Tuesday, 24 October 2017

ANALYSIS OF THE IMPACT OF INCREASES TO CHILD BENEFIT AND CHILD TAX CREDITA ON CHILD POVERTY RATES IN THE UK AND SCOTLAND


Social Policy Research Unit


 October 2017

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

 CHILD BENEFITS

 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 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

 Conclusion
If the Scottish Government were to increase child benefit by £5 per child per week 30,000 children would be lifted out of poverty AHC and if the increase was £10 per child per week the poverty 46,000 children would be lifted out of poverty.

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.

 Table 3: Illustration of the impact of additional child tax credit 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 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 provides the same data using population weights. The estimated overall child poverty rate (BHC) in 2015/16 was 19.6% (29.6% for 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 is applied. The 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.
An increase of £5 per child per week would reduce child poverty in Scotland by 11.1% BHC and 8.8% AHC.

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.

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