Measuring marriage won’t stop child poverty

The government’s new policy of using the relationship status of parents/carers to measure child pove

Buried away on page 52 of the government's new 79-page child poverty strategy are plans to measure family structures. The inclusion of this new indicator is baffling. It is the first time that the government will monitor relationships. And this new focus is at odds with other indicators and the government's flagship social mobility strategy, which emphasise the importance of what parents do rather than who parents are.

Relationships do matter and marriage is a choice for many. But the evidence on how marriage connects to the child poverty agenda is less clear. There is evidence of correlation, but that shouldn't be confused with causation.

IPPR research shows the importance of the quality of relationships. Warmth, love and spending quality time together matters. It is the quality of relationships that should matter. For some couples that will result in marriage or civil partnerships; for others it won't.

But the connection between child poverty and relationship status is contentious. With high employment rates, a strong welfare state and good childcare, family structures become far less important. Living in a dual-earner household – whether married or cohabiting – reduces the risk of child poverty to close to zero. But even for lone parents, the experience of the Scandinavian countries shows that poverty risks are hugely diminished by universal childcare services and an active welfare state.

The government's new indicator on family structures will measure the proportion of children living in relative poverty by the relationship status of their parents – couples who are married/in a civil partnership, cohabitating couples and lone parents. It sits alongside, and seemingly carries similar weight to, other indicators of relative and absolute poverty in the Child Poverty Act.

Conversely, the government's child poverty strategy introduces other valuable indicators, such as in-work poverty, that are underpinned by strong evidence. IPPR's research has highlighted the risks associated with in-work poverty and the need for policy to focus more clearly on job sustainability and advancement. And today, the institute has published Parents at the Centre, which makes policy recommendations that focus on high-quality and accessible early-years provision that can have a significant impact on progress towards the child poverty target.

Eradicating child poverty is about more than just money and income. We need to develop and implement progressive policies that invest in the under-fives, support children's centres to remain universal and tackle in-work poverty. But policy also needs to catch up with and reflect reality: stepfamilies are the fastest-growing family type.

So, as this new measure of family structure goes almost unnoticed, it suggests that the government may be advocating "policy-led evidence", trying to generate data for marriage tax breaks that lack support across government. The child poverty agenda should not be used as a pawn in that debate.

Dalia Ben-Galim is associate director of the Institute for Public Policy Research.

Dalia Ben-Galim is Director of Policy at Gingerbread. 

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation