Social Policy Research Unit
ANALYSIS OF THE IMPACT OF INCREASES TO
CHILD BENEFIT AND CHILD TAX CREDITA ON CHILD POVERTY RATES IN THE UK AND
SCOTLAND
Objective
The
Scotland Act 2015-16 gives the Scottish Government new powers to top-up social
security payments. The Child Poverty
Action Group in Scotland asked us to estimate what impact increasing child
benefits and child tax credits might
have on child poverty rates in Scotland. We have also made estimate for the
whole of the UK. This is an update of an analysis of 2013/14 Households Below
Average Income data
To
make these estimates we used the latest 2015/16 Households Below Average Income
data based on the Family Resources Survey (FRS). In the case of the child
benefit simulations we increased the income of the household by the child
benefit increase multiplied by the number of dependent children in the
household. This assumes that child benefit is being claimed for all children
and ignores the fact that child benefit is taken back from households with an
earner earning £50,000 plus per year. This would have no impact on the child
poverty simulations.
An
increase in child benefits and child tax credit would increase median incomes
and therefore the contemporary 60% of median poverty threshold. It is a moot
point whether we should take account of this. In the tables below we have simulated
the impact on poverty rates using a fixed threshold.
Results
In
2015/16 the child poverty rate before housing costs (BHC) in the UK was 20.1 %
and after housing costs (AHC) was 29.8% (which is the same as the published
HBAI numbers). The sample contains 11,501
dependent children. Child poverty rates in Scotland were 19.0% BHC and 26.2%
AHC based on a sample of 1,204 children. Table 1 provides an illustration of
the child benefit top up at various amounts and their impact on child poverty
reduction after the median incomes are adjusted. So for example an increase of
£2 per child per week would reduce child poverty in Scotland by 6.3% BHC and 3.9%
AHC.
Table 1: Illustration of the impact of
additional Child Benefit has on the child poverty rate based on the HBAI
2015/16 household level data (weighted by number of children in the household).
Median incomes not adjusted.
|
Extra
CB £ per child per week
|
No of children living
< 60% median income in the UK
|
Child poverty % in the UK
|
Child poverty reduction % in the
UK
|
No of children living < 60%
median income in Scotland
|
Child poverty % in Scotland
|
Child poverty reduction % in
Scotland
|
|
BHC
|
|
|
|
|
|
|
|
0
|
2068
|
20.1
|
|
207
|
19.0
|
|
|
1
|
1999
|
19.4
|
3.3
|
196
|
18.0
|
5.3
|
|
2
|
1949
|
18.9
|
5.8
|
194
|
17.8
|
6.3
|
|
5
|
1732
|
16.8
|
16.2
|
174
|
16.0
|
15.9
|
|
10
|
1454
|
14.1
|
29.7
|
158
|
14.5
|
23.7
|
|
AHC
|
|
|
|
|
|
|
|
0
|
3071
|
29.8
|
|
285
|
26.2
|
|
|
1
|
3010
|
29.2
|
2.0
|
278
|
25.6
|
2.5
|
|
2
|
2942
|
28.6
|
4.2
|
274
|
25.2
|
3.9
|
|
5
|
2698
|
26.2
|
12.1
|
246
|
22.6
|
13.7
|
|
10
|
2335
|
22.7
|
24.0
|
226
|
20.8
|
20.7
|
In
the following tables the analysis is repeated using population weights.
The
estimated overall child poverty rate (BHC) in 205/16 was 19.6% (29.6% AHC).
This figure is based on an estimated population of 13,523,332 dependent
children in the UK derived from the HBAI household level data after weighting
applied. Child poverty rate (BHC) in Scotland was 19.2% (26.0% for AHC) based
on an estimated population of 984,526 dependent children living in Scotland.
Table
2 provides the illustration without adjusting the median incomes. So for
example an increase of £2 per child per week would reduce child poverty in
Scotland by 4.3% BHC and 3.6% AHC.
Table 2: Illustration of the impact of
additional Child Benefit has on the child poverty rate based on the HBAI
2015/16 data (weighted by ‘gs_newbu’ multiplied by ‘depchldh’). Median incomes
not adjusted.
|
Extra
CB £ per child per week
|
No of children living
< 60% median income in the UK
|
Child poverty % in the UK
|
Child poverty reduction % in the
UK
|
No of children living < 60%
median income in Scotland
|
Child poverty % in Scotland
|
Child poverty reduction % in
Scotland
|
|
BHC
|
|
|
|
|
|
|
|
0
|
2650573
|
19.6
|
|
189029
|
19.2
|
|
|
1
|
2580183
|
19.1
|
2.7
|
182256
|
18.5
|
3.6
|
|
2
|
2529793
|
18.7
|
4.6
|
180932
|
18.4
|
4.3
|
|
5
|
2257391
|
16.7
|
14.8
|
162471
|
16.5
|
14.0
|
|
10
|
1909908
|
14.1
|
27.9
|
149048
|
15.2
|
21.2
|
|
AHC
|
|
|
|
|
|
|
|
0
|
4012678
|
29.6
|
|
255990
|
26.0
|
|
|
1
|
3941606
|
29.1
|
1.8
|
250711
|
25.5
|
2.1
|
|
2
|
3851804
|
28.4
|
4.0
|
246734
|
25.1
|
3.6
|
|
5
|
3573965
|
26.4
|
10.9
|
226299
|
23.0
|
11.6
|
|
10
|
3136577
|
23.2
|
21.8
|
210144
|
21.4
|
17.9
|
CHILD TAX CREDITS
Method
To
make these estimates we used the latest 2015/16 Households Below Average Income
data based on the Family Resources Survey (FRS). In the case of the child tax
credit simulations we increased the child tax credit for all children in
households if they reported receiving some child tax credit. No account is
taken of the two child limit or the benefit cap – it assumes that they have
already been abolished. It takes no account of how this increase might impact
on other benefits. It is also to be noted that the FRS has a tendency to under report
means-tested benefit receipt compared to the administrative data, in
particular respondents can get confused if they are receiving child tax credit
and child benefit.
An
increase in child tax credits would increase median incomes and therefore the
contemporary 60% of median poverty threshold. It is a moot point whether we should
take account of this. In the tables below we have only simulated the impact on
poverty rates using a fixed threshold.
Results
In
2015/16 the child poverty rate before housing costs (BHC) in the UK was 20.1%
and after housing costs (AHC) was 29.8% (which is the same as the published
HBAI numbers). The sample contains 11,
501 dependent children. Child poverty rates in Scotland were 19% BHC and 26.2%
AHC based on a sample of 1,204 children.
Table
3 provides estimates of how a variety of child tax credit increases would
reduce child poverty. For example a £2 per child per week increase in child tax
credits would reduce child poverty in Scotland by 4.4% BHC and 2.6% AHC.
|
Extra
CTC £ per child per week
|
No of children living
< 60% median income in the UK
|
Child poverty % in the UK
|
Child poverty reduction % in the
UK
|
No of children living < 60%
median income in Scotland
|
Child poverty % in Scotland
|
Child poverty reduction % in
Scotland
|
|
BHC
|
|
|
|
|
|
|
|
0
|
2068
|
20.1
|
|
207
|
19.0
|
|
|
1
|
2011
|
19.5
|
2.8
|
199
|
18.3
|
3.9
|
|
2
|
1976
|
19.2
|
4.4
|
197
|
18.1
|
4.8
|
|
5
|
1782
|
17.3
|
13.8
|
182
|
16.7
|
12.1
|
|
10
|
1543
|
15.0
|
25.4
|
169
|
15.5
|
18.4
|
|
AHC
|
|
|
|
|
|
|
|
0
|
3071
|
29.8
|
|
285
|
26.2
|
|
|
1
|
3022
|
29.3
|
1.6
|
280
|
25.8
|
1.8
|
|
2
|
2966
|
28.8
|
3.4
|
277
|
25.5
|
2.8
|
|
5
|
2751
|
26.7
|
10.4
|
253
|
23.3
|
11.2
|
|
10
|
2423
|
23.5
|
21.1
|
233
|
21.4
|
18.2
|
Table 4: Illustration of the impact of
additional child tax credits has on the child poverty rate based on the HBAI
2015/16 data (weighted by ‘gs_newbu’ multiplied by ‘depchldh’). Median incomes
not adjusted.
|
Extra
CTC £ per child per week
|
No of children living
< 60% median income in the UK
|
Child poverty % in the UK
|
Child poverty reduction % in the
UK
|
No of children living < 60%
median income in Scotland
|
Child poverty % in Scotland
|
Child poverty reduction % in
Scotland
|
|
BHC
|
|
|
|
|
|
|
|
0
|
2650573
|
19.6
|
|
189029
|
19.2
|
|
|
1
|
2591317
|
19.1
|
2.2
|
184371
|
18.7
|
2.5
|
|
2
|
2550802
|
18.8
|
3.8
|
183047
|
18.6
|
3.2
|
|
5
|
2310371
|
17.1
|
12.8
|
167993
|
17.1
|
11.1
|
|
10
|
2025434
|
15.0
|
23.6
|
158194
|
16.1
|
16.3
|
|
AHC
|
|
|
|
|
|
|
|
0
|
4012678
|
29.6
|
|
255990
|
26.0
|
|
|
1
|
3960137
|
29.2
|
1.3
|
252611
|
25.7
|
1.3
|
|
2
|
3891351
|
28.7
|
3.0
|
249827
|
25.4
|
2.4
|
|
5
|
3657416
|
27.0
|
8.9
|
233347
|
23.7
|
8.8
|
|
10
|
3264108
|
24.1
|
18.7
|
217192
|
22.1
|
15.2
|
Conclusion
If
the Scottish Government decided to increase child tax credits unilaterally it
would not have much impact on the UK poverty threshold. So it is not
unreasonable to focus on the fixed poverty threshold. If the Scottish
Government was to increase child tax credits by £5 per child per week 22,643
children would be lifted out of poverty AHC and if the increase was £10 per
child per week the poverty 38,798 children would be lifted out of poverty.