Cities should be given incentives to tackle poverty locally – JRF report

Calls have been made for local authorities and City Regions to retain savings made from tackling unemployment and poverty in their area, in a new report for the Joseph Rowntree Foundation (JRF).

As the Northern devolution debate gathers momentum, figures for JRF by the Centre for Economic and Social Inclusion (CESI) show how 80p in every £1 saved from moving someone out-of-work into a job paying the Living Wage goes to central government. 

By contrast, just 7p goes to the local authority. The rest of the savings go to the NHS (10p), the criminal justice system and housing providers (3p). 

The report authors argue schemes which successfully help people find a job paying a decent wage could be rewarded by cities retaining some of the benefits savings.

The estimates are based on research carried out by experts CESI, who assessed the benefits of tackling worklessness and low pay to government, local authorities and the economy.

When someone out of work moves into a job paying the Living Wage, the report found: 

  • The Government gains £6,900 on average. This is from benefit savings, increased tax take and reduced administration costs. 
  • The local economy is boosted by £14,400 a year. This is from increased productivity and disposable income, which creates spend and demand in the local economy. This adds up very quickly - for each 20,000, the boost is £289 million a year.  
  • Individuals are better off by £6,500 a year. 

Josh Stott, policy and research manager at JRF, said: “We need to make sure we harness devolution for cities to tackle poverty. Otherwise we risk returning to business as usual - seeing growth but leaving behind people and places in poverty. Addressing poverty means cities can reach their full economic potential, making use of the skills and talents of all the workforce.”

The report says local strategies for: effective welfare-to-work schemes; encouraging employers to pay the Living Wage; increasing the supply of affordable housing and childcare; and attracting more and better jobs are all vital to address poverty locally. Providing a strong education and skills system and in-work training will also help people and employers benefit more from economic growth.

Paul Bivand, of CESI, said: “There is an increasing consensus cities and counties should play a greater role in stimulating growth and making sure their unemployed and low paid residents benefit. Cities and counties have no clear incentive to tackle worklessness and low pay in their areas because most of the gains go to national government. Successful local initiatives could be rewarded by local areas keeping benefit savings – creating an incentive to invest more resources, time and energy in promoting inclusive economic growth.”