Brown's final budget: £1bn extra for child poverty

from The Guardian

Larry Elliott and Patrick Wintour

Gordon Brown will announce today that the government is to spend an extra £1bn to lift 200,000 children out of poverty as he uses his final budget to help put Labour back on track to meet its target for alleviating deprivation among the young.

Stung by a UN report showing the UK as the worst place in the developed world to grow up, Mr Brown will increase spending on tax credits for the working poor and on raising child benefits.

He will make investment in children the centrepiece of today's package, using it to sketch out some of the themes of his premiership should he succeed Tony Blair this year.

The additional spending on child poverty will be accompanied by an announcement that education will be the biggest winner from this year's spending review, with extra resources earmarked over the three years from 2008 to start bridging the gap on spending per pupil between state and private schools.

Mr Brown's budget preparations were disrupted yesterday by the former head of the civil service, Lord Turnbull, who said he exhibited a "Stalinist ruthlessness" and displayed cynicism towards colleagues, claims which dominated the media and led to a debate about the chancellor's personality.

But Mr Brown has signalled that he intends to use today's package to contrast Labour's approach to tackling child poverty with the lukewarm attitude of David Cameron's Conservatives to tax credits.

One government source said: "We remain committed to our targets on child poverty and to raising the money-per-head spent on state school pupils to the level currently spent in private schools. Even in the context of a tight spending round and tight public finances, it is important that we continue to invest in meeting these targets."

With figures yesterday showing the public finances in a better than expected state going into Mr Brown's 11th budget, the chancellor will argue that extra resources are needed now if the government is to have any chance of halving child poverty from the record level of 4.2 million inherited from the Conservatives in 1997. Sources said most of the £1bn would be spent on tax credits, the system introduced by Mr Brown to channel extra money to those with children on low incomes. Child benefit is paid to all parents regardless of income, and the chancellor will argue that the £1bn should be aimed at those who need it most.

After nearly doubling in the 18 years of Conservative rule between 1979 and 1997, the number of children living below the poverty line had fallen by 700,000 by 2004-05, the last year for which figures are available. A further fall is expected when the data for 2005-06 is announced this month, but the chancellor has been under pressure to step up the government's effort to meet the target set by Mr Blair of eradicating child poverty in Britain within a generation.

Official figures show that despite the 700,000 drop by 2004-05, the government failed to meet its interim target of reducing, by a quarter, the number of children living in households on less than 60% of median incomes.

The Institute for Fiscal Studies, the UK's leading independent experts on tax and spending, has estimated that the government needs to raise 1 million children above its own decency threshold if it is to meet its next target of halving child poverty by 2010. "Unless the government is to fall short of this target, or there are radical shifts in parental working patterns, new spending will be needed, from extra borrowing, increased taxation or a reordering of spending priorities", the IFS said earlier this year.

The extra cash to reduce child poverty is expected to be balanced by plans to implement some of the key proposals in the Freud review on welfare including progressively tighter benefit restrictions on lone parents with children under 11 as well as a radical revision of the New Deal for young people.

The Conservatives have criticised the New Deal on the grounds that nearly 50% of young jobseekers who have left the programme end up back on benefits within a year. Mr Brown has also expressed interest in funding extra catch-up classes for the poor in maths and English, and ministers are also confident that he will lift some of the VAT burdens on city academies.