Poor children need a Coronavirus bonus | CPAG

Poor children need a Coronavirus bonus

Published on: 
26 March 2020
Written by: 

Prof Jonathan Bradshaw and Dr Antonia Keung
Social Policy Research Unit
University of York

The increase to the universal credit (UC) standard allowance and the working tax credit basic element by £20 per week as part of the government’s response to the Coronavirus is welcome. According to the Resolution Foundation “Having recently fallen to their lowest real-terms value since the early 1990s, the main adult rate of unemployment benefits is now at its highest ever level, as the chart below shows. Relative to average earnings, it is at its highest level since 1998-99."

chart

What is still missing from the whole package is any response to benefits for children. Children have been sent home from school, and although vouchers have been promised for children who will miss free school meals only about 20% of children are eligible, 65% do not claim their entitlement and the voucher scheme will not replace the universal free school meals provided for the under eights. Child poverty rates were rising before the Covid-19 crisis and are likely to rise further now.

This blog explores the likely impact on household poverty and on child poverty of the UC and WTC increases and how it would compare with a £10 per child per week increase in child benefit which Child Poverty Action group has advocated as a response to the crisis.

We do this by modelling the impact of the increases by applying them to household income using the 2017/18 Households Below Average Income data based on the Family Resources Survey. No assumptions have been made about the impact of the crisis on employment and earnings, nor about households who become eligible to claim UC as a result of those changes. One dilemma is that it appears that the £20 up-lift does not apply to those still receiving the legacy benefits (mainly jobseeker’s allowance (JSA) and employment and support allowance (ESA)) but only to those who are receiving working tax credit or universal credit. Apart from this being unfair it creates an incentive for those on legacy benefits to apply for UC (offset by the need to wait five weeks for UC). According to the DWP1 in 1997/98 there were 350,000 people claiming income tested JSA and 1.38 million claiming income tested ESA. These numbers, especially the JSA claimants, will have fallen since then. But the DWP has been migrating people from legacy benefits to UC very slowly and on an experimental basis (in Harrogate!). Can they really cope with a sudden influx of new claims, in addition to the huge influx of claims coming from the newly unemployed? They are already recruiting 10,000 extra staff.

For our purposes we do the analysis twice - first giving the uplift to those on UC or WTC only and then repeating it for those on ESA, JSA, WTC or UC.

We use weighted data which adjusts the sample to match the population. We do not adjust the poverty threshold before or after the top-up. No allowance is made for the child benefit claw back but as we are only interested in changes in poverty this would not have any impact.

Results

The tables in part 1 show the impact on child poverty (1a) and household poverty (1b) of the £20 per week increase in UC and WTC. The tables in part 2 show the impact on child poverty (2a) and household poverty (2b) of the £20 increase but imagining this also went to recipients of JSA and ESA as well as those on WTC or UC.

In all cases the impact of the top up on poverty is very small – less than 2 percentage points for child poverty and less than 1 percentage point for household poverty. This contrasts with the impact that an increase in child benefit of £10 per child per week will have on child and household poverty rates shown in part 3. Table 3a shows that child poverty rates would be reduced by about 5 percentage points and household poverty by 1-2 percentage points.

Conclusion

The needs of families with children have not been recognised in the Covid-19 measures. An increase in child benefit would be much more effective than the announced increases in UC and WTC. It would reduce child poverty more and also reduce household poverty more, not least because households with children are much more likely to be poor.


Part 1: Analysis of the impact of income increase by £20 per week for working age families in receipt of UC or WTC on child poverty rates

Table 1a: Relative child poverty rates before and after weekly £20 top up for working age families in receipt of UC or WTC

Relative child poverty rates Before housing costs After housing costs
Before top-up 21.8% 29.5%
After top-up 20.5% 28.2%
Total number of children in working age families 13,647,812

Note: without adjusting the median income after top-up

Table 1b: Relative household poverty rates before and after weekly £20 top up for working age families in receipt of UC or WTC

Relative household poverty Before housing costs After housing costs
Before top-up 16.1% 22.0%
After top-up 15.8% 21.7%
Total number of working age families 25,830,458

Note: without adjusting the median income after top-up
 

Part 2: Analysis of the impact of income increase by £20 per week for working age families in receipt of UC or WTC or JSA or ESA on child poverty rates

Table 2a: Relative child poverty rates before and after weekly £20 top up for working age families in receipt of UC or WTC or JSA or ESA

Relative child poverty rates Before housing costs After housing costs
Before top-up 21.8% 29.5%
After top-up 20.0% 28.0%
Total number of children in working age families 13,647,812

Note: without adjusting the median income after top-up

Table 2b: Relative household poverty rates before and after weekly £20 top up for working age families in receipt of UC or WTC or JSA or ESA

Relative household poverty rates Before housing costs After housing costs
Before top-up 16.1% 22.0%
After top-up 15.4% 21.4%
Total number of working age families 25,830,458

Note: without adjusting the median income after top-up


Part 3: Analysis of the impact of increasing child benefit by £10 per week per child for families with dependent children on child poverty rates

Table 3a: Relative child poverty rates before and after £10 child benefit top up per week per child

Relative child poverty rates Before housing costs After housing costs
Before top-up 21.8% 29.4%
After top-up 16.3% 24.5%
Total number of children 13,717,030

 

Table 3b: Relative household poverty rates before and after £10 child benefit top up per week per child

Relative household poverty rates Before housing costs After housing costs
Before top-up 16.1% 22.0%
After top-up 15.0% 20.9%
Total number of working-age families 25,830,458

 

Data source:

Department for Work and Pensions. (2019). Households Below Average Income, 1994/95-2017/18. [data collection]. 13th Edition. UK Data Service. SN: 5828, http://doi.org/10.5255/UKDA-SN-5828-11

Note: relative poverty means less than 60% of contemporary median income. All the above charts use HBAI 2017/18 weighted by GS_NEWBU.

  • 1. There is a good deal of doubt about the current figures because DWP has started reporting UC unemployed case load with JSA and incapacity case load with ESA. We can no longer see who is not on UC.