UK: Child poverty the “new normal,” as oil industry gets billions in subsidies

On Wednesday, there were two reports published that at first seem unconnected.

The first, was about the shocking level of poverty in the UK. The leading child poverty coalition in the UK published data showing that child poverty is becoming the new normal in some parts of Britain, with over fifty per cent of children living trapped in poverty in some areas.

The data, published by the End Child Poverty coalition, which represents over 70 organisations from UK civic society including children’s charities, social justice groups and trade unions, highlighted how “poverty is on the rise – and rising fastest in places where it is already highest.”

Anna Feuchtwang, Chair of the End Child Poverty coalition, said: “We know what causes child poverty and we know how to end it. We know that the income of less well-off families has been hit by severe real-terms cuts in benefits and by higher housing costs.”

Feuchtwang continued: “Growing up in poverty means growing up trapped. It restricts a child’s chances of doing well at school, of living a healthy and happy life, and of finding well paid work as adults”.

As it launched the report, End Child Poverty called on the Government to set out an ambitious and credible child poverty-reduction strategy, including restoring the link between benefits and inflation, increasing child allowances and tax credits for struggling families and reversing the cuts and investing in children’s services such as mental health, education, childcare and social care.

Also on Wednesday, a second report was published. Oil Change International, along with its partners, Platform, and FoE Scotland launched a ground-breaking report entitled Sea Change, which for the first time revealed the climate impact of North Sea oil and gas extraction, and explored how much the oil and gas the oil industry receives in subsidies. The report also outlined the way forward with a job-creating energy transition.

You might ask how are the two reports are connected?

One outlines the bleak state of Britain today, especially for young people, and other a detailed analysis as to why we have to stop drilling for oil and move towards a just transition and clean energy future.

But the Sea Change report also examined the subsidies the oil and gas industry receives and it makes stark reading for anyone who has been struggling on the frontlines of children’s services, as benefits are cut, services are slashed and kids enter a cycle of poverty they may never escape from.

Sea Change outlines both the lucrative tax breaks, allowances and also reduced tax rates the offshore oil industry has received for years, as Britain’s public finances have been squeezed elsewhere.

So not only are the oil companies receiving handouts via tax allowances, but also de facto handouts by having lower comparable tax rates than other oil producing countries.

For example, if you compare the tax rate between the UK and its close oil producing neighbour, Norway, Sea Change highlights that over “the period 1990 to 2017, the UK government collected £181 bn in revenues (in 2019 pounds); if the effective tax rate had been the same as Norway’s, this would have been about 2.5 times as high, at £437 bn.”

In other words, says the report “low UK taxes compared to Norway’s have given oil companies nearly £255 bn at the expense of the taxpayer.”

If you asked anyone dealing with the crisis with children in the UK right now what £255 billion would fund – from helping with youth centres and services, tax credits, apprentices, they would argue it would make a significant life changing and life enhancing difference for thousands, if not millions, of children.

But that is not all. The UK oil industry enjoys other benefits, as the report outlines: In the tax years 2015/16 and 2016/17, the UK Treasury gave “more money to oil companies than it took from them in taxes”, with a tax bill of negative £2 million and negative £350m in each respective tax year.

And there is worse to come when the oil rigs are decommissioned, where estimated costs could run up to £100 billion, although no one knows what the final figure will be. The public is due to pay a significant chunk of this.

As Sea Change outlines: “Whatever the final figure turns out to be, the taxpayer’s share constitutes an open-ended bill of tens of billions of pounds”.

The British Government could adopt a win-win approach that works for British kids and the climate. Stop funding fossils and kick start a radical transformative jobs programme in renewable energy.

As the report outlines: “The UK should remove all subsidies for oil and gas extraction, including tax breaks, and redirect them toward funding a Just Transition”.

This transition could create in excess of one hundred thousand clean energy jobs, as well as help the UK achieve its climate goals.

We live in a climate emergency, British children live in poverty in record numbers. Young people rightly care about climate change in ever increasing numbers. It does not have to be this way. The solution is there, we just need the political will to make it happen. We need a just transition now.