Income Inequality and Child Poverty in the UK

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OECD figures present the UK as having one of the highest levels of income inequality in the European Union (as measured by a Gini coefficient of 0.35) and a child-poverty rate of 0.118. There is a need to reduce this inequality as it is impacting on peoples standard of living and hindering economic growth.

Government Spending

As relative poverty rates increase, a huge burden is placed on government spending. In 2013 a report approximated that annually, UK child poverty costs the country at least £29 billion. The additional for benefits and demand for government services, as well as reduced tax receipts has worsened the government’s fiscal deficit by £20.5 billion. (Group, 2019) There is a need for spending to be focused on preventing relative poverty, to relieve future spending on government spending. Current maternity pay is 90% of average weekly earnings (in the first 6 weeks), lowering to a maximum of £145.18 a week (for the next 33 weeks). (Gov UK, 2019) The North East has the lowest average living costs at £437, which 145 a week will leave new parents with huge financial strain, possibly forcing them to return to work early.

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In the UK there is an insufficient provision of childcare (nurseries and registered childminders) at an affordable price, which is hindering labour market participation rates of parents. The UK has amongst the highest childcare costs in the world, costing up to £920 per month, placing huge strain on new-parents, and leaves them with little disposable income, leaving them unable to provide the necessities a child needs in their pre-school years. In comparison childcare in Sweden is provided free for those with low incomes and even at the other end of the scale costs a maximum of £119 a month. Childcare costs accounts for 33% of peoples average income, in comparison to 4% in Sweden. (BBC, 2018) A reduction in the burden of child-care costs would help elevate poverty figures.

The Consequences of Child Poverty

Growing up in relative poverty can significantly affect future prospects, limiting their development, progress in education and their health. By the age of three, poorer children are estimated to be, on average, nine months behind children from more wealthy backgrounds. (Busby, 2019) Children growing up in relative poverty often have access to poor quality schooling and achieve poor results, limiting their job opportunities to low skilled and low paid work. (The Children’s Society, n.d.) Research shows that the majority of children from poorer backgrounds grow up to live in relative poverty, spending must be directed at breaking this poverty cycle.

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