Gov Tax Plans Will Increase Poverty – IFS

A report by a major economic research institute has found the Governments policies on tax and benefits will lead to a major increase in poverty over the next few years.

The forecast from the Institute for Fiscal Studies (IFS) into the UK's poverty levels up to 2021 predicts poverty will rise by about 600,000 children and 800,000 working-age adults. Meanwhile, median income will fall by around 7% in real terms, the largest three-year fall for 35 years.

James Browne, one of the authors of the report, pointed out that child poverty targets of between five and ten per cent were "supposedly" legally binding for the Government under the Child Poverty Act, and were not on track to be met.

“The previous government significantly increased spending on benefits and tax credits for families with children, and child poverty fell by nearly a quarter between 1998 and 2009, but this was still not enough for the government to hit its child poverty targets. "

"The Child Poverty Act imposes even more stringent targets in a much more constrained fiscal environment. Even if there were an immense increase in the resources made available, it is hard to see how child poverty could fall by enough to hit this supposedly legally binding target in just nine years."

Mr Browne challenged the Government to set out concrete suggestions about how it will achieve the child poverty targets, "ideally backed up by quantitative modeling similar to that in our report".

A damaging section of the report found that absolute and relative child poverty is forecast to reach 24% by 2021 respectively, compared to the targets of 5% and 10%, set out in the Child Poverty Act, which was passed with cross-party support last year.

"This would be the highest rate of absolute child poverty since 2001-02 and the highest rate of relative child poverty since 1999-2000," the report said.

The report also found that the period between 2009-10 and 2012-13 is likely to be dominated by a large decline in real incomes for everyone, while the Universal Credit being introduced by Chancellor George Osbourne would make no net direct effect.

The IFS claimed the Government's switch from the use of the Retail Price Index to the Consumer Price Index to means-tested benefits was a key contributor to the problem, and would decrease the relative value of benefits and pensions, plunging vulnerable people into deeper poverty.

(DW/CD)