In the last two decades, important demographic, labour and socioeconomic chang­es have taken place in the richer countries and the consequence has been a notable increase in the social vulnerability of children and growth in income inequality be­tween families with dependent minors. In turn this has boosted the upwards ten­dency of child poverty risk rates. The arrival of the Great Recession in 2008 only served to exacerbate that tendency.

In Spain, where child poverty rates  were already higher than in many countries in the European Union (EU) prior to the crisis, the increase in economic difficulties for families in the last decade has been considerable. If we set the threshold of sufficient income for avoiding poverty at its 2008 value, the number of minors whose homes can no longer access that threshold in 2014 would have risen from 27% to 39%, which represents an increase of 45% in just 7 years. As a consequence, and despite the reduction in the unemployment rate from 2014 to date, Spain continues to figure in the group with the highest child poverty rates in the whole of the EU-28: prac­tically one in every 4 minors (26.8%) lives below the poverty threshold (figure 1).

The majority of countries in the European Union with high levels of child poverty are also those that make less of a budgetary effort with regard to family benefits. Figure 2 reflects how a country such as Denmark, with a high level of spending on family benefits (3.5% of GDP), manages to achieve the lowest child poverty rate of the whole continent whereas Spain, with less than half that level of spending (1.3% of GDP) and far from the European average, is supporting one of the highest rates of child poverty together with Rumania, Bulgaria, Greece and Italy.

In addition to the weight of family policies, childhood poverty is closely linked with the redistributive capacity of the entire system of benefits and taxes by household types. From a comparative perspective, the global redistributive capacity of the Spanish system for households with minors is very limited and lower than that of other European systems such as the German, French, British and even the Italian systems. The United Kingdom has managed to reduce income inequality between families with dependent minors by nearly 40%, France and Germany by somewhat more than 30%, and Spain by only 23%. If we do not take into account the role of contributory pensions, we would be even further behind the United Kingdom, France and Germany, which indicates that, beyond contributory pensions, Spain’s system of benefits and taxes redistributes little towards young families with depend­ent minors.

The weakness of public policies aimed at families is one of the main causes of the fragility of the safety net that is our welfare state. This fragility has been compensat­ed, as occurs in other countries in Southern Europe, by the family network: the first, and often the only network for many households during the economic crisis.

In contrast with Spain, one of the most generalised family policies in the countries of the EU is a universal benefit per dependent minor, funded with general taxes or with social security contributions. This policy, which is variable in value and com­plemented with benefits aimed at the poorest, or fiscal deductions linked to families, is not in place in all 28 European Community countries. There are nine countries that do not have it, and it is precisely these which register the highest rates of child poverty on the continent.

Based on the amount of the universal benefit in purchasing power parity, it is possi­ble to make three major groupings of countries (figure 3a). The first would include the five with the highest benefits, above 110 euros per month: Luxembourg, Ger­many, Austria, Ireland and France; in the second is the largest group of seven coun­tries with between 95 and 70 euros per month: Denmark, United Kingdom, Sweden, Belgium, Finland, the Netherlands and Estonia; and, finally, the five countries with the smallest benefits, mainly in Eastern Europe, which do not reach 70 euros each: Hungary, Lithuania, Slovakia, Latvia and Rumania. In some of the countries, the universal benefit is combined with various benefits conditioned by income as addi­tional support for families with fewer resources.

The other eleven EU countries base their monetary benefits for children on in­come-based transfers: Italy, Slovenia, Greece, Malta, Croatia, Poland, Cyprus, Por­tugal, Bulgaria, Czech Republic and Spain (figure 3b). It is important to underline that, if these benefits have a high income threshold, they have similar redistribu­tion effects as a universal benefit and are very effective in the fight against pover­ty. In contrast, if they have a low threshold, their effectiveness may be low despite the amount being high. Furthermore, some countries do not have a single income threshold, but rather have several, and they reduce the amount of the benefit as family income increases.

In Spain, fiscal deductions, on a state-wide and autonomous community level alike, are an important part of the child benefits system. From the instruments of a state­wide nature, the minimum per descendant applied in IRPF (income tax) is the most important in terms of beneficiaries and spending, because in 2017 it was received by over 7 million contributors, and thus became the fundamental axis of the Spanish system of monetary benefits for families. This deduction is non-refundable, because the majority of households living below the poverty threshold are exempt from paying income tax, therefore such deductions have practically no impact on child poverty risk. The rest of the income tax deductions have a much lower budgetary importance, ranging from 9 million euros of deductions for single-parent families to 949 million euros in deductions for large-sized families.

Child benefit (CHB) is the only transfer to families with dependent minors. Its budgetary weight was around 1,375 million euros in 2017, before the reform that took place in 2019, and less than a third of the fiscal spending in fiscal deductions per child, which represented between approximately 4 and 5 billion euros (figure 4). In 2019, following the reform, the budgetary weight of the CHB has reached some 1.8 billion euros, of which nearly 500 million are allocated to minors without disabilities. The current amount of the benefit is 28.4 euros per month per child for families with low annual incomes, i.e., less than around 12,700 euros per year (if there is only one dependent child in the household), and 49 euros per month for families with very low incomes, i.e. around 4,700 euros per year (if there is only one dependent child in the household).

The governmental reform of CHB which was carried out in 2019 has represented an increase in the benefit amount of 17% (from 24.2 to 28.4 euros per month per mi­nor) for households with low incomes and of 100% for those with very low incomes (from 24.2 to 49 euros per minor), which raises the number of recipient households by 5% and spending on the benefit by 66%.

This policy is a step in the right direction, but to reduce child poverty it remains lim­ited, as indicated in figure 5, since the percentage of minors living below the poverty threshold practically does not change: from 31.9% it fell to 31.8% after the reform. In any event, the reform has further reduced, although still by very little, the poverty intensity of minors, which has fallen from 38.1% to 36.9%.

As a guide for designing more effective family benefits than those that currently exist, and with an acceptable budgetary cost, we have performed a simulation exercise which consists of evaluating the efficacy and efficiency of various reforms, which improve CHB amount and cover and consider a new universal child benefit of an average amount within the context of the European Union.

Two of the policies consist of reforming the CHB while maintaining the income conditions. One increases the amount of the benefit up to 145.5 euros per month (the policy that multiplies the amount by six) and the other up to 97 euros per month (the policy that multiplies the amount by four), with an increase in cover when raising the income threshold to 20,000 euros. The third is an additional universal policy (taxable or not) of a similar amount.

The results of figure 6 indicate that there are various policies that have a high level of efficacy: CHB x6 and CHB x4. The height of the blue bars tells us that these policies manage to reduce the number of poor minors from the current 31.8% to somewhat less than 30%. CHB x6 is the one that reduces this percentage least, but in contrast it reduces poverty intensity most: from 37% to 26.4% (orange bars). This means, as shown by the grey bars, that if these policies were implemented, the number of minors in households with incomes below the poverty threshold would be reduced by between 7% and 19%, while the intensity of child poverty would be reduced by between 8% and 25%.

Each policy reduces, to a different degree, the percentage of minors below the pov­erty threshold, according to the age and type of family.

The results of figure 7 indicate that a policy that increases CHB amount but not so much its cover (CHB x6) would reduce poverty more in single-parent homes and large families than the rest of the policies. In contrast, the other policies would re­duce something more than child poverty in households with two or several adults and one or two minors.

The results from graph 8 confirm that a policy that increases the amount and not so much the cover (CHB x6) would reduce the poverty of minors of all ages practically equally (some 6-7%). In contrast, the other three policies would more greatly reduce the poverty rate among children aged over 6 years. Universal policies would be more effective for reducing the number of poor minors who have reached adolescence with ages between 13 and 17 years.

Figures 9 and 10 show that a policy that increases the amount and not so much the coverage (CHB x6) is particularly effective for reducing the intensity of poverty among families with two adults and minors, whereas policies that increase coverage, such as CHB x4 and universals, further reduce the intensity of households with 3 or more minors and of single-parent families.

Finally, CHB x6 considerably reduces the intensity of poverty among all children aged below 12 years; while policies that increase cover manage to reduce intensity more among those of a lower age (0-3) and somewhat less the intensity suffered by other minors.

As we increase the number of recipients of child benefit, the cost of each reform increases, which is why universal policies are significantly more costly than the rest. In any case, to adequately evaluate the costs of introduction of each of them it would be necessary to calculate all the potential costs of control and administra­tion, together with the potential dimension of the fraud when declaring income and an estimate of higher or lower access due to practical difficulties in applying for them. 

In outline, as we can appreciate in figure 11, the most expensive policy is the uni­versal benefit of 100 euros per month that would be received by all households with children who are minors, a total of 5.3 million households, and that would represent an extra expense of some 9.5 billion on top of the current CHB (1.75 billion euros). If this universal benefit were taxable in income tax, its cost would be somewhat lower, around 8 billion euros. Both universal policies are the most appropriate if, as well as reducing child poverty and its intensity, the aim is to compensate all families due to the cost of raising their children which, in the me­dium term, could result in a generalised increase in fertility rates.

If our aim is to reduce the number of minors below the poverty threshold, the in­come-based benefit (20,000 euros) of an amount of 97 euros per month turns out to be the most efficient in terms of cost and efficacy. This policy would have a moder­ate budgetary cost (increase by another 3.2 billion euros on expenditure on family policies) and for every billion euros of expenditure, the percentage of poor minors would be reduced by 1.3 percentage points and the intensity of their poverty by 1%. This benefit would be received by 2.5 million households lived in by 9.5 million people.

If our main objective is to reduce the intensity of poverty rather than the number of poor minors, the most efficient policy in terms of cost and efficacy would be the income-based benefit of some 145 euros per month per child (CHB x6). This policy could have a budgetary cost of some 2.8 billion euros, and for every billion euros of spending, it would reduce the percentage of poor minors by 0.8 percentage points and the intensity of their poverty by 2.6%. This benefit would be received by 1.6 million households lived in by 6.3 million people.

1. Despite the reduction in the unemployment rate, our country continues among those that have the highest child poverty rates in the entire EU-28: practically one in every 3 minors (31.8 %) lives below the poverty threshold.

2. The weakness of public policies aimed at families is one of the main causes of the fragile safety network of our welfare state. In contrast, one of the most general­ised family policies in the EU is a universal benefit per dependent minor.

3. Income-based child benefit (CHB) is the only monetary transfer for poor fam­ilies with dependent minors in Spain. Due to its low amount, some 28.4 euros per month per child (or 49 if the household is suffering from severe poverty), its impact on the disposable income of families is very limited.

4. Tax deductions such as  the minimum per descendant in income tax are an im­portant part of the system for child benefits in Spain. This deduction is not reim­bursable for households situated below the poverty threshold, because they are exempt of taxation, therefore it barely influences the risk of child poverty.

5. The CHB reform carried out in 2019 has meant an increase in the amount of the benefit, above all for households with minors in severe poverty. In any case, its impact on the number of poor and  the intensity of the poverty has been small, therefore this reform is clearly insufficient.

6. Increases in the amount of CHB up to 97 or 145 euros per month would be effec­tive for reducing child poverty and, especially, its intensity. These policies would even further reduce the poverty of minors who live in single-parent households and in large-sized families. If we increased the income threshold for receiving it, this would improve its coverage and we would manage to reduce somewhat further the number of poor minors, above all impacting on those who live in households with two or more adults.

7. A benefit conditioned to a maximum income of 20,000 euros and for an amount of 97 euros is the most efficient for reducing the number of minors below the poverty threshold: for every billion euros of expenditure, the percentage of poor minors would be reduced by 1.3 points and the intensity of their poverty by 1%.

8. A benefit of some 145 euros per month per child (CHB x6), conditioned by in-come, is the most efficient policy for reducing poverty intensity: for every billion euros of expenditure, poverty intensity would be reduced by 2.6% and the per­centage of poor minors, by 0.8 percentage points.

9. As we increase the coverage of child benefit, raising the value of the income con­dition increases the cost of each reform, which makes universal policies more costly than the rest. These policies are very appropriate if, in addition to reducing child poverty and its intensity, it is aimed to compensate all families for the cost of childrearing which, in the medium term, could result in a generalised increase in fertility rates.