Nearly a quarter of children could be living in poverty by 2020, researchers warn

The UK’s leading public finance think tank predicts that 600,000 more children and 800,000 adults of working age will be living in poverty as the result of a ‘large decline’ in real incomes, which will see the biggest drop in household income for 35 years.

It blames changes to the tax and benefits system and the fact that the Government now uses the lower consumer prices index instead of the higher retail prices index as a measure of inflation on which to base the amount claimants receive in means-tested benefits.

The IFS said that median income is expected to fall by around 7 per cent in real terms between 2009-10 (the latest household income data available) and 2012-13.

The figures show that the Government will miss targets to reduce relative and absolute poverty by 2020 set out in the Child Poverty Act.

The IFS forecasts that absolute child poverty will reach 23 per cent in 2020, rather than the 5 per cent Government target.

James Brown, co-author of the report, said, ‘The previous Government significantly increased spending on benefits and tax credits for families with children, and child poverty fell by nearly a quarter between 1998 and 2009, but this was still not enough for the Government to hit child poverty targets.

‘The Child Poverty Act imposes even more stringent targets in a much more constrained fiscal environment.

Even if there were an immense increase in the resources made available, it is hard to see how child poverty could fall by enough to hit this supposedly legally binding target in nine years.’

A household is considered to be living in absolute poverty if income falls below 60 per cent of median income.

The report acknowledges that without the Universal Credit, due in 2013, 450,000 children and 600,000 adults of working age would be in poverty by 2020.

Examples given by the IFS report show the poverty line for this financial year for a couple with one child is £297 a week or £347 a week for a couple with two children, once tax and National Insurance have been deducted and adding in all income from tax credits and benefits.

Alison Garnham, chief executive of the Child Poverty Action Group, said the Government must invest in child benefit, child tax credits and affordable childcare

to fight child poverty.

‘This devastating report leaves the Government’s child poverty and social mobility strategies in jeopardy. The Government has to stop pretending you can fight poverty or improve life chances by making the poor poorer.

‘Ministers seem to be in denial that, under current policies, their legacy threatens to be the worst poverty record of any Government for a generation. They risk damaging childhoods and children’s life chances, as well as our national economic wellbeing from wasted potential and spiralling social costs.’

Nick Pearce, director of the think tank IPPR, said that the Government must focus on ensuring that pre-school children did not spend their early years in poverty.

‘The Government should not abandon the long term goal of eradicating child poverty, but given that money is so tight, it should prioritise ensuring that no child under school age spends their earliest years in poverty. As well as focussing money on this age group, progress towards reducing child poverty should also include providing free childcare and nursery education – to give children a good start in life and help their parents to work,’ he said.