Wednesday, March 28, 2007

The IFS on child poverty

I love the Institute for Fiscal Studies. They can produce a 51-page document [PDF] with a mass of tables and charts, and then call it, with a straight face, a ‘briefing note’.

It looks at, among many other things, the detail of the rise in relative child poverty from 2004-05 to 2005-06 (see table 8 on p. 33 and the discussion on p. 34). This breaks down into a rise in child poverty rates in two-parent families (most significantly in ones where income comes from self-employment), which is partly offset by a fall in child poverty rates among lone-parent families:

“The pattern of incidence effects across family types shows us that the rise in child poverty in 2005–06 is chiefly due to a rise in the risk of poverty for children in couple families: the risk of relative poverty fell for children in the three types of lone-parent families but rose for children in all two-parent family types except those with two full-time earners.
“… On average, children in lone-parent families have a higher risk of poverty than children in couple families, but the continuing rise in the proportion of lone parents who work – a factor that acts to lower the risk of poverty – more than outweighs the former factor.
“…the fraction of children in poverty who live in couple families rose from 57.4% in 2004–05 to 60.3% in 2005–06, and the fraction in families with someone in work rose from 48.4% to 49.9%. Both changes may well increase the desire to introduce income tax or tax credit reforms that direct more support to couples with children or to working (rather than non-working) parents.”

Elsewhere, they use simulation methods to judge whether the small rise in overall income inequality (measured by the Gini coefficient) in the last year was due to tax and benefit policies. They find that policy changes were redistributive, but only just:

“Tax and benefit reforms affecting incomes in 2005–06 appear to have had very little impact on overall levels of inequality, but what effect they had was to reduce inequality slightly: our simulations suggest that had the 2004–05 tax and benefit system remained in place in 2005–06, the Gini coefficient for net income would have been very slightly higher than actually observed”

And on last week’s Budget, they say:

“We agree with the assessment made by HM Treasury that the measures in Budget 2007 mean that child poverty will be 200,000 lower than if they had not been introduced.”

Make of that, and the rest of the ‘briefing note’, what you will.

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