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  • Joint call for cash injection into families’ pockets, to save up to 700,000 children from poverty and boost economy
  • More support for childcare urged, to protect early years learning and enable parents to continue working 

An urgent cash boost to struggling families is vital to improve the lives of millions of children and spare up to 700,000 from living below the poverty line as the pandemic continues, says a new analysis by IPPR in a joint project with the TUC. 

Strengthening the social security system, by doubling child benefit payments or by raising universal credit and tax credits for children, would make a life-changing difference to many of the poorest families, the two organisations say.  

In a research paper published today, they also call on the government to invest urgently in childcare, to sustain this vital family service and ensure that parents across the country can continue to get to work. As well as improving outcomes for children, the “family stimulus” package would help to boost the economy through higher household spending, the report says – adding up to £19 billion to GDP, equivalent to more than half a per cent of national output.  

IPPR and the TUC say this should be in addition to improvements to the government’s new Job Support Scheme, training schemes for workers who lose their jobs, investment in job creation and a wider boost to social security - including ending the benefit cap and the two-child limit on benefit payments. 

The paper examines options for getting more cash into families’ pockets in the face of the expected doubling of unemployment from its pre-Covid levels to 9.1 per cent next year, meaning millions more people likely to be out of work. 

It argues for improving the social security system, which is one of the least generous in the developed world: a family where the single earner falls out of work can expect to lose about half of their income. At a minimum, the report says, the government should maintain the emergency £20 increase to Universal Credit and tax credits made at the beginning of the pandemic – currently due to expire in April next year. 

Researchers looked at two alternative ways to boost cash to families, both of which would significantly reduce poverty. 

Doubling child benefit from its current rates would: 

  • Inject £14 billion directly into the economy over the next 18 months 
  • Boost GDP by £19 billion over 18 months (delivering a boost of 0.6% to GDP in 2021-22) when considering the ripple or multiplier effects of additional spending 
  • Lift more than 500,000 children and 200,000 adults out of poverty 

Increasing the child element of Universal Credit by £20 a week per child and removing the two-child limit would: 

  • Inject £11 billion directly into the economy over the next 18 months 
  • Boost GDP by £15 billion over 18 months (delivering a boost of 0.5% to GDP in 2021-22)  
  • Lift more than 700,000 children and 300,000 adults out of poverty 

Combined with other measures, such a family stimulus can serve as a backstop for family incomes and thus for the economy as a whole in this time of profound economic stress, the report says. 

On support for the struggling childcare sector, IPPR and the TUC note that it has already lost an estimated £228 million (13 per cent of its income) through parents withdrawing their children. Providers also face a cliff edge at the end of January, when government support for free places unused during the pandemic is due to end – meaning an estimated £400 million cut in support. 

The two organisations jointly call on the government to: 

  • Continue funding the pre-pandemic number of free childcare places until their take-up has returned to normal, at a cost of £400 million 
  • Provide at least £88 million transitional funding, for early years education providers, like that provided to schools, to protect jobs and save settings from closure 
  • Invest further to create good quality childcare jobs with improved pay and conditions, so creating new opportunities in social infrastructure akin to those in physical infrastructure such as roads, transport and clean energy 

The report notes that other countries recognise the social and economic importance of childcare investment and have injected cash directly – including an additional €1 billion (£911 million) in Germany, and a Canadian federal government investment of $625 million (£365 million) to protect access to childcare. 

Frances O’Grady, General Secretary of the Trades Union Congress, said: 

“The job support scheme will help protect jobs and businesses. But under the scheme workers will still lose out on up to a third of their usual pay. So we need additional protection for children and families as part of the government’s wider package of support.  

“Some of this must go directly to families, to prevent an increase in child poverty and to lift more families above the poverty line. And it’s vital to support childcare services too, which have been heavily hit by the pandemic.  

“When a childcare provider goes out of business, the knock-on effects a dreadful for working parents, employers and the economy. Without childcare, many parents would have to reduce their hours, or may not be able to work at all. And that will hold back our economic recovery.  

“It’s more often mums than dads who do the larger share of childcare. So the impact is likely to be much worse for women workers. It could reverse years of progress on employment equality.  

“We need government to recognise that the long-term cost of a collapse in childcare supply will be much greater than stepping in to protect it now, before it’s too late.” 

Carys Roberts, Executive Director of the IPPR, said:  

“Marcus Rashford’s campaign for free school meals has shone a light on the difficulties faced by so many families across the UK to put nutritious food on the table this winter.

“But it shouldn’t fall to a footballer and restaurants already struggling with a pandemic to patch up our broken safety net. That’s why IPPR and the TUC are calling today to put cash in families' pockets, helping families across the country who are in dire financial straits. Doing so would also give a much-needed boost to the economy, preventing even more jobs being lost.

“Even with the Chancellor’s latest revisions to his job protection measures, his winter economy plan is missing a crucial piece of support. We have one of the least generous social security systems of any developed country. The higher payments we’re calling for with the TUC today will mean fewer families forced to rely on foodbanks to feed their children or otherwise scrambling keep themselves afloat as the pandemic continues.

“Not only will this family stimulus spare hundreds of thousands of children from the scarring effects of poverty over the next 18 months, but it will also mean an economic stimulus – helping to keep the economy going as we push through the pandemic, and preventing even more jobs being lost.”

Editors note
  • The joint IPPR and TUC report, A Family Stimulus: Supporting children, families and the economy through the pandemic by Henry Parkes, Clare McNeil and Carsten Jung is available for download at: 
  • Researchers used the IPPR tax benefit model. Full details of the methodology, including derivations of the fiscal multipliers of the different social security options, are in the report.
  • Poverty figures are based on the relative poverty line, defined as having a household income below 60 per cent of equivalised household income (that is, after adjustment for who lives in the household as is standard in income analysis) in the absence of the reform.
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