Markets and Morality

An alternative approach to alleviating child poverty

When Marcus Rashford, the Manchester United footballer, called on the government to provide free school meals over the October half-term to disadvantaged children, the campaign received widespread support, with over 1 million signatures signed on the Rashford-led petition. Even so, the government whipped its MPs to vote against a Labour motion to extend free school meals and, in one of the many of its U-turns during the pandemic, ultimately agreed to provide £400m to support underprivileged children and their families in England. In spite of the government’s indecisiveness, Rashford’s campaign brought to the fore a very important issue: child poverty.

According to the Child Poverty Action Group (CPAG), in 2018-19, there were 4.2 million children living in poverty in the UK, which equates to roughly 30% of the child population. There are certain demographics who are more likely to have children living in poverty. For example, of children who live in single-parent households, 44% live in poverty. There are several factors that contribute to child poverty, one of the most important being long-term worklessness and low earnings within the child’s household. Of children who experience persistent poverty (defined as living in poverty for at least three out of four years), 38% lived in workless households.

However, as Kristian Niemietz described, the benchmark that is normally used for defining poverty is misleading, because it measures relative poverty, that is, income in relation to others, as opposed to actual material deprivation. This means that even as a society gradually becomes wealthier, the levels of poverty would not fall, unless society also becomes more equal. Thus, this measure does not accurately reflect economic progress. Using relative income as a poverty benchmark also has several shortcomings, as it does not take into account benefit under-reporting, or temporary fluctuations in income, among others. Therefore, when discussing child poverty, we have to make sure that we are appropriately defining poverty as the ability to purchase the good and services that are essential to the human condition, not how much a person earns in comparison to others.

But whatever the precise numbers – what is indisputable is that there are children who do live in perilous conditions and at risk of going hungry. Groups such as the CPAG often suggest that the best way to tackle this is to increase benefits. However, benefit spending in the UK is already fairly high by international standards, and the COVID-19 pandemic has not exactly improved the country’s finances. This makes ever-larger government spending programmes an economically unwise measure for the future.

Instead, in the medium-to-long term we should focus on reforming the various governmental interventions that increase living costs and worsen circumstances for those living in poverty. The most important sector is land use planning. Since 1947, land use planning laws in the UK have been entirely mandated by the state. Large tracts of land in areas of high housing demand are designated as part of the ‘green belt’ where development is not permitted. This has led to a rise in prices, meaning a greater proportion of people’s income is spent on housing costs. Between 1965 and 2009, real incomes before housing costs at the tenth percentile of the income distribution grew by 80%, whereas income after housing costs grew by only 45%. If housing costs had increased at the same pace as incomes between 1965 and 2009, real incomes of low-income families would be 26% higher. Sky-high housing costs mean that the least well-off in society live in more crammed conditions, and have less disposable income left after housing costs to spend on other necessities. If the government liberalised land planning laws, the cost of housing would dramatically decrease. This would reduce poverty, including child poverty, as parents would spend less on housing and more on other goods, such as food, that would improve the child’s situation. Similar reforms are possible in other sectors, such as childcare, energy and agriculture.

The Church of England is another organisation which, like CPAG, frequently calls for more government spending on welfare programmes. But rather than rely on the state – why does the CofE not make greater use of its own considerable resources and local knowledge first? The CofE runs an £8.7bn investment fund, which generates annual dividends of nearly £900m. Why not pool some of those assets with those of other faith organisations, in a multi-faith, not-for-profit fund, and use the dividends to finance poverty relief schemes? That would allow faith leaders to come up with various ways of improving the life chances of children suffering from poverty, supplementary to any benefit scheme provided by the state.

Of course, if the Church of England were a purely private organisation, then there would be no legitimate reason for me to comment on their activities. In general, the liberal position is to “mind your own business”, and that includes avoiding commenting on the activities of private organisations. However, the Church of England is better thought of as a hybrid organisation, which, while mainly private/voluntary, enjoys many protections by the state that are not afforded to other private organisations. For example, it enjoys the direct leadership of the head of state, positions within the House of Lords (26 bishops sit as Lord Spirituals) and chancel fees (a Medieval-era law that allows a Church at parish level to claim contributions from local land owners to repair the chancel of the church). Therefore, whilst we would not comment on the activities of an organisation such as John Lewis, the Church of England’s unique designation makes it more appropriate for members of the public to opine on how some of its assets could be used for greater benefit.

Ultimately, there is a pressing need to help reduce the number of children who live in poverty, but we should resist falling into the trap that the solution is increased government spending. At a time when the government’s finances are stretched, we should seek ways to provide support to children that are outside the realm of the state. In the medium to long term, there should be a focus on removing government intervention in sectors that raise living costs and diminish the ability of people to escape poverty. Whilst no solution will ever eliminate child poverty, we should embrace proposals that both alleviate the problem and are fiscally responsible.

1 thought on “An alternative approach to alleviating child poverty”

  1. Posted 28/03/2021 at 10:00 | Permalink

    Many thanks, always interested in reading views on reducing poverty.

    If a liberal position is “mind your own business” that is hardly liberal as most liberalism supports the free market as long as it does not put detriment upon others – Amazon is a private business so should we ignore reported employment practices, sometimes causing poverty or low wages among staff, across the world just because amazon is a private organisation?

    The solution I agree is less state control and intervention, however that can only be achieved if private organisations that pay the majority of incomes are willing to step up to the plate so everyone earns a decent wage to live on without state subsidy.

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