Child poverty: where we are and what we need to do

Rt Hon Alan Milburn Speech to The Children’s Society St Alban’s Centre, Leigh Place, Baldwin Gardens London, EC1N 7AB 13 December 2011 A new concern is stalking our world. It is a concern about economic and social inequality. The global financial crash, both in its causes and its consequences, have catapulted concerns about inequality to the top of the public and political agenda. You can see it in the developing world where rampant wealth accumulation and extreme disadvantage live in increasingly uneasy juxtaposition. And you see it in the developed countries of the world where, even in times of austerity, the gap between top and bottom continues to grow ever wider. In country after country – whether it is Britain or Brazil, Russia or Egypt, America or China – this growing concern is finding a very public voice. I cannot see the noise subsiding in the years to come. Without action to address those concerns it is liable to grow ever louder. The principal focus – and anger – is directed at those at the very top of the heap. When excess reward becomes separated from effort and endeavour it causes understandable outrage. My plea today, however, is to refocus those concerns about inequality so that as much attention is given to helping those at the very bottom as it is to finding ways of restraining those at the very top. There is a very British reason for doing so. Last week, the OECD released research showing that the divide between the wages of the rich and the poor has grown in nearly all of the world's leading economies. Of the 22 nations the OECD surveyed, however, the UK had experienced the fastest growth in inequality. From the 1980s inequality in the UK grew faster than elsewhere before it peaked in the year 2000. It then fell but is now rising once again. At the sharp end of that widening gap between rich and poor sit the most vulnerable: children. Today - if we use the best-known measure of the number of children living below a poverty line set at 60% of median household incomes, the so-called relative

poverty measure - there are 2.6 million children in poverty in our country. That is nearly 1 in 5 of all children. If we take a narrower measure, those living in absolute poverty, 1.4 million children are in poverty. Those figures should shock and shame us all. That is even more the case when we consider that according to the self-same relative measure child poverty in Britain is almost 10% higher than it is in countries like Denmark. Child poverty is unacceptable in a modern, civilised country like Britain. It offends a cherished belief that sits at the heart of what our country aims to be: a place where every child should have an equal opportunity to grow and flourish, to become everything that he or she has the potential to be. I agree with the Child Poverty Action Group when it says “poverty is not simply about being on a low income and going without – it is also about being denied power, respect, good health, education and housing, basic self-esteem and the ability to participate in social activities.” A child growing up in poverty is likely to live in an area of higher crime. They will have fewer children’s play areas. Their parents will be more likely to be unable to afford to keep their house warm. At least one parent is likely to be unemployed. If a parent works it is far more likely to be a job that is insecure and low paid, with little chance for progression. Local schools are more likely to be failing. Early years services are likely to be lower quality. As a child you are will be at greater risk of bullying. Poverty is linked to decreases in maternal health and babies’ birth weight and increases in the likelihood of sudden infant death and early childhood accidents. Children growing up in poverty are in turn more likely to experience poor physical and mental health, low educational attainment, and future unemployment. The interlinking of low income and low opportunities is cumulative and it is destructive. Child poverty strangles progress. It stunts potential. It stifles talent. Only one in five young people from the poorest families achieve five good GCSEs, including English and maths, compared with three quarters of those from the wealthiest families. The more children there are in poverty the less social mobility there will be. Child poverty exacts a high price from those children, their families and their communities. It also exacts a high price from our country. According to the Joseph Rowntree Foundation child poverty costs the UK economy around £25 billion a year in extra public spending on welfare, education, police and justice services. That is a millstone around the neck of our economy – and one we cannot afford, now least of all. That is why, in 1999, Tony Blair was right to make the historic and hugely ambitious commitment to abolish child poverty by 2020. It was a scar on the conscience of the nation. And it was a profound act of political will to commit to healing it. Today all the main political parties have given their support to this ambition and the Coalition

government has renewed the commitment to eradicate child poverty. I welcome the emergence of that cross-party consensus. It provides a platform of hope for all of us who care about the issue. I welcome too the Government’s commitment to establish a statutory independent Commission on Social Mobility and Child Poverty tasked with assessing whether what governments and others do – as distinct from what they say – is helping achieve those noble ambitions. In my role as Independent Reviewer on Social Mobility and Child Poverty I am making recommendations to government on how the Commission could best fulfil that role. I will also be making my own assessment of what is happening to child poverty and what more needs to be done. I will be publishing a report to Parliament in spring next year on just that issue. Today I want to share with you some of my preliminary views. What I have to say will, I suspect, make many of those who care about this issue – government included - feel distinctly uncomfortable. But I believe if in this period of austerity and uncertainty there is not a heavy dose of realism we stand no chance of making social progress. In my view the debate on child poverty today is consumed in a fog of fantasy and fallacy, of confusion and complexity. The fantasy is that the aim of eradicating child poverty by 2020, set by Labour and adopted by the Coalition, will somehow still be realised. The confusion is that the current approach to tackling poverty and speeding mobility is mired between policy agendas – of income distribution and opportunity creation - that have been made to sound like enemies when they are actually friends. Many can see what is happening – but no one seems prepared to reveal that the Emperor has no clothes. So long as that remains the case we will not have a firm foundation for making progress in what are inauspicious times for attempting to do so. So let me today make four clear statements, based on what I have learned to date as Independent Reviewer. Progress on child poverty is stalling. Worse than that it has almost certainly started to reverse. Child poverty is set to rise and, if things go on as they are, it is likely to go on rising for many years to come. The child poverty targets that Labour first set and the Coalition have since backed will simply not be met. Now let me explain why I make each of those statements.

Relative child poverty fell by 0.7 million and absolute child poverty by 1.7 million between 1997 and 2005. After two decades – between 1979 and 1998 - when child poverty had doubled, Labour’s first two terms represented sustained and considerable progress. But in Labour’s third term that progress stalled. Child poverty is higher today that it should be if the existing child poverty targets – set out in the 2010 Child Poverty Act - were being met. According to a detailed study by the respected Institute for Fiscal Studies, things are likely to get a lot worse in the years to come. On their calculations, absolute and relative child poverty are forecast to be 23% and 24% in 2020-21 respectively compared to the targets of 5% and 10%, set out in the Child Poverty Act. The IFS say that relative poverty amongst children will rise to reach nearly 1 in 4 by 2020 – back to where it was in 1999/2000. Putting it very clearly, the IFS says: “it is impossible to see how relative child poverty could fall by [as much as needed to meet the 2020 target] in the next 10 years without changes to the labour market and welfare policy, and an increase in the amount of redistribution performed by the tax and benefit system, both to an extent never-before seen in the UK.” I do not dispute that finding. It is a blunt and indisputable conclusion. Nor do I hear it hotly contested by government. But Ministers should now concede publicly what I believe they know privately. They should come clean and make clear that the government will not meet the 2020 target. Nor is this just a challenge for the government. The IFS conclusion is given credence in the fact that none of the main political parties will commit to the public policy changes and the extra public spending - which the IFS estimate to be in the order of £19 billion – that would be needed to make the 2020 target in any way achievable. There is a duty on all the political parties to either put up or shut up. Of course campaigning to hold both the Government and the Opposition to the commitments they have made should not cease. I urge those campaigns aimed at ending child poverty to continue. But I believe we need to do something else as well. Where some may see an opportunity today to abandon the goal of ending child poverty, I believe the task for all of those who want to achieve that goal is to define new and credible ways of conceiving that ambition for the tougher times in which we now live. A starting point might be to learn lessons from Labour’s legacy and better understand what went right and what went wrong. There were three strands to the Labour government’s agenda. First, to make work pay. Second, to provide out of work support and benefits to families with children. Third, to invest in education and other services to improve children’s life chances. Overall, substantial progress was made. By 2010, 800,000 fewer children were growing up in relative poverty than in 1997. Even more striking was the reduction in absolute poverty. In 1997, nearly 30% of children

were in absolute poverty. By 2010, this had fallen to just 11%. The real incomes of poor families with children rose substantially during this period. Where did that success come from? There was some success on work, particularly for thousands of single parents. In fact, there was a sharp decline in the proportion of children growing up in single parent households where nobody was in work – from 51% of lone parent families in 1997 to 41% in 2005 – where it has hovered ever since. Worklessness also fell amongst couples with children, but far less dramatically, and it went back up in the recession. Nor did work always ensure that families could escape poverty. Getting a job was no guarantee of getting out of poverty – despite the introduction of the National Minimum Wage and tax credits. In 1997, 48% of the children growing up in poverty lived in a household where one adult worked. By 2010 it was 56%. Too many of those parents who got jobs simply got stuck, not getting good enough pay, working enough hours, or seeing enough career progression to raise themselves out of poverty. The hard truth, then, is this: whilst higher employment and better wages for the lowest paid contributed to the reduction in child poverty, much of the heavy lifting was done by tax and benefit reforms. Big increases in child benefits and tax credits increased the incomes of poor families substantially right up until the end of Labour’s second term. It was in the third term, when benefits and tax credits were not uprated by enough to keep reducing poverty rates at the required pace, that progress on reducing child poverty largely stalled. What about services to improve children’s life chances? Though the tail of poor performers remains too long, progress in many of our schools was strong. Gaps between the educational outcomes of children from low and high income backgrounds narrowed. Children who receive free school meals had faster improving GCSE results than those who do not. Similarly, some ethnic minority groups, such as black afroCaribbean boys, began to close the attainment gap. Primary schools in the poorest areas improved almost twice as fast as those in the most affluent. In secondary schools city academies improved results at four times the national rate despite having twice the number of pupils on free school meals. So the glass ceiling was raised but it was not broken. The education attainment gap between rich and poor narrowed but, as Leon Feinstein’s work demonstrates so graphically, low ability children from wealthy families still overtake high ability children from poor families during primary school. But where it matters most – for young children – big leaps forward were made. All three and four year olds gained access to free early years provision and, later, so did some of the most disadvantaged two year olds. Yet at only 15 hours, many mothers who wanted to struggled to balance childcare with high quality full-time work. Help with costs was provided through the tax credit system. But in too many areas, the

market responded poorly to demand. Britain’s female employment rates didn’t see the gains that might have been expected of such significant investment. Even today, 42 percent of women who work part-time say they do so because of caring responsibilities – the highest figure in the entire OECD. Household income suffered as a result. The child poverty story in the last fifteen years, then, is one of progress though not enough, and then more recently one of stagnation and now in all likelihood one of reversal. And the hard truth is that much of the progress that was made took place in far sunnier times. Today we are facing into two strong headwinds: falling family incomes and declining public spending. Unemployment is rising and real wages are falling – so we won’t be able to rely on the jobs market alone to cut child poverty. Nor do most people realistically expect tax and benefit reforms at a time of such fiscal restraint to provide the resources needed to match the scale of our ambitions. So far then, so bad. This analysis – which I believe to be realistic – will no doubt prompt a sense of despair amongst those who have worked so hard and for so long in the cause of social progress. It needn’t - providing we are prepared to focus on defining the policy mix that can best achieve the goal of eradicating child poverty even as we acknowledge that we will fall well short of the 2020 target. I believe five changes to the current approach are needed. First, it is time to end the current confusion in government between tackling child poverty, increasing social mobility and beating social injustice. The first two have already had government strategy papers dedicated to their cause published this year. The third will get a government white paper next year. There is a danger here of too much resulting in too little. My experience in government of making change is that clarity and consistency are the foundation stones on which progress has to be built. For all the progress we made Labour in government did not have sufficient of either. At some points the priority was social mobility, at others the eradication of poverty. Tony Blair spoke to aspiration, Gordon Brown spoke of equality. Of course we were always on the fairness terrain. But we failed to accurately define what we were trying to achieve – in part because we seemed to be pursuing two notions simultaneously and sometimes independently: one was equality of opportunity, the other equality of outcome. The problem with equality of outcome is self-evident. It would need to be imposed by a central authority and determined irrespective of work, effort or contribution. It would deny humanity not liberate it. The problem with equality of opportunity is, in the words of Tawney, that the invitation for all to come to dinner takes place in the sure knowledge that circumstances would prevent most people from attending.

Today’s world is a very different place from Tawney’s. A globalised capitalist economy and welfare state social democracy have successfully combined to eradicate many of the social evils which gave birth to progressive politics. It is worth reminding ourselves that thankfully today poverty is a stranger to most families in countries like our own. Disadvantage has not been eradicated. Nowadays it simply takes different forms. As Amartya Sen has noted families and communities suffer not only economic disadvantage but social, educational and cultural disadvantage as well. That points to a more holistic agenda being needed. In my view its focus needs to be on how we narrow the gap in life chances between the less well off and the better off so that those who have the aptitude and aspiration to do so get a fair opportunity to progress – regardless of their starting point in life. The goal I believe we should be aiming for is to reduce the extent to which a person’s class or income is dependent on the class or income of their parents. But I am not the Government. My view, however, is that it needs to be clear what is its overall purpose. At present, despite many good intentions, I find that hard to discern. Its coming social justice white paper is the opportunity to replace confusion with clarity. I hope it will make a simple case: because poverty clips wings, if child poverty does not fall social mobility will not rise. These are two sides of the same coin. And the job of government is to make both possible. Second, then, it is time to end the notion that child poverty can be beaten if it remains seen as an issue only for some in our society - when it is actually an issue for all. Last week’s annual British Social Attitudes Survey contained two apparently contradictory conclusions. One was that the public are overwhelmingly sympathetic to ending child poverty. The other was that the public tolerance for those in poverty has fallen dramatically. Public support for benefits spending and income redistribution has almost halved in the last twenty years. Those figures are a wake-up call for all of us who care about this issue. The argument we have made about beating poverty has not been won. In my view it needs to be reframed. To begin with we too often talk about poverty as if it was intractable. Of course, for many it is. There are clear correlations in our country between where you start out and where you end up. If you grow up in poverty the chances are you will live your life in poverty. Equally, however, people’s experience of poverty can often be fluid. There is good evidence to suggest that the numbers living permanently in poverty are dwarfed by those who may at some point in their lives experience it. The fact that many more people feel a sense of insecurity, punctuated with spells below the poverty line, than they experience a lifetime of poverty suggests to me that the fight against poverty should be repositioned as part of a wider battle to tackle insecurity. It should be part of a wider narrative more explicitly tied to what the majority of people in our country think and feel. At its simplest a society where opportunities are hoarded rather than spread hurts more than those at the very

bottom end. It hurts the people President Clinton once famously called the ‘forgotten middle class’. You can see that already with internships. They tend to go to the few who have the right connections not the many who have talent. Yes we need to beat poverty, but social progress - if it is to be for the many not the few in our society also has to be based on the notion of unleashing aspiration and liberating talent. It seems to that such a notion is capable of building a wider coalition of support in our society than the simple plea – vital though it is – to end child poverty. There is a related reason why I believe we should take this approach. The British Social Attitudes Survey reveals that the majority view in our country is that while government should do more to help the poorest, in turn people have a responsibility to do more to help themselves. This streak of self-reliance seems, if anything, to be growing stronger as we enter tougher economic times. Our approach to beating child poverty – if it is to be sustainable and command public confidence - has to align with that view of the word. Of course, it is inconceivable that poverty or disadvantage can be overcome without the State playing its part. Poor people are hardly able to spend their way out of poverty. They need help with education, housing, training, childcare. Government has to help create jobs and put in place the right incentives so that people are able to get off benefits and into work. The Universal Credit, if it can be implemented in the right way could be a major step forward in that regard. So the State has to play its part. Equally, it has to know its place. It is only the State that can equalise opportunities throughout life and empower its citizens. Equally only citizens can seize those opportunities and realise their own aspirations to progress. People have a responsibility to help themselves. At the simplest level it is parents who bring up children, not governments. What parents do holds the key to what their children can do. Parental interest in a child’s education has four times more influence on attainment by the age of 16 than does socio-economic background. Improving children’s life chances means improving support for parents. This is a point I will return to in a moment. Third, however, it is time to end the stand off between competing policy agendas when it comes to tackling child poverty. It is sometimes suggested that we have to choose between an economic-led or an opportunity-led agenda to social justice. Between transferring incomes to those in poverty or instead focussing on improving services. The current government blames the last government for focussing on the one at the expense of the other. But if poverty is to be beaten and mobility advanced we will need less of an either/or mentality and more of an attitude that embraces both approaches. I say that because the international evidence about what works best when it comes to tacking child poverty points overwhelmingly in that direction. The OECD in studying global interventions on child poverty concludes that income transfer programmes to

children in poor families are “certainly of value” and that “raising the income of families of young disadvantaged children in particular is likely to be part of a portfolio of policy solutions.” Equally the OECD warns that income transfers “are not a magic bullet.” It argues that work, what it calls “gainful parental employment is an important route out of poverty for families, and thus for children.” We know that in our country children living in workless households are almost 50% as likely than average to live in poverty. So Iain Duncan Smith is correct to argue that “income through benefits maintains people on a low income, whereas income gained through work can transform lives.” Work is the best antidote to poverty. We know that from history. Social mobility speeded up in the 1950s thanks to a big change in the labour market. The shift from a manufacturing to a services economy drove demand for new skills and opened up new opportunities for professional and white collar employment. More room at the top enabled millions of women and men to step up as a consequence. Social mobility has slowed down in the decades since primarily because of another big change in the labour market: the move to a knowledge-based economy. Since the 1970s technological change has been skills-biased. People with higher skills have seen large increases in productivity and pay while those with low skills have experienced reduced demand for labour and lower average earnings. Today we have a segregated labour market. Those with skills and qualifications enjoy greater job security, higher levels of prosperity and better prospects of social advance. Those without skills find it hard to escape a world of constant insecurity, endemic low pay and little prospect of social progress. Bridging this divide is the key to healing social division in our country. The pupil premium is an important step in this direction. But more must be done. Beating child poverty calls for a bigger effort on the part of government to create jobs, particularly as the risk of a renewed recession rises. It calls for a bigger effort to lift educational standards, particularly in the most disadvantaged areas. It calls for a bigger effort to make work pay, particularly as families face falling real incomes. Above all else, it calls for a bigger effort to make work possible, particularly through improved early years provision. In other words, both an economic and an opportunity agenda are now needed. Fourth, then, it is time to end the mealy-mouthed approach to investing in early years services. The UK significantly under-invests in childcare, spending around 0.5 per cent of its GDP on childcare costs, compared to 2 per cent in Sweden and Denmark. The OECD evidence shows that child poverty is lowest and social mobility is highest where parents can rely on high quality, affordable childcare and early learning services. Having two parents in work in a household massively reduces the chances of the family being in poverty. Widely available, affordable childcare is the best means of securing two incomes for a family, since it dramatically lifts the maternal employment rate. This is the conclusive evidence from the experience of the Nordic countries and

Canadian provinces like Quebec, which have introduced universal pre-school childcare. In Scandinavia child poverty rates are around half of British rates. By contrast the recent OECD report on family policy Doing Better for Families reports that the UK is one of the biggest investors in families across all countries of the OECD spending 3.6 per cent of its GDP in 2007 on family benefits (compared to an OECD average of 2.2 per cent) but that most of the spending is targeted at cash benefits for families. In Scandinavian countries the spending is targeted at services. The report says that Nordic countries which spend proportionally more on services than they do in cash, get ‘more bang for their buck’: "Nordic countries have better outcomes in terms of less child poverty, gender equality, better employment rates in families and better childcare enrolment rates for under sixes". High-quality childcare and early years services must be the foundation stone of a new approach to tackling child poverty. These services demonstrably improve social mobility for low-income children, particularly when coupled with intensive, targeted services of the kind proposed by Graham Allen MP and Frank Field MP for the most disadvantaged families. International and UK research has shown that children who experience high-quality early childhood education and care (ECEC) score higher on language tests, have better social skills and display fewer behavioural problems. Research also shows that children from disadvantaged backgrounds have the most to gain from high quality early years provision. That is why the Government’s commitment to make early years services available to two year olds, as well as three and four year olds, is so welcome. But I believe it should go further. The Government should commit to a long-term plan to make childcare and early years services as universal as they are in countries which enjoy far higher levels of social mobility and far lower levels of child poverty than we do. I accept that the fiscal constraints the country faces mean that this will take time to deliver but I believe it should be a longterm priority for our country. Fifth, we need to end the all-or-nothing approach to tackling poverty. If everything is a priority then nothing is. We face a situation today where the 2020 child poverty target will in all likelihood not be met. Where child poverty if anything is set to increase. And where prospects for economic growth and rises in public expenditure are both under significant duress. In this situation I believe strongly that if we want to make social progress in these next few years we will have to choose between priorities even as we continue to maintain a long term ambition to end child poverty. The priority in my view for these next few years has to be children aged under-five. That is where most effort and most resources should be focussed. I say that because there is now overwhelming evidence that the earliest years of a child’s life shape decisively what happens to them as they grow up and make the transition to adulthood. This is not a blinkered determinism. Of course, there are several make or break moments in a child’s life at which fate can turn – for better or

worse. Poor teaching in a failing school can set children back, just as excellent teaching in an outstanding school can transform their life chances. Nor do I deny that the experience of poverty in later childhood can harm and damage children. It clearly can. But in circumstances where the targets set out in the Child Poverty Act for all children are unlikely to be met and where fiscal constraints are likely to remain tight for many years to come I believe that we have to give a new priority to eradicating child poverty in the earliest years of a child’s life. The long term ambition to eradicate all child poverty should not be lost but the government’s principal focus in the years to come should be the 800,000 children under five years old, about 30% of the total, who currently are living in relative poverty. And the government’s principal weapon in beating the poverty they and their families’ experience should be sustained improvements in early years services. As the OECD has rightly argued “Governments should concentrate spending early in the child’s life cycle….If interventions are well designed, concentrating them into early childhood can enhance both social efficiency and social equity.” That doesn’t mean reducing the direct financial support the Government currently offers those families. We will not beat poverty by making the poor even poorer. Instead, it means prioritising free or affordable, high-quality early years services to children. That may require us to rethink how we measure child poverty so that we don’t skew incentives towards income transfers and away from services. These five changes, in my view, can reignite momentum behind the ambition to beat child poverty. Currently it is in danger of stalling or, worse still, reversing. I do not believe that anyone – government included - wants that to happen. But the omens are not good. The economy is stalling. Public spending is falling. Inequality is widening. We are truly in tough times. It would be wrong if the poorest paid the heaviest price. Preventing that from happening has to be the top priority. That demands not just renewed determination but far greater clarity. It calls for effort and resource to be put behind the things that can make the biggest difference. It calls for an opportunity agenda and an economic strategy not to be in conflict but to be in co-operation. It calls for a strategy that marries short-term realism to long-term vision. The journey that has begun to end child poverty will be longer and tougher than anyone thought it would be. Making progress will be hard. But it has to be done. And I believe we can. I will do all in my power to help bring that about. And I know you will do the same.