United Kingdom

Children in receipt of tax credits

Key points

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Graph 1: Over time

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Graph 2: By group

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Graph 3: By family type

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Why this indicator was originally chosen

Tax credits are the government's chosen vehicle for reducing in-work poverty, particularly for families with children.

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Definitions and data sources

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.

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External links

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Relevant 2007 Public Service Agreements

Overall aim:  Halve the number of children in poverty by 2010-11, on the way to eradicating child poverty by 2020.

Lead department

HM Treasury.

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:

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The numbers

Graph 1

Year Thousands
Getting tax credits; lifted out of low income Getting tax credits; still in low income Not getting tax credits; in low income
1994/95 200K 400K 1,300K
1995/96 300K 400K 1,200K
1996/97 300K 600K 1,300K
1997/98 300K 600K 1,400K
1998/99 300K 800K 1,300K
1999/00 400K 700K 1,300K
2000/01 600K 700K 1,200K
2001/02 600K 700K 1,200K
2002/03 700K 800K 1,100K
2003/04 1,000K 800K 900K
2004/05 1,100K 1,000K 700K
2005/061,100K 1,100K 800K
2006/071,100K 1,300K 800K
2007/081,000K 1,400K 800K
2008/091,100K 1,300K 800K

Graph 2

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

Graph 3

Children in couple families37%
Children in lone parent families61%

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