I n 1997, child poverty had tripled since Labour was last in office in 1979. One in three British children – about four million in all – lived in families earning below half the average income level. This was twice the rate of France or Germany and four times the rate of the Scandinavian countries. While New Labour was elected with no clear commitments on tackling child pover- ty, in March 1999 the Prime Minister said Our historic aim will be for ours to be the first generation to end child poverty… It is a 20 year mission. And there have been more specific asser- tions: child poverty was to be halved with- in ten years and the 2000 Spending Review set a Public Service Agreement to ‘reduce by at least a quarter, by 2004, the number of chil- dren living in households with an income of less than 60 per cent of the median’. What has been the effect of the policy mea- sures taken (or announced) to date on fami- ly incomes and child poverty rates and what issues need yet to be considered if these long- term goals are to be achieved? Tax and benefit changes The principal tax and benefits changes announced since April 1997, and including the 2001 Budget, that have directly effected household incomes have been: ● replacing family credit with the working families’ tax credit (WFTC). As with fami- ly credit, this is withdrawn according to income, but is more generous where it is given, with a higher maximum payment and a lower taper ● the increase of child benefit, in real terms, by 27 per cent for the first child and by 3 per cent for second and subsequent children ● the introduction of the children’s tax cred- it to replace the married couple’s tax allowance and the tax allowance for lone parents ● the increase in income support and other associated means-tested benefits for fami- lies with children, most substantially for those with children under 11. Other general measures, such as changes to income tax and the introduction of the national minimum wage, affect both families with children and the median household income and hence any relative poverty line based on it. The poverty line used here is the Eurostat standard poverty line, defined as 60 per cent of median income level before hous- ing costs. We use the McClements equiva- lence scale. To assess the effects on poverty rates of the tax and benefit changes introduced during CHILD POVERTY 71 Child poverty Aims, achievements and prospects for the future DAVID PIACHAUD London School of Economics HOLLY SUTHERLAND University of Cambridge 1070-3535/01/02071 + 05 © 2001 IPPR