Child poverty is not only causing extreme hardship, but is imposing a large cost on taxpayers and reducing the UK’s economic potential. At a time when the government is having to spend billions to support its economic infrastructure, new research from the Joseph Rowntree Foundation published today (23 October) estimates that child poverty costs at least £25 billion each year in losses to the Exchequer and in reduced GDP.
The research is based on economic modelling and provides two detailed calculations that make cautious estimates of some of the measurable financial costs from the fallout of child poverty.
A first calculation estimates the extra money that the government spends addressing the effects of child poverty. Research shows clearly that children from low-income families experience disadvantage in education, health and family life. This requires extra spending, for example on social services, to help overcome these circumstances. It can also trigger extra spending on law and order because the pressures of poverty and disadvantage can contribute to poor family-functioning which in turn is associated with a higher rate of anti-social behaviour.
Based on the higher amount of social spending in areas with high child poverty, the study estimates that child poverty is associated with at least £12 billion in public spending on services.
A second calculation estimates the longer-term economic cost of the damage inflicted on those who grow up in poverty. As adults, they have a reduced chance of working and an increased likelihood of being in low-paid jobs.
The study estimates that this is costing the Exchequer £2 billion a year in extra benefits paid to adults who grew up in poverty and are now out of work. Child poverty is also diminishing UK GDP by at least £11 billion through reduced earnings of those in work, £3 billion of which would have gone to the Exchequer in taxation.
An overview of the new research has been written by JRF poverty adviser Donald Hirsch who said:
"Child poverty imposes huge costs on those affected but it is also costly to us all. Getting rid of child poverty will not be cheap. But this report shows that large amounts are being spent on paying for the fallout from child poverty. This could be more productively employed in preventing it from occurring in the first place."
“Tackling child poverty would bring a double benefit – for the families whose life chances and quality of life would be improved and for society, which would no longer have to pay such high costs of picking up the pieces."