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Growth alone isn’t enough to end poverty in the UK

Magically boosting annual GDP figures can’t be seen as an end in itself.

By Zoë Billingham

Fairer and greener growth should be a key pillar of any party’s plan for government. It is welcome that Labour has made it central to the party’s economic agenda. Fair growth to raise long-term living standards for all, and green growth to help us meet our climate goals. Instead, we currently have a stagnant, unequal and environmentally unsustainable economy. But we cannot rely on growth alone to end poverty.

Unicef recently published a damning report that revealed the UK had seen the largest increase in children living in households experiencing financial hardship among comparable rich nations since 2014. The report showed a 20 per cent jump in the UK. The UK also has one of the worst rates of child poverty compared with its peers, ranking 37th out of the 39 EU and OECD countries analysed. More than one in three children in the north-east and north-west of England live in poverty.

Poverty on this scale, in the sixth-largest economy in the world, isn’t just morally wrong; it’s also bad economics. As Unicef’s report sets out, children who experience poverty have less chance of completing school and are more likely to earn less as adults. We know poverty negatively impacts physical and mental health; yet healthy people are key to a stronger economy. Long-term sickness and low life expectancy is contributing to huge gaps in labour markets.

Economic growth can be an effective way to raise long-term living standards and reduce poverty, but only when driven by improvements in productivity that are reflected in real wage increases. The latter do not automatically flow from the former. Labour, recognising that much of the growth of the past decade has not resulted in generalised rises in living standards, has not only put growth at the heart of its plans for government but, importantly, has emphasised that it must be “in every part of the country making everyone, not just a few, better off”. To ensure that when the economy grows, everyone benefits, we need to rebuild a strong social security system and functioning public services. Currently, our social security system doesn’t provide enough to live on; a couple in which at least one person is over 25 face a shortfall of at least £66 per week between Universal Credit rates and estimated essential costs, according to the Joseph Rowntree Foundation. Similarly, our public services need urgent attention. Making initial investments will in turn be growth enhancing.

[Read more: Does devolution really boost growth?]

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But our economy doesn’t always grow. Since 2008, it has suffered from stagnation. And yet social security and public services need upfront investment to help alleviate the poverty faced by more than four million children in the UK, whether we boost our growth trends or not. The costs of child poverty alone are estimated at £40bn per year. Waiting for growth to solve this issue won’t work.

We only need to look back to the last Labour government to know what the social security system can do both to support people in need and to help make work pay. The introduction of working tax credits was transformative, particularly for parents and disabled workers. This time around, Labour’s “New Deal for Working People”, coupled with public-service reform, investment and social security repair, could be just the combination required to help reverse the direction of child poverty once again.

To address our unacceptable levels of poverty, we must use all the levers at our disposal.

[Read more: What are the key questions Labour needs to answer in 2024?]

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