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Poverty sets country back £78 billion each year, says charity

05 August 2016

JOSEPH ROWNTREE FOUNDATION

POVERTY costs the public purse at least £78 billion a year, research by the Joseph Rowntree Foundation (JRF) has found.

Their report, Counting the Cost of UK Poverty, sought to estimate both how much extra government spending is required because people are poor, and what is the knock-on financial impact of poverty.

The researchers’ findings suggest that, even excluding benefits payments to those on low incomes, the Government spends approximately £69 billion extra a year on healthcare, on schools, in the justice system, on social services, and on housing because of the greater costs that serving the poor incurs.

Added to this are the knock-on effects of poverty, including £4 billion in lost tax-revenue from those who grew up in poverty and thus have worse jobs, and a further £5 billion on benefits such as pension credit, and employment and support allowance, which are needed disproportionately in poorer areas.

As well as the harm poverty does to those who experience it, it also does “widespread damage to society”, the report says. In total, about 20 per cent of Government spending on public services is simply making up for the ways in which poverty has ruined lives. This figure, which the report says is likely to be a conservative estimate, is equivalent to four per cent of the UK’s GDP last year, and similar to the country’s deficit.

The authors of the report warn that totting up the knock-on effects of poverty throughout an individual’s life is difficult; so the figure of £9 billion is probably just the “tip of the iceberg”..

The chief executive of JRF, Julia Unwin, said: “Poverty doesn’t just hold individuals back, it holds back our economy, too. Poverty wastes people’s potential, depriving our society of the skills and talents of those who have valuable contributions to make. UK poverty is a problem that can be solved if Government, businesses, employers, and individuals work together.”

The greatest cost is in healthcare, where an extra £29 billion is spent each year, the report says. A quarter of all spending on hospital care and primary care is a result of conditions that are more common, and start earlier, among those living on low incomes.

About £10 billion each year is spent in schools because of poverty, the report finds. An additional £9 billion is spent on the police and justice system because crime is concentrated in poorer communities. Furthermore, the report says, studies have suggested that about half of all crime-related spending is in response to the additional crime associated with deprivation. Children’s services account for £7.5 billion a year, and a further £4.6 billion extra is spent on adult social care because of poverty. Finally, £4 billion of the spending on housing each year is a result of poverty.

The report concludes that, even putting aside the moral imperative to rescue Britons from poverty, eradicating deprivation would save the Exchequer significant amounts each year. “Putting public effort into helping people thrive is ultimately more fruitful than having to spend money picking up the pieces of broken lives,” the report says.

The chief executive of the Trussell Trust, David McAuley, said that the evidence showed that tackling poverty was not just a matter of compassion, but an “economic imperative for the nation”. While foodbanks run by the Trust were stepping up the challenge, much more needed to be done by both the Government and businesses to end poverty for good, he said.

A spokeswoman for the Government, responding to the research, said that they were making “good progress” in boosting employment, which is key to reducing poverty, and she cited initiatives such as the new higher National Living Wage, and increased free childcare.

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