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Cities should ‘keep more of savings made from tackling unemployment’

City regions should keep more of the savings they make by reducing unemployment and poverty, a new report from the Joseph Rowntree Foundation (JRF) has recommended. 

The call comes as Sheffield has become the second northern city to agree a devolution deal with Whitehall that will see more powers over transport, skills, housing and economic development transfer to the city region’s combined authorities. 

JRF stated that as the northern devolution debate gathers momentum, figures 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 and 10p to the NHS. The remaining 3p accrues to the police and criminal justice system, housing providers and fire services. 

Based on research carried out by CESI, the report ‘The Benefits of Tackling Worklessness and Low Pay’ found that when someone out of work moves into a job paying the Living Wage, the government gains £6,900 on average. This is from benefit savings, increased tax-take and reduced administration costs. 

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. 

However, it argues that currently there is no “clear incentive” for local partners to tackle poverty as part of local growth strategies or to make the most efficient and effective choices given local circumstances. 

It suggests, though, that successful and innovative city poverty reduction strategies could be rewarded with local areas retaining some of the benefits savings, thereby incentivising local partners to invest more resources, time and energy in promoting balanced and inclusive 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.” 

(Image: c. Helen Cobain)

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