26 Mar 2020

 Sam Royston, Director of Policy and Research said:

“It is appalling that 4.2 million children are living in poverty in the UK today – with more than two thirds of them facing severe poverty. This country is one of the richest in the world and we are letting future generations down by failing to end child poverty in the UK.

“The figures show that poverty is not just rising, but deepening, with 600,000 more children pulled into severe poverty compared to 2010. The current coronavirus crisis is likely to see this number continue to rise as parents face job losses and falls in earnings.

“We welcome the coming together of politicians, professionals and communities to do everything it takes to respond to this crisis – including to address the additional pressure it will place on struggling families. The measures announced by the Treasury last week, to protect jobs and those facing financial insecurity through the course of the pandemic, are also a major step in the right direction.

“However, faced by the levels of child poverty already present across the UK, and shown by these figures, much more needs to be done to protect families in coming days, weeks and months.”

 

The Hardship Fund

The Children’s Society has welcomed the £500 million hardship fund, which will undoubtedly be a relief for local authorities struggling to cope with the financial impacts of Covid-19. However, in line with The Local Government Association we would like to see councils being given more flexibility on how to spend it. The charity’s recommendation is that councils are free to put a large proportion of the funding towards Local Welfare Assistance.

Local welfare provision offers a vital lifeline to families and people in financial crisis, they offer food and fuel vouchers, household appliances and white goods, as well as cash grants. Since the introduction of the scheme in 2013 funding from central government has decreased and councils have been forced to cut the amount of money they invest in emergency support. Research in 2019 by The Children’s Society found that 1 in 7 local authority areas in England have no local welfare support

Sam Royston, Director of Policy and Research, said:

“Those on the lowest incomes - families living on less than half the average annual income - are likely to be the hardest hit by the pandemic. These figures show the number of children living in severe poverty is now at 2.9 million, an increase of 100,000 since last year and up 600,000 in the last decade.

“With the Covid-19 crisis we have already heard that large numbers of people are getting in contact with emergency support providers to ask for help. Having the flexibility to invest money from the hardship fund would ensure local authorities can create well-funded and robust schemes that will provide a safety net for people who have nowhere else to turn.”

 

Tax Credits

The Children’s Society believes the government should urgently look at how tax credits are calculated and make sure that if earnings fall they are recalculated on the basis of the new lower earnings.

Since 2012, a change in the way tax credits are worked out means that if families earnings reduce from one year to the next, their old - higher - earnings may continue to be used to calculate their entitlement. So, if a worker sees their earnings fall, let’s say they earn £20,000 in 2019/20 and £17,500 in 2020/21 – they are still treated as if they earn £20,000 throughout 2020/21.  

This so-called “income disregard” can apply for up to £2500 of earnings (and if their earnings fall by more than that the maximum £2500 disregard is applied). For a family seeing a fall in earnings of £2500 or more, using their out-of-date earnings figure would typically cost them more than £1,000 over the course of a year – a really substantial amount for a family struggling with lower earnings.

Sam Royston, Director of Policy and Research, said:

“This rule – which means that families seeing their pay fall are treated as earning more than they actually do - is incredibly unfair in the context of the pandemic, where considerable numbers of workers are likely to see earnings reductions in excess of £2,500 over the course of the year, as a result of sickness or the need to provide childcare.

“This is all the more important in light of the latest child poverty figures which show there has been an increase in the proportion of children living in poverty who have at least one parent working, going from 70% to 72% in the last year.

“To help working families on low incomes the Government urgently needs to suspend this rule, at least for the financial year 2020-21, to ensure that where earnings fall, households are able to see their Tax Credit entitlement taking full account of this loss.”