The costs of child poverty
We all know that growing up in poverty makes for a miserable childhood and that the consequences can be grave and enduring. But new research published last week shows that alongside the moral argument for reducing child poverty is a hard-nosed economic one too.
Building on previous work undertaken for the Joseph Rowntree Foundation in 2008, academic Donald Hirsch has estimated that current levels of child poverty cost the UK at least £29 billion, or more than 2.5% of GDP, a year.
The £29 billion figure is composed of two parts: the costs we incur right now and those that will accrue to the country in the future. Specifically, the research shows that:
* Programmes designed to correct for the effects of poverty in the here and now such as additional social services, criminal justice and educational interventions currently cost the country £15 billion a year (it’s worth noting that this figure does not include the benefit spend which is seen very much as part of the solution).
* In the longer term, there are additional costs because adults who grew up in poverty have weaker employment prospects. Their resultant loss of earnings will cost the country £8.5 billion a year; the losses to the Revenue of taxes forgone total another £3.5 billion; and the additional cost of benefits required to support them during spells of unemployment is at least £2 billion a year. Taken together, then, the future costs of child poverty are conservatively estimated at £14 billion a year.
The figures are sensitive to spending levels and underlying economic indicators but the most significant variable that affects them is the number of children living in poverty. Critically, the new research shows that should child poverty rise to 3.4 million by 2020 as the Institute for Fiscal Studies has recently projected, the price tag will increase to at least £35 billion a year.
In view of this, policies that increase child poverty – the under-inflation uprating of most working age benefits, for example, or the recently floated cap on annually managed expenditure – begin to look like economic no-brainers, a point Child Poverty Action Group made recently (albeit in more polite terms!) in its letter to the Chancellor ahead of the spending review.
The problem, of course, is that reducing child poverty is like any other form of early intervention: it requires a government prepared to invest right now to make savings that most likely accrue on another’s watch. But what we urgently need is one with sufficient vision to do just that…