Children in receipt of tax credits
- The number of children in working families taken out of low income by the money received from tax credits was 1.1 million in 2008/09. This is 0.8 million higher than the 0.3 million taken out of low income by the predecessor to tax credits in 1998/99.
- Over the same period, however, the total number of children in working families who were either in low income despite tax credits, or would have been in low income but for the credits, increased from 2.4 million in 1998/99 to 3.3 million in 2008/09.
- In other words, as the number of children helped by tax credits to escape low income has increased, so too has the number needing tax credits in order to do that. One result of this is that the number of children in working families who are in low income is actually no lower than a decade ago despite the introduction of tax credits
- The 1.1 million children not in low income thanks to tax credits represents a quarter of all the children in families receiving the credits. Another third (1.4 million) is made up of children whose families receive tax credits but are still in low income despite this. The other half or so (2.0 million) are children who would not be in low income even if their families did not receive tax credits.
- Tax credits are more effective in taking children in lone parent families out of low income than they are for those in couple families: three-fifths of children of lone parent recipients who would have been in low income without tax credits are lifted out of low income by the credits compared with two-fifths of children in couples.
Tax credits are the government's chosen vehicle for reducing in-work poverty, particularly for families with children.
The first graph provides an analysis of the number of children in working families where, excluding tax credits (and their predecessors), the household is in low income. For each year, it shows the number of children in three categories, namely: not in receipt of tax credits; in receipt of tax credits (over and above the family element) but still in low income; and in receipt of tax credits and, as a result, no longer in low income. Note that the restriction to working families only is important as the child supplements of some out-of-work benefits (although not the base benefits themselves) are now considered by the government to be tax credits rather than benefits so their inclusion would have made the data non-comparable over time.
The second graph provides, for the latest year, an analysis of the children in working families in receipt of tax credits over and above the family element. The first two categories - those who are still in low income and those who, as a result of tax credits, are no longer in low income - are the same as in the first graph. The third category is children whose household would not be in low income even without tax credits.
The third graph provides, for the latest year, an analysis of how effective tax credits are in taking children in working families out of low income. For both couples and lone parents, it shows the proportion of children in working families in receipt of tax credits who would be in low income without the credits but have been taken out of low income because of the credits.
The data for all the graphs is from Households Below Average Income, based on the Family Resources Survey. The data in the first graph relates to Great Britain whilst that in the second and third graphs relates to the United Kingdom (FRS did not cover Northern Ireland until 2002/03). As elsewhere, the low-income threshold used is 60% of contemporary median household income after deducting housing costs. To ensure comparability over time, the data for 1998/99 and earlier includes recipients of Disability Working Allowance as well as Family Credit while the data for 2003/04 onwards excludes those just receiving the family element of Child Tax Credit.
Overall adequacy of the indicator: medium. All the data is considered to be reliable and provides reasonable estimates. However, the extensive changes in the system from year to year make the data somewhat difficult to interpret.
- See the 2008 Joseph Rowntree Foundation report entitled Addressing in-work poverty.
- See the HM Revenue & Customs site on tax credits and tax credit statistics.
- See the HM Revenue & Customs website pages on estimates of the tax credit take-up.
Overall aim: Halve the number of children in poverty by 2010-11, on the way to eradicating child poverty by 2020.
Official national targets
Reduce by a half the number of children living in relative low-income by 2010/11.
Other indicators of progress
Number of children in absolute low-income households.
Number of children in relative low-income households and in material deprivation.
Previous 2004 targets
Halve the number of children in relative low-income households between 1998/99 and 2010/11, on the way to eradicating child poverty by 2020, including:
- reducing the proportion of children in workless households by 5% between spring 2005 and spring 2008; and
- increasing the proportion of parents with care on Income Support and income-based Jobseeker's Allowance who receive maintenance for their children by 65% by March 2008.
|Getting tax credits; lifted out of low income||Getting tax credits; still in low income||Not getting tax credits; in low income|
|Still in low income||1,400,000|
|No longer in low income because of the tax credits||1,100,000|
|Would not be in low income even without the tax credits||2,000,000|
|Children in couple families||37%|
|Children in lone parent families||61%|