A third source to boost living standards: the family

Policymakers should seek to mitigate the barriers to the giving and receiving of financial and practical support between family members.

Alongside tackling the deficit, the government‘s priority is now tackling another major economic problem: the rising cost of living, caused by a mix of stagnant wages, a real terms reduction in benefits, and inflation. But with public spending constrained and economic growth still fragile, policymakers need to think creatively about solutions beyond the traditional reliance on the state or the market to help struggling families.

A recent report by the Child Poverty Action Group and Joseph Rowntree Foundation demonstrates the scale of the problem for families on modest incomes: over the past year the average cost of raising children has risen by 4% for those also paying for childcare. 

To boost family incomes, policymakers tend to fixate on two levers: the state or the market. Either government, through increased cash transfers or reduced taxation, or businesses, through increased wages, are called upon to do more. Under the last Labour government, cash transfers from the state to low-income families increased substantially with some notable successes, such as the reduction in the number of children living in poverty. The coalition government has prioritised reducing income tax. Recent emphasis has shifted to the role employers can play in boosting income: there is campaigning from across the main political parties to increase the minimum wage and spread the voluntary living wage to more employers.

The state and market should do more to help alleviate poverty. But the current economic conditions limit their reach. So it is also worth exploring how a third major resource can help improve family incomes: a person’s wider family.

Already, a significant minority of households receive regular financial support from their wider family, predominantly their parents. It is estimated that about 1 in 6 households regularly receive financial help from their parents with the average received in one year about £1,400. The national annual flow of such transfers is estimated to be about £1.2bn. But this undervalues the scale of transfers taking place: it misses out those who receive money through inheritance, which is estimated to be about £30bn a year.

Forthcoming research from the Social Market Foundation found that many on the lowest incomes, especially those experiencing circumstantial poverty due to unemployment or divorce, receive significant financial support from their parents, often worth thousands of pounds. And in-kind support such as the provision of childcare and shopping is also common and saves households significant amounts of money.

The family, then, is often a major but hidden form of welfare. Its impact can be quite remarkable. There can be a considerable improvement in living standards of low income families who receive support from parents: they are better able to work or train, and afford a wider range of goods from children’s clothes to holidays.

Policymakers should seek how to mitigate some of the barriers to the giving and receiving of financial and practical support between family members. Obviously, the lack of familial exchange may be explained by geographical or emotional distance between relatives. But there are other barriers such as money and time: for example, especially with cultural and governmental expectations to work for longer in older age, grandparents will have less time in the week to provide support.

Employment for older people could be more flexible. Since the late 1980s, DIY retailer B&Q has encouraged older workers, with a quarter of its workforce now over the age of 50, by ensuring flexible working – including for caring responsibilities – is part of the company culture. Maybe this could be nudged along by making parental leave, especially parents’ unpaid entitlement, transferable to grandparents if unused?

To tackle the financial constraints some families face, maybe tax efficient, high-interest multigenerational family trusts could be established to encourage low-income families to build up a pot of money to help different generations in testing times?

This year’s Budget – with announcements to help families with childcare, petrol and housing costs – showed that the government is focussing on measures to boost living standards for those on modest incomes. But policymakers will need to think creatively and draw on multiple sources: the state and the market, yes, but also the family.   

About 1 in 6 households regularly receive financial help from their parents with the average received in one year about £1,400. Photograph: Getty Images.

Ryan Shorthouse is the Director of Bright Blue, a think tank for liberal conservativism 

Photo: Getty
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Like it or hate it, it doesn't matter: Brexit is happening, and we've got to make a success of it

It's time to stop complaining and start campaigning, says Stella Creasy.

A shortage of Marmite, arguments over exporting jam and angry Belgians. And that’s just this month.  As the Canadian trade deal stalls, and the government decides which cottage industry its will pick next as saviour for the nation, the British people are still no clearer getting an answer to what Brexit actually means. And they are also no clearer as to how they can have a say in how that question is answered.

To date there have been three stages to Brexit. The first was ideological: an ever-rising euroscepticism, rooted in a feeling that the costs the compromises working with others require were not comparable to the benefits. It oozed out, almost unnoticed, from its dormant home deep in the Labour left and the Tory right, stoked by Ukip to devastating effect.

The second stage was the campaign of that referendum itself: a focus on immigration over-riding a wider debate about free trade, and underpinned by the tempting and vague claim that, in an unstable, unfair world, control could be taken back. With any deal dependent on the agreement of twenty eight other countries, it has already proved a hollow victory.

For the last few months, these consequences of these two stages have dominated discussion, generating heat, but not light about what happens next. Neither has anything helped to bring back together those who feel their lives are increasingly at the mercy of a political and economic elite and those who fear Britain is retreating from being a world leader to a back water.

Little wonder the analogy most commonly and easily reached for by commentators has been that of a divorce. They speculate our coming separation from our EU partners is going to be messy, combative and rancorous. Trash talk from some - including those in charge of negotiating -  further feeds this perception. That’s why it is time for all sides to push onto Brexit part three: the practical stage. How and when is it actually going to happen?

A more constructive framework to use than marriage is one of a changing business, rather than a changing relationship. Whatever the solid economic benefits of EU membership, the British people decided the social and democratic costs had become too great. So now we must adapt.

Brexit should be as much about innovating in what we make and create as it is about seeking to renew our trading deals with the world. New products must be sought alongside new markets. This doesn’t have to mean cutting corners or cutting jobs, but it does mean being prepared to learn new skills and invest in helping those in industries that are struggling to make this leap to move on. The UK has an incredible and varied set of services and products to offer the world, but will need to focus on what we do well and uniquely here to thrive. This is easier said than done, but can also offer hope. Specialising and skilling up also means we can resist those who want us to jettison hard-won environmental and social protections as an alternative. 

Most accept such a transition will take time. But what is contested is that it will require openness. However, handing the public a done deal - however well mediated - will do little to address the division within our country. Ensuring the best deal in a way that can garner the public support it needs to work requires strong feedback channels. That is why transparency about the government's plans for Brexit is so important. Of course, a balance needs to be struck with the need to protect negotiating positions, but scrutiny by parliament- and by extension the public- will be vital. With so many differing factors at stake and choices to be made, MPs have to be able and willing to bring their constituents into the discussion not just about what Brexit actually entails, but also what kind of country Britain will be during and after the result - and their role in making it happen. 

Those who want to claim the engagement of parliament and the public undermines the referendum result are still in stages one and two of this debate, looking for someone to blame for past injustices, not building a better future for all. Our Marmite may be safe for the moment, but Brexit can’t remain a love it or hate it phenomenon. It’s time for everyone to get practical.