Cost of ending child poverty will increase due to recession

Findings published today by the Institute of Fiscal Studies suggest that the government would need to spend £4.2bn extra on tax credits for low-income families in the next financial year in order to hit the short-term target of reducing the number of children in poverty from 3.4m in 1998/99 to 1.7m in 2010/11.

Kate Green, chief executive of the Child Poverty Action Group, backed the recommendations made in the report. "Investing in low income families is one of the most effective forms of fiscal stimulus. It can be done quickly through tax credits and benefits and it supports immediate spending in the grass roots of the economy," she said.

Last year, IFS predicted that an injection of £2.8bn was required in the next budget to ensure the 2010 target was met. However, the research, funded by the Joseph Rowntree Foundation, indicates that the current economic climate is pushing low-income families further into poverty, and if action is not taken there will be 600,000 children in poverty above the target come 2020/11.

The IFS now believes another 30 per cent increase in the per-child element of the Child Tax Credit is required.

The research also indicates that if the government were to meet their target to eradicate child poverty to only 10 per cent of children (living in households with an income of less than 60 per cent of the median income) by 2020, it would cost £19bn in tax credit and benefit packages.

However, the IFS did point out that eradicating child poverty would involve the government doing much more than simply redistributing income to low-income families with children.