900,000 people left facing poverty in tax and benefit shake-up

Hundreds of thousands of people will be dragged into poverty by the government's tax and benefit reforms, according to research from a leading economic think-tank.

The Institute for Fiscal Studies forecast an overall rise in poverty among children and working age adults over the next three years. Its findings contradict Chancellor George Osborne's claims that the spending review will not affect child poverty over the next two years.

Campaign groups described the projected rise in child poverty as "totally unacceptable" and "disastrous".

Hide Ad
Hide Ad

The IFS predicted a rise in absolute poverty - defined as households with a real terms income of less than 60% of the median in 2010/11 - of 900,000 by the end of 2014.

Relative poverty - measured against the median in any given year - would increase by 800,000, it said.

The figures include the first rise in absolute child poverty for 15 years. They would have been higher still except for a general decline in living standards as average earnings fail to keep up with inflation.

The research suggests that the government's tax and benefit reforms - compared with the policies inherited from Labour in May - would increase absolute poverty by 200,000 children and 200,000 working age adults in 2012/13.

"This finding is at odds with the government's claim in the 2010 spending review that its reforms will have no measurable impact on child poverty in 2012/13," the IFS said.

It added that the rise is down to the impact of changes to local housing allowance, which the Treasury has not factored into its calculations on poverty.

In 2013/14, the tax and benefit changes would take another 300,000 children and 500,000 adults into absolute poverty, the IFS found.

Any rise in poverty would be a major setback to the government's target of reducing absolute child poverty to 5% and relative child poverty to 10% by 2020/21.

Hide Ad
Hide Ad

Meeting those goals, enshrined in law by this year's Child Poverty Act, would require the biggest falls in child poverty in more than half a century, the IFS calculated.

Robert Joyce, one of the authors of the IFS report, said: "We find that the coalition government's measures act to increase poverty among these groups slightly in 2012/13 and more clearly in 2013/14."Meeting the legally binding child poverty targets in 2020 would require the biggest fall in relative poverty after 2013/14 since at least 1961."

The Treasury said there was "considerable uncertainty" in the IFS results which meant they "may not be meaningful".

The report, funded by the left-leaning Joseph Rowntree Foundation, prompted alarm among child poverty campaigners.

Alison Garnham, chief executive of the Child Poverty Action Group, said: "Every year without progress is a failure and every year child poverty rises is a calamity.

"Instead of 'poverty plus a pound', we will see poverty minus a coat, poverty minus a meal and poverty minus hope."

Shadow work and pensions secretary Douglas Alexander said: "This revealing report from the respected IFS flatly contradicts David Cameron's promise that there would be no increase in child poverty."