Tackling Child Poverty

Maximising Income

Related to the discussion around income events that drive social mobility there are many opportunities to support households to maximise their income. Of course the reality of family life is far more complex than simply being able to separate income events from demographic events as they have a entirely intertwined relationship with each other. For example there are financial implications associated with marriage, birth, death and divorce and demographic implications as a consequence of fluctuating household finances.

Poverty & Work

One or more people work in greater than half of the households in Wales living at or below 60% of UK median income. This is known as in living in ‘work poverty'. If we then look at all of the households in Wales that live on 50% or less of UK median income worklessness predominates. This is the most fundamental relationship between work and poverty that indicates work is a principal determinant of a household's socio economic status.

Based on latest household income data from 2008-09 the IFS predictions show that relative poverty in 2010–11 will be about 300,000 lower among both children and working-age parents than it was in 2008–09. They say that this trend is driven largely by the fact that forecast median net income is set to fall in real terms over those two years. This reduced the 60% of median relative poverty line. Absolute poverty is forecast to remain stable among families with children over this period.

Read more about workless households in Wales Online here.

Minimum Income Standards

What is the Minimum Income Standard? from Joseph Rowntree Foundation on Vimeo.

In 2008 the Joseph Rowntree Foundation published the first minimum income standard (MIS) for the whole of the UK. Over time, changes in prices affect the cost of a minimum standard of living and changes in social norms change the 'minimum' that is required. This study considers both of these, and updates the MIS budgets to April 2011.

This report shows:

• What incomes different family types require in 2011 to meet the minimum standard; and
• how much the cost of a minimum household budget has risen since the last update in 2010.

The findings also reflect important changes in the tax and benefits systems.

Click here to read more about the JRF's Minimum Income Standard (MIS) for the UK in 2011.

Minimum Income Calculator

Do you earn enough for a minimum acceptable standard of living in the UK? Go to the JRF's standard of living calculator to find out.

The Minimum Wage

The minimum wage was established in 1998 as part of the UK government driven programme to drive up household incomes through work. The Low Pay Commission (LPC) was established as an independent body as a result of the National Minimum Wage Act 1998 to advise the Government about the National Minimum Wage. The table below shows how the minimum wage has increased over time since its inception.

Click here to download the Low Pay Commission report 2011.

Redistribution of wealth via Tax and benefits

Note that this is not a devolved area of government. The Welsh Government is in a position to lobby and influence national policy making decisions in this area but there are currently no devolved powers for Welsh Government to create it's own tax or benefits policy.

Alongside the minimum wage the UK tax and benefits system has played a pivotal role in influencing incomes to the poorest households.

Taxes and benefits must be seen as two parts of the same equation if we are to look at the principle of wealth redistribution via the state. In 2007-08

· the poorest fifth of households had an average gross annual income of £11,105 on average, and paid £4,302 a year in tax, a ratio of 38.7%. Benefits and tax credits account for £6,453 of the £11,105 average gross income of the poorest fifth of households. Private income from sources such as earnings, private pensions and investments was an average of £4,651. The poorest fifth of households were clearly net beneficiaries from tax and benefit to the value of £2,151 a year, on average for 2007-08

· the richest fifth of households had an average gross annual income of £74,247, and paid £25,926 in tax, a ratio of 34.9%. The richest fifth of households received £1,666 a year in income from the state, and so they are net contributors to the Government's coffers, to the tune of £24,259 a year, on average.

The simple breakdown above shows that the net tax rate of the poorest fifth is -46% of their original income. The negative number reflects that they are net beneficiaries of the tax and benefits system. By the same calculation the richest fifth have a net tax rate of +33% of their original income showing they are net contributors to UK tax and benefits coffers. One can therefore argue that the tax and benefit system on the whole redistributes wealth from the rich to the poor.

The UK government has proposed changes to the UK benefits system, known as the Universal Credit. Read Realising the full benefits of Universal Credit for more information.

Childcare

Save the Children has conducted some recent research that explores low income households relationship with childcare. Click here to

Click here to see some estimates of the costs of child poverty by Local Authority area

In 2004 the Welsh Assembly Government published Childcare and Early Years Provision in Wales - A Study of Parents' Use, Views and Experiences, a study that provided information on parents' use, views and experiences of childcare and early years provision. The Welsh Assembly Government and the Department for Work and Pensions (DWP) commissioned the National Centre for Social Research (NatCen) to carry out the study at the same time as the Department for Education and Skills (DfES) commissioned a study of childcare use in England.

The resulting Childcare Strategy for Wales – Childcare is for Children sets out in more detail how the Welsh Assembly Government intended to tackle the challenges of children having the flying start in life they deserve.

Although Local Authorities don't generally provide since 2006 every council is obliged to undertake an assessment of the sufficiency of childcare in its area under duties enshrined in the Childcare Act 2006.

A review of childcare across all 22 Local Authorities in Wales was conducted by the Welsh Assembly Government in 2010. It found a lack of understanding about exactly where childcare is needed to support employment, and little support for disabled children, or those with additional needs.

Across Wales there is a very strong link between the amount of childcare and poverty. In areas of higher deprivation there is less childcare which creates a vicious circle of inability to work and increased risk of households falling into or remaining in poverty. Blaenau Gwent has the least provision in Wales, with just one childcare place per 23 children generating an estimated cost to the local economy £4.8m in earnings alone because parents can't work due to cited childcare difficulties. It is also the Local Authority with the highest proportion of children living in households in Severe poverty (50% of median). Also see Children in severe poverty in Wales: an agenda for action

The 2010 government review identified 7 childcare priorities

• Ensure there is enough good quality childcare in every locality
• Developing infrastructure, including links to regeneration and community projects
• More flexible and changing patterns to meet parent needs
• Supporting childcare enterprises
• Improve skills and attract more childcare workers - there are 18,978 in the sector in Wales, 2.400 businesses and 2,000 childminders
• Improved information to parents on options and finance available
• 'Joined up' programmes to meet local needs and provide consistent quality

Wealth calculator

How rich do you think you are, compared to everyone else in the UK? Do you feel pretty well-off, rather poor, or just 'in the middle'? It's a simple enough question, but you may be surprised by the answer. The IFS website offers a calculator called (imaginatively enough) 'Where Do You Fit In?' Punch in the number of people in your household, their income (after tax) and the amount of council tax you pay, and it'll tell you exactly where you fit in to the UK income distribution.

Financial Inclusion

Includes access to affordable banking and savings accounts that give a reasonable return in investment and current accounts that offer opportunities for families to pay for goods and services on line, including setting up direct debits and standing orders to ensure bills are paid on time and do not incur additional charges or interest fees.

The Welsh Government has published a Financial Inclusion Strategy and associated Action Plan to identify the work which needs to be undertaken by the Welsh Government in collaboration with relevant stakeholders, to address the problems associated with financial exclusion.

Credit Unions

Financial exclusion and tackling poverty, specifically child poverty, have been key political issues since 1997 and the importance of credit unions in dealing with these issues has been a regular theme of government.

The ideas and values central to how credit unions work were developed in the 19th century. In Britain they were the work of pioneers such as Robert Owen. In Ireland the first credit union was founded in 1958 and now approximately 50% of the population belong to a credit union. In England, Scotland and Wales Credit Unions have taken some time to take off. The Association of British Credit Unions Ltd (ABCUL) is the leading trade association for credit unions in England, Scotland and Wales.

Credit Unions market themselves as a membership collective that offers accessible and affordable financial services in the form of low cost loans and a safe and convenient way to save. Service can include current accounts, debt management advice and Christmas savings accounts.

Credit unions in Wales play a growing role in offering affordable and accessible financial services in deprived communities. In December 2010 the Welsh Assembly Government published Raising the Profile: Meeting the Challenges, a three year Action Plan for supporting the Welsh credit union sector.

Sleeping giants: unlocking the potential of credit unions in Wales by Professor Mark Drakeford purports that a productive future for Welsh credit unions lies in concentrating upon potential members whom banks and building societies have neither the desire nor ability to serve, rather than in competing with mainstream financial services, and in a new emphasis on retaining those members, once recruited.

Doorstep Lending

Home credit, or doorstep loans, is where you borrow money and the lender calls at your home to collect the repayments. To lend money lawfully you have to be licensed by the Office of Fair Trading (OFT). People who lend money without a licence are breaking the law. They are known as loan sharks. Click here to Citizens Advice for more information.

Poverty Premium

The poorest families in the UK pay higher prices than better-off families for basic necessities like gas, electricity and banking. The costs that poor families bear in acquiring cash and credit, and in purchasing goods and services, can amount to a ‘poverty premium' of around £1,000 – 9 per cent of the disposable income of an average-size family.

Also read The UK Poverty Rip Off.

Financial Literacy

Financial literacy at it's most basic level is a measure of a person's ability to understand their household finance. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions through their understanding of finances.

Although financial literacy primarily deals with a set of adult skills at the household level it is importantin the context of child poverty because a parent's ability to make well informed decisions about the best use of household resources has a direct impact on the wellbeing of any children present. Of course it is also important to recognise that children and young people also need to be financially literate. Financial literacy starts with basic skills and the Early Years through the whole of their educational career to support them to leave school with the appropriate financial literacy skills.

In Wales the National Basic Skills Strategy was published in 2001 and in 2007 Raising the level of literacy and numeracy in Wales. The Welsh Government has created a set of Financial Literacy resources to be used as part of the PSE framework at Key Stage 4.

In 2004 the Basic Skills Agency was funded by the Department for Education and Skills to undertake an audit of the resources available to support financial literacy for Adults. Download the Audit of Financial Literacy Resources here. The Financial Literacy Resource Centre was set up as a result of the audit.

Are CFS doing anything on Financial Literacy ?

The Money Advice Service

The money advice service was launched on the 4th April 2011.

It is advertised as a free, unbiased service to help everyone make the most of their money. The Money Advice Service will help people take the right financial decisions and act on them, by giving personalised advice online at moneyadviceservice.org.uk over the phone on 0300 500 5000, and face-to-face across the UK through a national network.

The Money Advice Service aims to revolutionise the way people in the UK think about and manage their money. Research shows that if people feel in control of their finances they feel better off, have a greater sense of wellbeing, and are happier.

Fuel Poverty

Households are considered by the Government to be in 'fuel poverty' if they would have to spend more than 10% of their household income on fuel to keep their home in a 'satisfactory' condition. It is thus a measure which compares income with what the fuel costs 'should be' rather than what they actually are. Whether a household is in fuel poverty or not is determined by the interaction of a number of factors, but the three obvious ones are:

• The cost of energy.
• The energy efficiency of the property (and therefore, the energy required to heat and power the home)
• Household income.

To read more Click here to NEA Cymru.

Digital Inclusion

Captain Cooke took 2 years and 320 days to sail to Australia and return with the news of what he found there. Yesterday 25 hours of new content was posted to YouTube every minute of the day. 500 exabytes of information were seamlessly transferred across the globe, more than 2.5billion mobile minutes were exchanges across Europe and millions of internet searches were requested. This is the reality of the digital world in which we live. Exclusion from it makes lives poorer.

The ability of people to use new technologies is as important as reading and writing. Individuals who do not have those skills are likely to become increasingly economically and socially disenfranchised. It is an agenda about people and improving their lives, being able to communicate more easily; getting goods more easily and for lower prices and about being able to access public services more easily. Digital inclusion is also about reducing social isolation. It is about people being able to benefit, both as citizens and consumers.

The House of commons Welsh Affairs committee in 2009 found no evidence that digital exclusion is significantly greater or different in nature in Wales compared to the rest of the UK, although there are clearly factors which are of particular relevance. For example, we were disappointed to note that no account had been taken with regard to the needs of Welsh language speakers in the Digital Inclusion Action Plan and recommend that the UK Government and the Welsh Assembly Government give careful consideration to the Welsh Language Board's recommendations with regard to the needs of Welsh language speakers.

Digital inclusion has to involve tackling a number of disparate issues. People may be excluded from the digital age because:

• They lack the skills and understanding to gain access to the internet or to use electronic communications and may not understand what would be opened up by having that access. This may also come down to a lack of ambition and confidence with a particular impact on elderly people and on people in deprived areas;
• They cannot afford the equipment and the training necessary to gain access to the internet, or can only do so intermittently;
• They lack access to broadband, because it is not available in their local area - something that is often highlighted in regard to rural areas but can apply to urban areas too.

In December 2010 the Welsh Assembly Government published Delivering Digital Inclusion: A Strategic Framework for Wales. The strategy makes it clear that it intends to bring clear strategic leadership, but says that progress can only be made through the concerted efforts of the private, third, and public sectors, and cannot be delivered by the Welsh Assembly Government alone.

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