please read here) 

4.3 million children are growing up in poverty in the UK, that counts for 30% of all UK children during 2022/23. This figure has increased from 3.6 million during 2010/11. An almost 20% increase in a time period slightly more than 10 years, which is the highest among all OECD countries. But why? We have had record high employment over the last decade, but despite that child poverty has increased.

Labour market 

But being at work doesn’t mean you are out of poverty! 69% of children in poverty have at least one parent at work. At the same time as the economy has been reaching record high employment, an increase in zero hours contracts and insecure work has occurred as well. When you are in a zero hour contract or any other type of insecure work, you are not allowed to claim benefits or other assistance from the government, but at the same time your income is not guaranteed, as well the hours you are going to work. 

Analysis from Lancaster University has revealed that “three in four (73.5%) of the record 1.1 million people (aged 16-65) currently on zero-hour contracts in the UK are in severely insecure work, meaning they face contractual and financial insecurity, and a lack of access to rights and protections. Only 6.1% of the 1.1 million are in secure employment, with a regular income and access to rights.” For many people that income is their only source that could help them sustain their families, as the majority of families in low income don't have a support network or wealth to help them make ends meet. 

Childcare costs

But let’s say if you are in stable employment, does that mean that the risk of child poverty is eliminated? Unfortunately not, stable employment doesn’t guarantee that you will be able to afford to support your children. One of the main reasons is the cost of childcare; based on analysis from the Understanding the Society survey and the Social Market Foundation “childcare accounts for 7% of household income among those paying for it, rising to 17% for those in the bottom income quintile. A third of childcare users in the bottom income quintile are in childcare poverty, defined as costing more than 20% of household income.”

Childcare costs have increased rapidly since 2010, according to the Institute of Fiscal Studies (IFS) the cost of a part-time childminder place had risen 43% by 2021, while for a part-time

nursery place the cost increase was 59%. The increase of childcare costs outstrips the growth in both general economy-wide prices (which grew by 24%) or average weekly earnings (which rose 30% over the same period), according to IFS. The above estimations do not take into account the last couple of years where the increase in prices and cost of living has severely affected the poorest families. 

Of course this situation is getting worse if you have more than one child, 46% of children in families with three or more children were in poverty, up from 36% in 2011/12. Having more than one child makes childcare inaccessible for many families, putting them into the situation of one of the parents leaving work (usually the mother) having negative consequences for their future prospects. As a consequence, larger families, if they do not have wealth, are trapped into poverty either because of the higher cost of childcare or because of the loss of income and future prospects. 

Social Security System 

Following that, there are arguments that the changes in the social security system have made life harder for families with children and have not supported them to move out of poverty. One of them is the introduction of the benefit cap in universal credit. Universal credit is subject to the benefit cap, which was introduced in 2012. The benefit cap limits the total amount of benefits a household can receive. This affects mainly working families, as while their working hours are increasing their eligibility for social security is decreasing, however if the working families are in insecure work as mentioned above, this can leave them in a worse off situation. 

Another cap is the infamous two-child benefit cap, the ‘two-child limit’ means that claimants do not receive an additional amount for third or subsequent children born after 5 April 2017. That has an effect on larger families (with more than 2 children) to be affected more from that policy. According to IFS “76% of households affected by the two-child limit are in the poorest 30% of working-age households. In comparison, 63% of households eligible for universal credit with children are in the poorest 30% of working-age households.”

But the question is if we remove or change the benefit cap or “two-child limit” will it resolve poverty? It will undeniably support larger families, but probably not so much as other policies that have helped to uplift families out of poverty. The IFS found that the £20 per week increase in universal credit, reduced absolute poverty rates by 0.3 percentage points during the six months it was in place in 2021/22, or by 0.6 percentage points in annualised terms (affecting 379,000 people). The annualised effect of the changes to work allowances and the taper rate was a decrease in absolute poverty rates of 0.2 percentage points (133,000 people). The IFS states that this is because “changes to work allowances and the taper rate mainly benefit somewhat higher-earning households further up the income distribution and do not affect out-of-work households at all”.

 Effects of benefit policy reforms on absolute poverty rates

Source: IFS calculations using TAXBEN, the IFS tax and benefit microsimulation model, and Family Resources Survey 2021–22.

What is known is that the social security system needs to be updated, made easier to access, to support people to get out of poverty and provide them with future opportunities. It will be challenging based on the current economic situation to solve all the problems in the social security system, especially with the limited funds that the government has. 

Of course there are other reasons that have contributed to child poverty such as parental qualifications, geography, disability, family instability and drug and alcohol dependency. The upcoming blogs will provide a more holistic view on child poverty and which households have been more at risk, where and what characteristics they have.