Child poverty costs Britain at least £25bn a year, study finds

Anyone who thought bailing out the banks was a costly exercise should think again; it was a snip compared to the cost to the nation of child poverty, an economic study says.

Researchers found Britain has to pay at least £25bn a year because of the extra burden placed on state services by child poverty, as well as income and tax revenues lost to the country in the long term as a result of a child's poor performance in education. The full cost could be much higher because the teams that compiled the study used their most conservative estimates in coming to the final £25bn figure.

Three groups of economists and academics were commissioned by the Joseph Rowntree Foundation. They found that the Government spends £12bn each year trying to deal with the effects of child poverty, based on the extra spending on social services, health and housing needed to cater for children from low-income homes. Child poverty was found to account for 71 per cent of social services spending at a cost of at least £2.8bn across the UK. It cost schools £2.9bn on extras, such as special educational needs.

Higher law-and-order spending, calculated to cost the nation at least £1.2bn a year, was also included in the figure, because disadvantaged children are more likely to fall into crime. A second calculation estimated the long-term economic loss to Britain. It concluded that taxpayers are shelling out £2bn a year in extra benefits for unemployed and unskilled adults who grew up in poverty.

Child poverty was also calculated to be costing Britain's economy at least £11bn in reduced earnings because poorer children do not do so well at school and have fewer skills and therefore get lower-paid jobs.

The Treasury loses out on £17bn directly each year as a result of child poverty, and the remaining £8bn is lost by Britain's GDP as a result of lower skills and lost jobs.

Donald Hirsch, an independent adviser who oversaw the project, said: "The Government's argument for spending £37bn on bailing out our banking system was that the move was needed to ensure the long-term health of the country. Exactly the same logic should be used here."