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Two-thirds of poor children are in working families - study

Published 16/07/2015

Many children living in poverty have parents who are in work, figures have shown
Many children living in poverty have parents who are in work, figures have shown

Almost two-thirds of children in poverty are living with parents who work, according to a new study.

The Institute for Fiscal Studies (IFS) found that, while levels of absolute child poverty were unchanged between 2009/10 and 2013/14, the proportion living in a working family grew from 54% to 63% as wages lagged behind inflation.

And the independent economic thinktank warned that benefit cuts announced in Chancellor George Osborne's Budget will put upward pressure on absolute poverty for working-age households - including those in work - over the next five years, as planned rises in the minimum wage fail to match welfare reductions.

The findings come just days after Work and Pensions Secretary Iain Duncan Smith announced plans to scrap the Government's legally-binding target of lifting all children out of relative poverty by 2020, to be replaced with measures including levels of parental unemployment.

But IFS senior research economist Robert Joyce said that the new report showed that in-work poverty was having a growing impact on children.

"The Government has recently emphasised worklessness as a cause of poverty," said Mr Joyce, the report's co-author. "This makes sense, but tackling low living standards will be difficult without improvements for working families too."

The IFS analysis of official figures found that the decline in real-terms earnings since 2009, after inflation is taken into account, has forced the proportion of children who are in absolute poverty despite their parents working up from 19% to 21%.

Report co-author and IFS research economist Chris Belfield said: "The recent stability in absolute income poverty among children has masked important and offsetting trends.

"Since 2009/10, a fall in the number of workless families has acted to reduce poverty, but this has been offset by a substantial rise in in-work poverty. This largely reflects the wider nature of the labour market since the recession: robust employment and weak earnings."

Child Poverty Action Group chief executive Alison Garnham said the report showed the "absurdity of the Government's attempt to amend the Child Poverty Act to say there's no such thing as working poverty".

Ms Garnham said: "Almost two-thirds of poor children are now in working families and if the Chancellor's cuts to in-work tax credits go ahead, then the numbers will continue to rise.

"Removing those children from the scope of poverty measures cannot redefine the reality of their poverty out of existence. Parents need politicians to strengthen, not weaken, work incentives. Rather than spending billions on tax cuts which benefit the better off, the Government should stop cutting tax credits and universal credit and start tackling the high housing and childcare costs that are holding parents back."

Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: "A strong economy and rising employment have masked the growing problem of in-work poverty, as years of below-inflation wage rises have taken their toll on people's incomes. The upcoming minimum wage rise will help, but many low-income working families will still find themselves worse off due to tax credit changes.

"Boosting productivity and creating more jobs which offer progression at work is vital to make work a reliable route out of poverty."

For Labour, acting shadow work and pensions secretary Stephen Timms said: "This IFS report shows David Cameron and George Osborne have overseen a huge increase in the number of children in poverty who live in working families and they're set to make matters worse with huge tax credit cuts for working people.

'We urge ministers to act now to cut the number of children of working families living in poverty. That means tackling low pay rather than attacking the low-paid with tax credit cuts."

Scottish National Party MSP Joan McAlpine said: "This is damning new evidence from the IFS of the appalling impact David Cameron and George Osborne's relentless attack on the working poor is having - and it is clear that it is vulnerable children who are paying the price.

"The Tory Government should be utterly ashamed that the number of children from working families living in poverty has grown under their watch - but as we saw with last week's Budget, they are intent on intensifying their punitive cuts agenda as their slavish devotion to right-wing ideology trumps any commitment to supporting those in need."

A Government spokesman said that the number of people in in-work poverty is 200,000 lower than at its peak in 2008/09.

The spokesman said: "This report recognises that rising employment has led to increases in the proportion of children living with working parents. And we know that the proportion of people living on low incomes is at the lowest level since the mid-1980s.

"Work remains the best route out of poverty and we want to ensure that when people go out to work they are paid a decent wage and get to keep more of what they earn. That is why we have introduced a new National Living Wage and are increasing tax thresholds so Britain can move from a low wage, high tax and high welfare economy to a higher wage, lower tax and lower welfare society."

Barnardo's chief executive Javed Khan said: "This report puts paid to the myth that work alone provides a route off the breadline, discrediting the Government's Budget plans to cut families' lifeline tax credits.

"With every day that passes, more families tell Barnardo's they face debt, hunger and homelessness because low wages and benefits changes have left them unable to pay for the basics - no matter how hard they work. Government plans to cut these families' crucial benefits will only push more children into poverty."

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