The economic cost of poverty on U.K. government finances has been calculated in a new report published this week.
The report, "Counting the cost of U.K. poverty", found that dealing with the consequences of hardship costs the U.K. government £69 billion ($90 billion) a year, equivalent to 20 percent of all public service spending.
The report estimated a further £9 billion can be added to the bill due to the knock-on effects of poverty, such as lost future tax revenue and additional welfare payments as children who grew up in poverty were likely to have lower employment and earning potential as adults.
"Poverty wastes people's potential, depriving our society of the skills and talents of those who have valuable contributions to make. This drags down the productivity of our economy, hinders economic growth, and reduces tax revenue," said Julia Unwin, chief executive of charity the Joseph Rowntree Foundation which published the report, in a press release.
The report, written by academics at Heriot Watt and Loughborough Universities, calculated which areas of social policy spent the most due to the effect of poverty:
- £29 billion each year is spent on treating health conditions related to poverty.
- £10 billion is spent by schools dealing with the impacts of poverty, such as providing free school meals to children whose parents receive some form of welfare.
- £9 billion is spent on policing to deal with crime in poverty-stricken areas.
- £7.5 billion goes towards children's services, including the provision of free childcare.
"It is hard even to estimate the full cost of poverty, not least its full scarring effect on those who experience it," said Loughborough University's Professor Donald Hirsch, one of the report's authors, in a press release.
"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."