Asset-based welfare and child poverty Dr Rajiv Prabhakar, LSE and The Open University, 1

Introduction What role can assets can play in reducing child poverty A sceptical case against assets Why assets are important What steps may help people build up assets Example: Welsh Assembly child poverty strategy 2

A neglected topic Glennerster : ‘poverty campaigners have devoted too little attention to the fact that most poor people have no assets’ (‘Capital poor’, Benefits, 2006, 27). Winckler, What is Needed to End Child Poverty in Wales, JRF, 2009: childcare; flexible employment; parental skills; benefit and tax credits 3

A sceptical case The Child Trust Fund does not provide help now Those on low-incomes cannot save: ‘families who are at the greatest risk of living in severe and persistent poverty are the least likely to be able to contribute to the CTF, so their children will derive little or no financial benefits when they turn 18’ ( Child Poverty Action Group, 2005) Assets are a distraction from income benefits and job creation 4

Why assets are important Help now Financial cushion against shocks (redundancy, relationship breakdown) Eg: Save the Children and Family Action Families in Crisis programme, Saving Gateway Longer term strategy ‘Asset-effect’: alter the way people think Prevent poor children becoming poor parents, e.g. CTF 5

Can those on low incomes save ? At times, paying debt may be higher priority than saving Evidence suggests saving is possible Harvey et al, 2007, Final Evaluation of the Saving Gateway 2 Pilot: Main Report, London: HM Treasury and DFES) Ran from 2005 to 2007, 22,000 accounts 6

Can those on low incomes save? 16 to 64 (individual earnings below £25,000; family earnings below £50,000; receipt of a main out-of-work benefit). 18 months and offered various match rates Those with accounts were 5 per cent more likely to say that they had boosted their saving. 69 per cent of months saw the net monthly contribution equal to the monthly match limit Financial exclusion a barrier to saving Saving into CTFs: a problem of inclusion? 7

Wales: some background 32% of children live in households whose income (after housing costs) is less than 60% of UK median This amounts to 192,000 children Source: Winckler

Children living in relative low-income households, to Children living in in relative low-income households to

Financial inclusion and assets Welsh strategy: work, income benefits and assets Financial inclusion: top-ups and credit unions Deputy First Minister Ieuan Wyn Jones in July 2009: ‘This top-up is another example of where we are delivering Welsh solutions to the issues we face in Wales. Tackling child poverty and financial exclusion remain among our key commitments for this term’ Welsh Assembly government provides £50 extra in 2009/10 to all eligible children born between 1 September 2002 and 31 August 2003, with a further £50 for children from low income households. 10

Welsh strategy (continued) Welsh Assembly government set a target of increasing the number of credit unions being able to offer C TF accounts from 3 to 18 by June 2009, which would represent 60% of credit unions in Wales. The Welsh Assembly government provided £350,000 to help achieve this target, and the goal was achieved by May

Issues Recent policy remains to be evaluated Will top-ups and credit unions deliver inclusion? Credit unions: a national model? Possible role for Post Office Conservative plans for CTF Will inclusion reduce poverty? More important because of recession? 12