Estimating the costs of child poverty

The moral case for eradicating child poverty rests on the immense human cost of allowing children to grow up suffering physical and psychological deprivations and unable to participate fully in society. But child poverty is also costly to everyone in Britain, not just those who experience it directly. What are the costs to the whole of society of allowing child poverty to continue?

This paper:

• includes the findings from three specially commissioned reports and estimates some of the tangible costs resulting from child poverty.

Key points

• Child poverty’s consequences are wide-ranging and long-lasting. Children from low-income families are less likely to do well in school, and more likely to suffer ill-health and to face pressures in their lives that help to explain an association with anti-social behaviours and criminality.
• These consequences cost society: in the money that government spends in trying to counter the effects of child poverty, and in the economic costs of children failing to reach their potential.
• These costs cannot be calculated precisely, but the following are cautious estimates:
  • Public spending to deal with the fallout of child poverty is about £12 billion a year, about 60 per cent of which goes on personal social services, school education and police and criminal justice.
  • The annual cost of below-average employment rates and earnings levels among adults who grew up in poverty is about £13 billion, of which £5 billion represents extra benefit payments and lower tax revenues; the remaining £8 billion is lost earnings to individuals, affecting gross domestic product (GDP).
• The conclusion is that child poverty costs the country at least £25 billion a year, including £17 billion that could accrue to the Exchequer if child poverty were eradicated. Moving all families above the poverty line would not instantly produce this sum. But in the long term, huge amounts would be saved from not having to pick up the pieces of child poverty and associated social ills.