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 

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How to think about the EU result if you voted Remain

A belief in democracy means accepting the crowd is wiser than you are as an individual. 

I voted Remain, I feel sick about this result and its implications for what’s to come. But I’m a believer in democracy. This post is about how to reconcile those two things (it’s a bit unstructured because I’m working it out as I go, and I’m not sure I agree with all of it).

Democracy isn’t just fairer than other systems of governance, it’s smarter. It leads to better decisions and better outcomes, on average and over the long run, than countries that are run by autocrats or councils of wise men with jobs for life. It is simply the best way we have yet devised of solving complex problems involving many people. On that topic, if you’re not averse to some rather dense and technical prose, read this post or seek out this book. But the central argument is that democracy is the best way of harnessing ‘cognitive diversity’ — bringing to bear many different perspectives on a problem, each of which are very partial in themselves, but add up to something more than any one wise person.

I don’t think you can truly be a believer in democracy unless you accept that the people, collectively, are smarter than you are. That’s hard. It’s easy to say you believe in the popular will, right up until the popular will does something REALLY STUPID. The hard thing is not just to ‘accept the result’ but to accept that the majority who voted for that result know or understand something better than you. But they do. You are just one person, after all, and try as you might to expand your perspective with reading (and some try harder than others) you can’t see everything. So if a vote goes against you, you need to reflect on the possibility you got it wrong in some way. If I look at the results of past general elections and referendums, for instance, I now see they were all pretty much the right calls, including those where I voted the other way.

One way to think about the vote is that it has forced a slightly more equitable distribution of anxiety and alienation upon the country. After Thursday, I feel more insecure about my future, and that of my family. I also feel like a foreigner in my own country — that there’s this whole massive swathe of people out there who don’t think like me at all and probably don’t like me. I feel like a big decision about my life has been imposed on me by nameless people out there. But of course, this is exactly how many of those very people have been feeling for years, and at a much higher level of intensity. Democracy forces us to try on each other’s clothes. I could have carried on quite happily ignoring the unhappiness of much of the country but I can’t ignore this.

I’m seeing a lot of people on Twitter and in the press bemoaning how ill-informed people were, talking about a ‘post-factual democracy’. Well, maybe, though I think that requires further investigation - democracy has always been a dirty dishonest business. But surely the great thing about Thursday that so many people voted — including many, many people who might have felt disenfranchised from a system that hasn’t been serving them well. I’m not sure you’re truly a democrat if you don’t take at least a tiny bit of delight in seeing people so far from the centres of power tipping the polity upside down and giving it a shake. Would it have been better or worse for the country if Remain had won because only informed middle-class people voted? It might have felt better for people like me, it might actually have been better, economically, for everyone. But it would have indicated a deeper rot in our democracy than do the problems with our national information environment (which I accept are real).

I’m not quite saying ‘the people are always right’ — at least, I don’t think it was wrong to vote to stay in the EU. I still believe we should have Remained and I’m worried about what we’ve got ourselves into by getting out. But I am saying they may have been right to use this opportunity — the only one they were given — to send an unignorable signal to the powers-that-be that things aren’t working. You might say general elections are the place for that, but our particular system isn’t suited to change things on which there is a broad consensus between the two main parties.

Ian Leslie is a writer, author of CURIOUS: The Desire to Know and Why Your Future Depends On It, and writer/presenter of BBC R4's Before They Were Famous.