A nation’s wealth and greatness is not measured by the number of billionaires but by how well it takes care of its children and weakest members

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

A nation’s wealth and greatness is not measured by the number of billionaires but by how well it takes care of its children and weakest members. From this perspective, the UK, one of the world’s wealthiest nations, has been on a downward journey. This descent is due to political choices rather than any economic necessity. The government has declared war on the poor rather than poverty.

The evidence is not hard to find. In 2022/23 around 4.3m children, 30% of all children were living in relative poverty (defined as households with income below 60% of the median level in a given year), up from 3.6m in 2010/11. This is highest rate of child poverty since the records began 20 years ago. In 2023, UNICEF reported that child poverty levels in the UK have risen by a fifth. The UK was placed 37th out of 39 countries in an overall league table of richer countries. Tory MPs blame child poverty on “crap parents” and ignore the visible hand of government’s obsession with cutting real wages, benefits, and public services, which in turn denies people access to good food, housing, family doctors, dentists and hospitals. 

The average real wage is lower than in 2008. In March 2024, the median gross wage reached £28,104 a year  or £23,754 after income tax and national insurance deductions. The Joseph Rowntree Foundation estimated that in 2023 a couple with two children needed to earn more than £50,000 a year to reach a minimum acceptable standard of living. Millions of families don’t reach that benchmark. 

Disposable incomes are eroded by unchecked profiteering as supermarkets, food, banks, energy, internet and other entities have declared record profits. People are typically paying rent of £2,633 a month in London and £1,291 elsewhere, leaving little for other essentials. Disposable income is eroded by regressive tax policies which force the poorest to pay a higher proportion of their income in taxes than the richest. The richest fifth households pay 31% of gross household income in direct taxes; compared to 14% by the poorest fifth. The richest fifth pay 9% of its disposable income in indirect taxes, compared to 28% by the poorest fifth.

The recent cuts in national insurance contributions have been accompanied by freeze on income tax thresholds, trapping people in fiscal drag and higher tax bills.  The net result is that anyone earning less than £26,000 a year will be worse off. Child poverty is compounded by a two-child benefit cap imposed by the government. This prevents families from receiving means-tested benefit support for third or subsequent children born from April 2017 onwards. The cap impacts 1.5m children and deprives 422,000 families of income of up to £3,455 a year. 106,000 families affected by the two-child limit are single-parent households with a child under three years old. Another 87,500 families have a disabled child. UNICEF noted that the UK expenditure on family cash benefits per child, as a proportion of GDP per capita has decreased from 18% to 11%.

The choice for families is to find extra income or go without essentials. Families are increasingly relying on foodbanks and charities to make ends meet. Due to poverty children are denied good food, housing, healthcare and miss out on what many others take for granted – such as books, toys, decent clothes, day out and holidays. 

Children born to undernourished parents are likely to have low birthweight and suffer from a variety of childhood ailments, which continue through later life. Infant mortality rate in the UK is nearly 4 deaths per 1,000 live births, compared to 1.7 in Japan, 1.8 in Finland, Slovenia and Sweden. Lack of good food leads to lower muscle and bone development, fatigue and physical and cognitive development. Cold homes and empty bellies are the harsh realities. 

Teachers and schools are increasingly diverted from educational tasks to finding beds for children, providing showers and washing uniforms as children lack beds and other facilities at home. Teachers are dipping into their pockets to provide food to hungry pupils. By the age of five UK children are up to seven centimetres shorter than their European counterparts. Due to poverty, cases of malnutrition in the general population have more than doubled in a decade and have quadrupled since 2007/8. From 2022 to April 2023, 10,896 NHS patients, including 312 children, were hospitalised with malnutrition in England. 405 children were admitted with scurvy. More than 36,000 urgent referrals of children to mental health teams were made between April 2023 and January 2024, around 830 every week. Children as young as 11 are being sectioned for mental health problems.

Children born into the poorest fifth of families are almost 13 times more likely to experience poor health and educational outcomes by the age of 17. Their school readiness is lower than the children from affluent families. They are less likely to go for higher education and escape the cycle of poverty, and are more likely to be confined to low-paid and less secure jobs. Childhood poverty takes a toll in later life as adults are more likely to suffer from diabetes, heart attack, cancer, and multimorbidity, increasing pressure on the healthcare and welfare system.

Child poverty costs the UK over £39bn a year, arising from greater risk of unemployment, lost production, lower earnings and greater demands on healthcare and public services to address the damage done by childhood poverty. Any cost-benefit analysis would show that investment in child poverty reduction measures would yield large social gains.

In a country where 50 families have more wealth than half the population and the top 1% has more wealth than 70% of the population combined, child poverty is political choice. The poorest fifth has only 8% of the total household disposable income. Equitable distribution of income and wealth, progressive taxation and affordable housing are key requirements for lifting families and children out of poverty.

The first step is to increase household income through a higher living wage. Unfair employment practices, such as zero-hour contracts, and fire-and-rehire policies need to be eliminated. Individually workers are in no position to negotiate with employers, and that task needs to be undertaken by trade unions through collective bargaining. The presence of worker-elected directors on the boards of large companies, which is common in the European Union, would help to increase productivity and secure equitable distribution of income.

The poorer families would be helped by abolition of VAT on domestic fuel and reduction in the standard rate of VAT. The cost of this can be loaded to taxes on households with higher income and wealth. Personal allowances for income tax purposes must not be less than the living wage. The two-child benefit cap needs to be abolished. This would cost the government around £2.5bn in 2024-25 and immediately lift 490,000 children out of poverty.

Free school meals for school-age children are available in some areas, but are not universal. Eligibility is means-tested and in England about 900,000 children living in poverty miss out on free school meals and denied nutrition. Making free school meals available to all children of school-age would cost around £2bn a year.

The above modest suggestions would significantly reduce child poverty and enable millions to live a fulfilling life. It would reduce social costs and benefit the economy.  Neoliberals devoted to class warfare immediately ask “How will you pay for this?” To them human misery has a price. They did not ask such questions when the state found £1,162bn to bailout banks (£1,029bn of guarantees + £133bn cash), £51.1bn to bailout energy companies, or £895bn of money created via quantitative easing to support capital markets. Billions are handed out in subsidies to rail, auto, steel, oil, gas, coal, biomass, internet and other companies to inflate profits and shareholder returns. Neoliberals object to anti-poverty policies and are no fans of modern monetary theory (MMT), but even within their ideological framework there are plenty of options to rebalance the tax system to eradicate poverty. 

For example, by taxing capital gains at the same marginal rates as wages, around £12bn a year in additional revenues can be raised. The same remedy for dividends can raise another £4bn-£5bn. Levying national insurance on recipients on capital gains and dividends, currently exempt, can raise another £8bn-£10bn. Restricting tax relief on pension contribution to 20% for all will generate £14.5bn a year. In sum, there is no shortage of resources for alleviating child poverty. A sustained attack on tax abuse is long overdue. HMRC admits that since 2010 it has failed to collect over £500bn in taxes due to evasion and abuse.

Child poverty is blighting the lives of millions and impoverishing the UK. Its eradication is an economic and social necessity.

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