Latest Public Sector News

01.08.16

One-fifth of public sector spending used to tackle poverty

The public sector is losing £78bn every year because of the cost of caring for the poorest in society, a new report has revealed.

The research, conducted by Heriot Watt and Loughborough Universities for the Joseph Rowntree Foundation, shows that £69bn, or one-fifth of public sector spending, goes towards mitigating the effects of poverty.

In addition, spending to deal with the effects of poverty costs £9bn in lost tax revenue and additional benefits, or 4% of the UK’s GDP.

Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: “It is unacceptable that in the 21st century, so many people in our country are being held back by poverty. But 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.”

Poverty has the greatest economic impact on healthcare, which loses £29bn a year because of the poorer health outcomes among people in poverty.

In addition, poverty costs schools around £10bn a year because of the need for increased resources to try to stop children in poverty falling behind and provide free school meals.

Poverty also creates £9bn costs for police and criminal justice services, £7.5bn for children’s services, £4.6bn for adult social care and £4bn for housing services.

Professor Donald Hirsch, from the Centre for Research in Social Policy at Loughborough University and one of the report’s authors, said: “It is hard even to estimate the full cost of poverty, not least its full scarring effect on those who experience it. What our figures show is that there are very large, tangible effects on the public purse.

“The experience of poverty, for example, makes it more likely that you’ll suffer ill health or that you’ll grow up with poor employment prospects and rely more on the state for your income.”

The Joseph Rowntree Foundation recently warned that the government’s reforms to benefits will lead to the greatest loss of income in impoverished areas.

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