New IFS research compares tax options to reduce child poverty

11 January 2010

New research, commissioned by Gingerbread and conducted by the Institute for Fiscal Studies, reveals the impact of different policy initiatives on tackling child poverty, and on work incentives.

The research, by Mike Brewer, James Browne and Robert Joyce, compares three policy options that have been proposed for families with children:

An increase in the Child Tax Credit
An increase in the Working Tax Credit for couple families with children
The introduction of a transferable personal tax allowance for married couples with a child under five (one form of a Married Couples Tax Allowance).

The research shows that by far the most effective policy at tackling child poverty is the Child Tax Credit. Investment of £0.8 bn in the Child Tax Credit would lift 130,000 children out of poverty, compared to under 10,000 for the same level of investment in the transferable personal allowance. Investing the same amount in additional Working Tax Credit for couples would lift 100,000 children out of poverty.

CEO of Gingerbread Fiona Weir said:

“Single parents’ priority is seeing their children lifted out of poverty. With all three political parties committed to ending child poverty by 2020, and limited public funds available, debate in the run up to the election is likely to be intense about the best way to achieve this.”

Gingerbread commissioned this research so that policy choices  can be informed  by the best available evidence. investing in the Child Tax Credit is the most cost-effective way to help families escape poverty, helping thirteen times as many children as investment in a transferable personal allowance. This is because it targets families on the basis of need whether they are married, cohabiting or single parent families  rather than family type.”

The full research will be available at www.ifs.org.uk from 00: 01am on Monday 11th January.