Child poverty: what now?

Alison McGovern MP

So the House of Lords did the job that the Commons could not. Without our undemocratic, unelected friends in ermine, the Conservatives would have succeeded in their stated aim to rip up the statutory commitment to end child poverty within a generation. Never mind that the Child Poverty Act received cross-party backing when it was passed – including from the Conservatives in opposition. The Conservatives in government changed their mind. But consistent argument from the Lords proved too tough a nut to crack, and our country’s national goal to end child poverty is preserved for now.

Yet whilst we know the commitment remains in theory, in practice, you can’t help but wonder how much Tory ministers plan to do to actually meet that goal? George Osborne was forced to back down on cuts to tax credits, but unless these cuts are also reversed for the introduction of universal credit, child poverty will rise, as the Institute for Fiscal Studies have forecast.

That is why Labour must take on the challenge – and think hard about how to achieve its mission of ending child poverty. Over a million children escaped poverty when my party was last in power, but we cannot imagine that simply retracing these steps will have a similar impact today. The world is changing, so our ideas must too.

Not least because ordinary British family incomes having taken a battering with a huge wages squeeze since the global financial crisis, now look set to stagnate. Over the coming parliament, the Resolution Foundation say that the richer half of our country looks set to do better than the less wealthy half. Inequality, which largely flat-lined after a big jump in the 1980s, is set to resume its inexorable rise.

The Resolution Foundation’s prediction would come as a surprise if we were just listening to the rhetoric of the current chancellor. 30 years after British Gas was sold off, Osborne is clearly hoping for his own ‘tell Sid’ moment, with adverts for the so-called ‘national living wage’ now being broadcast.

But there is a simple problem with the government strategy of appearing to raise wages, and therefore income, at the bottom. Wages can never discriminate between family type. They can never take account of the extra costs of having children. And they especially cannot respond to the circumstances of lone parents, who have limited ability to increase hours in order to improve their income. Beveridge understood this. That’s why family benefits were included in his plan, which was designed not to transfer money from one group in society to another, but rather, to smooth incomes over a person or family’s lifetime.

This is why, whatever mess George Osborne and Iain Duncan Smith get into, the next Labour government will have to make universal credit work for families. Universal credit should bring more simplicity in the system, but we do not know how effective it will be in lifting family incomes. When the government reversed its cuts to tax credits, these cuts in the fiscal transfer mechanism were in fact maintained, so families will feel the pinch once the switch to universal credit has filtered through the system.

If a future Labour government could drop these cuts, whilst also overseeing a lowering of the cost of the transfer due to wage increases, it would improve matters. But even if we were able to make this change, I don’t think this would get us far enough in taking on the challenges ahead. Financial support for families is still too complicated. Whilst there has long been help with income – from family allowance and child benefit, to working families tax credits – there are also a number of ways in which the state supports families with the cost of childcare. Childcare tax credits, vouchers and tax-free childcare all perform this function, along with an allocation of free hours.

It’s a complicated system that’s easy to misunderstand, and puts much responsibility on the shoulders of working parents to get right. Figures released by the National Audit Office show that only 58 per cent of parents of disadvantaged 2 year-olds are using their entitlement to free childcare and poorer areas continue to lag behind in uptake. We must be able to do better than this. Universal childcare – where parents would have access to free, good quality care for children during working hours – would make a seriously radical change to the choices available to families, and remove many barriers to work.

During the last election Labour and the Conservatives competed over who could offer parents the most free hours of childcare. From November 2014, I had the job of selling our policy of 25 hours of free childcare for 3 and 4 years olds to voters. What initially seemed like a good dividing line between us and the Tories, was then quickly done for when they topped our offer, saying they would provide 30 free hours.

But worse, when even in my own constituency I saw our contact data say that we were struggling to get the attention of voting parents, I knew that the policy wasn’t radical enough. It offered no support to parents until their child was three. And said little about our vision for the life of working parents. All it told them was that we would help them with 10 more hours than they were currently getting for two years of their child’s life.

But universal access to childcare could powerfully open up choice for parents, and be a huge boost to business and our economy. What’s more, because it removes a huge cost from working parents, it’s a powerful tool in the fight against poverty and inequality, providing support for everyone, but with greatest value to those who might otherwise struggle to make work pay.

And finally, if we decide to reshape childcare it will give us a new chance to help parents give their child a good start in life. We know that the earliest years are crucial in terms of learning. Early years professionals are now more skilled than ever, thanks to the early years foundation stage framework, in working with parents to help children learn through play, and get the crucial building blocks for learning.

If implemented with care to maintain those skills in the childcare workforce, universal childcare could therefore also change future life chances for thousands of British kids. For those disadvantaged families, whilst they may be able to access some free childcare when their child is two, a universal entitlement would help them get support earlier, helping them financially and improving access to support to help their child get on. But the challenge of helping a child learn can be daunting for everyone, not just the less fortunate. Many parents find the support of a childcare professional is indispensable. Opening up this opportunity and investing more at an earlier stage in children’s lives could be a boon to our nation’s educational attainment.

Devolution offers an opportunity to start afresh with childcare. As I found out when touring the country to talk about our 25-hours proposal, childcare needs vary greatly across the country. What’s more, the service needs to respond to local economies. So our current system of a complex range of financial support for parents could be replaced with one, accessible service that supported working parents. Plus, as one in three families with childcare needs get help from grandparents, this is a policy for the whole family from young to old.

Building institutions is hard work, but ultimately it is by far the best way to achieve radical and durable change. There are two reasons for this. Firstly, institutions (such as a school or a hospital) can have a more visible, personal relationship with a community of people than a funding programme to provide fiscal transfers to the same group.

I have written before about the administrative problems with tax credits. HMRC failed to respond to public concerns about their processes, or the ‘real life’ experience of receiving government help. But a childcare organisation can genuinely have a personal relationship via its staff with families that need the service. Like a GP’s surgery, or a primary school, an institution can be locally focussed in a way that responds to the context of the people served. This surely means more sustainable public support, alongside a better life experience for families.

Secondly, where institutions do have public support, they are then less vulnerable to Conservative governments and any desire to cut back. All too often, the parliamentary process has failed to protect Labour’s legacy for families. A childcare strategy and service that was owned more widely across local governments may be more robust in the face of Tory cuts.

I am not convinced that newly fashionable ideas such as the universal basic income would prove to be as progressive, practical or ultimately as popular with the public as a childcare system that truly worked for all families in our country. Leave aside the objections about whether it is right in principle to remove the conditionality attached to social security payments, a change which the public would take a dim view of, especially coming from a party already viewed as addicted to high welfare spending. I have yet to see a proposal for a basic income that could possibly provide the current level of support to people who need it, especially the long term sick and disabled, without recreating the bureaucracy it is trying to replace and bankrupting the country in the process.

Universal childcare is a big idea and will take a great deal of work to bring about. Not as expensive as basic income, but still a hefty price tag in a cold fiscal climate, and with complex questions to answer about how it is delivered locally, how to get the right staff and big set up costs. Ideally, there would be a seamless link between postnatal and other medical services and this new childcare, again a complicated organisational challenge. But the prize is worth it. I believe it is an idea worth making real, and something Labour should be fighting for.

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Fabian Review front cover Spring 2016 This article appears in the spring edition of the Fabian Review