Ideas to tackle poverty for the long term

Transcription

1 Ideas to tackle poverty for the long term An IPPR approach to reducing poverty by Graeme Cooke This report contributes to JRF s developing anti-poverty strategy for the UK. It proposes five ideas to reduce poverty which could make a substantial impact in the long term, including boosting social investment and redesigning back-to-work support for disabled people.

2 Ideas to tackle poverty for the long term n IPPR approach to reducing poverty Graeme Cooke This paper contributes to JRF s developing anti-poverty strategy for the UK. It does so by proposing five ideas that, if enacted, have the potential to make a substantial impact on rates of poverty in this country over the long term. To be plausible and effective, an anti-poverty strategy has to be based in the current economic and social circumstances: the approach may vary from time to time. hile employment remains important to any strategy, the reality of fiscal constraint and the persistence of lo -paid employment means other strategic directions need to be developed. This paper considers five key ideas: boosting social investment; supporting a dual earner household model; redesigning back-to- ork support for disabled people; preventing a lifetime of exclusion; providing access to lo -cost credit and incentives to build up savings. June 2015.jrf.org.uk

3 Contents 1 Background 1 2 Introduction 2 3 Boosting social investment and the social age 4 4 Supporting a dual earner household model 6 5 Redesigning back-to- ork support for disabled people 8 6 Preventing a lifetime of exclusion 10 7 Providing access to lo -cost credit and incentives to build up savings 12 8 Conclusion 14 Notes 15 References 16 ckno ledgments 17 bout the author 17

4 1 Background This paper takes as its starting point the definition of poverty developed by JRF: hen a person s resources (mainly their material resources) are not sufficient to meet their minimum needs (including social participation). The definition recognises the social and experiential dimensions of poverty, hile focusing attention on the significance of assets and expenditure as ell as income. It stresses the dynamism of the causes and impacts of poverty, alongside the ider range of economic and political po er relations that sustain it. nd it is open to mobilising the agency of the state, markets and broader civic society as ell as citizens themselves in reducing poverty. s ell as recognising the fiscal choices to be made in any anti-poverty strategy, e have to consider context: hat is the right approach for the circumstances? Paid ork alone is no longer a guarantee of lack of poverty. The headline employment rate has bounced back strongly over the last t o years, but earnings gro th remains very eak. e are operating against a background of age squeeze and gro th in zero-hours contracts. There is much uncertainty about the shape and pace of future economic change, and it is very likely that economies like the UK s ill continue to generate and sustain a significant number of lo -paid jobs (contributing to the phenomenon of orking poverty ). 1 Therefore, a part of any strategy needs to focus on tackling poverty hile recognising the nature of the labour market, rather than being blind to these challenges or assuming they can be easily or imminently eradicated. This analysis does not reduce the importance of employment ithin an effective anti-poverty strategy. Given fiscal constraint, its contribution ill need to be even greater in the years ahead. Nor does it imply fatalism about the shape and structure of the labour market, or the distribution of bargaining po er ithin it. Both should be core to future anti-poverty efforts. 1

5 2 Introduction Before turning to my proposals, it is necessary to highlight t o contextual issues. These help to ground the specific ideas in a set of broader arguments and strategic insights about the characteristics of a plausible anti-poverty strategy. The first contextual issue is that, hile not abandoning the importance of material resources or sacrificing conceptual clarity, JRF s definition of poverty offers a broader canvas for anti-poverty efforts than has often been the case in the recent past. Crucially, this perspective is consistent ith highlighting structural factors hich cause poverty and emancipatory reforms hich can increase the po er of those facing poverty. Both are vital companions to policies that reduce the incidence of poverty and the direct impacts on those experiencing it (for a longer discussion of this strategic imperative, see La ton et al., 2014, pp ). second important contextual point is that any plausible anti-poverty strategy must be alive to prevailing economic and social circumstances. There is a not a right approach to reducing poverty for all times and all places. In recent years this has meant recognising that the scope for more direct income redistribution is limited by the damage done to the public finances by the Great Recession of range of substantially different fiscal choices are still available, but this overall constraint ill remain through this parliament (though there is not a strong democratic mandate for a rene ed tax and transfer strategy in any case). Ho ever, the fiscal position is not the only aspect of contemporary economic conditions to hich an anti-poverty strategy must respond. In particular, the nature of the recent recovery, combined ith the continuation of longer standing labour market trends, is eakening the effectiveness of paid ork as an anti-poverty policy on its o n. Productivity has been sluggish in many sectors and another important part of this story is the lo ages reported by a significant share of the expanded ranks of the self-employed. In addition a large share of the rise in employment has been in part-time jobs. It is too early to kno the extent to hich the current age squeeze and other recent phenomena, like the gro th in zero-hours contracts reflect cyclical factors hich ill recede as the recovery takes a firmer hold. Ho ever, a substantial proportion of lo -paying jobs are an established structural feature of the UK labour market, mirrored across advanced economies. The shape and pace of future economic change is uncertain, not least in relation to patterns of global demand and the consequences of technological innovation. Politics too can make a difference. It is possible for economic actors firms, orkers and the government to affect the type of jobs created and ay skills are used. Similarly, the balance bet een profits, ages and investment can be shifted, for example by altering the po er dynamics in orkplaces and across the economy. This analysis does not reduce the importance of employment ithin an effective anti-poverty strategy. Given fiscal constraint, its contribution ill need to be even greater in the years ahead. Nor does it imply fatalism about the shape and structure of the labour market, or the distribution of bargaining po er ithin it. Both should be core to future anti-poverty efforts. Ho ever, the reality of both fiscal pressures and enduring sectors of lo -paid employment does suggest that a set of ne strategic directions should come more to the fore. here possible, these should also seek to actively confront the non-material dimensions of poverty, such as social isolation and a lack of po er and agency (as discussed further in La ton et al., 2014, pp ). The ideas in this paper aim to provide examples of such ne directions. t their core is a social investment approach, aimed at prioritising reforms and spending that expand productivity, boost 2

6 employment and support family life hile aiming to reduce the demand for compensatory elfare 2 over the longer term. The kinds of strategies hich flo from this starting point are those that: relieve key expenditure pressures; promote dual earner households, including through the benefits system; innovate in the design and delivery of employment support; prevent young people drifting into economic and social exclusion; emphasise the role of asset-holding in building resilience and coping ith insecurity, including freedom from debt, access to credit and the chance to build up savings. The follo ing ideas attempt to illustrate some ne strategic directions ith the potential to make a substantial difference to the long-term path of poverty in the UK. They seek to respond to contemporary economic trends and the broader canvas for policy implied by JRF s definition of poverty. They do not claim to add up to a comprehensive anti-poverty strategy. In particular, they do not address options for shifting the distributional impact of the tax and benefit system, hich can make a large short-term impact on poverty. Major choices remain in this area, despite fiscal pressures. 3

7 3 Boosting social investment and the social age Through prioritising the expansion of quality, affordable childcare substantial expansion of childcare provision ould contribute to reducing early childhood disadvantage, boosting parental employment (in particular for mothers) and mitigating gender inequality. This has been an essential component of the consistently lo rates of poverty achieved by the Scandinavian countries, as the cornerstone of a social investment strategy. The employment rate of mothers in the UK lags behind the international best in class, especially among those ith pre-school children. T o-thirds of mothers not in ork ho ant a job cite childcare affordability as a barrier. mong orking mothers, t o-thirds of those anting to ork more say the cost of childcare prevents it. Failures in the childcare market also lead to some mothers orking in jobs that leave their skills under-used (for further evidence see Ben-Galim, 2014). In addition to supporting employment, additional free or highly subsidised childcare, funded via the state, ould also boost the social age 3, thereby easing a major household expenditure pressure. There also are good reasons for thinking that greater efficiencies and value for money could be achieved by socialising the cost of childcare, given the failure of private childcare markets to provide high quality, affordable services, hile preserving choice for parents (Cooke and Henehan, 2012). In addition, organising childcare through local institutions, like children s centres and nurseries, offers places here relationships among local parents can be nurtured and outreach to more excluded parents can be organised. This can help to overcome social divisions and isolation, hile also mobilising civic resources in support of family life. Moreover, childcare services can provide opportunities to identify those in need of additional help. There has been a significant expansion of childcare provision in the UK over the last 15 years. Ho ever, availability and quality remain patchy, hile the price to parents remains high (particularly among those ith children aged one to three, those living in high cost areas, and those earning just above the tax credit threshold). Moreover, funding and service entitlements are complex, creating uncertainty for parents (Ben-Galim, 2014). In response, IPPR has proposed a plan to guarantee an affordable childcare place from the age of one, including a universal entitlement to free, part-time, year-round care for all those aged t o to four (for a full explanation of this model see Ben-Galim, 2014). This ould probably generate a significant boost to employment and family incomes. To ensure that quality is enhanced alongside affordability, e also propose that all those orking ith t o-year-olds be qualified to Level 3 in early years practice, ith a significant share holding a relevant, degree-level qualification. More specifically, our proposal is that all children aged t o to four be entitled to 15 hours a eek of free, good-quality childcare for 48 eeks a year. 4 This ould mean extending the existing t o-year-old entitlement to the 60 per cent of children ho remain ineligible for it under current plans, and broadening the entitlement for all those aged t o to four from 38 to 48 eeks a year. This ould mean school holiday periods ere covered. Ho ever, hile sufficient for helping child development, 15 hours a eek does little to enable a parent to ork. Therefore, for orking parents ith a child aged t o to four, a further 20 hours a eek of care should be available at a heavily subsidised rate. nd up to 35 hours a eek of subsidised childcare should be available for orking parents ith a one-year-old, to plug the major gap in provision at the end of statutory maternity leave. Local authorities should be responsible for ensuring this is delivered. The ne ly elected Conservative government has pledged to extend the existing free entitlement for three and four years olds to 30 hours a eek, during term time, here all parents in the family are 4

8 orking. This is an encouraging shift to ards our vision, though the restriction to term time hours ill limit the affordability and employment impact. Therefore, as a next step to improving affordability beyond the free entitlement, e suggest that the state should meet 95 per cent of eligible costs for those lo -income orking households on Universal Credit and 30 per cent of costs for those entitled to so-called tax free childcare. 5 This extra help should also be extended to parents of school-age children. Under these proposals a orking family ith one-year-old and a three-year-old, using the average amount of formal childcare, ould save over 450 a year compared ith the current government s plans (Ben-Galim, 2014). Over time, investment in childcare ould generate a fiscal return, through higher tax revenues and lo er benefit payments (perhaps in the region of 1.5 billion a year under reasonable assumptions). Ho ever, the upfront cost of our proposed expansion ould be a little under 2.7 billion a year. e suggest this revenue could be released through a combination of scrapping the planned married couple s tax allo ance, reducing the generosity of tax relief on pension contributions, and holding do n future rises in Child Benefit (see Ben-Galim 2014 for detailed costs and savings). This funding package ould involve a balance of tax rises and spending cuts, recognising the need to s itch resources to priority areas. Compared ith Denmark, for instance, hich has a much lo er rate of child poverty, the UK devotes a far higher share of spending on families ith children to income transfers relative to childcare services (Cooke and Henehan, 2012). There is a strong case for prioritising investment in services over cash transfers, on political and efficiency grounds. Imagine this Imagine, for example, if Tony Blair had pledged a Nordic system of universal childcare in Had a greater share of the resources put into increases to Child Tax Credit been devoted to that goal, it is likely that more sustainable progress to ards a lo er rate of child poverty ould have been achieved and such progress ould have been less easily undone. 5

9 4 Supporting a dual earner household model Through the creation of a separate ork allo ance in Universal Credit for second earners The risk of poverty in families ith children here one parent orks full-time and the other part-time is around one in 20 (six per cent), compared ith one in five (20 per cent) among single earner families (La ton and Thompson, 2013). This highlights the value of thinking households in any effective antipoverty strategy; in particular, it points to the crucial importance of policies that support dual-earner households, here both parents ant paid employment, consistent ith protecting time and space for family life. There are many legal, financial and cultural factors that affect the ability of adults to share ork and caring responsibilities ithin households. Labour market and skills policies can also make a difference in enabling employment among non- orking partners. In addition, the tax and benefit system should be geared to supporting this model, as our individualised system of taxation does. transferrable tax allo ance ould undermine it. Controversy about the implementation of Universal Credit has unfortunately obscured discussion of its design. Though it has some strong features, it ill eaken the incentive to ork for potential second earners. Many single earner families currently only receive tax credits, hich are ithdra n at a rate of 41p for every extra 1 of household earnings. By contrast, such families ill see Universal Credit ithdra n at 65p for every extra 1 earned. This is a significant increase in the effective marginal tax rate for second earners, making ork considerably less financially attractive. It ill undermine a key building block of a sustainable anti-poverty strategy. Therefore, IPPR has proposed the addition of a separate ork allo ance in Universal Credit for second earners, enabling them to keep more of their ages before household benefit entitlement begins to be ithdra n (see La ton et al., 2014, pp for a fuller discussion of this idea). In 2015/16, the first earner in a couple ith children ill be able to earn 2,664 a year before their entitlement to UC starts to be ithdra n. 6 Our proposal is for second earners to be given a separate ork allo ance orth 1,332 the same as a single person ithout children. This ould enable them to earn 26 a eek before their entitlement to UC as affected, assuming their partner brought home more than 2,664 a year. s an example, under current plans, if a second earner moved into ork earning 140 a eek 7, the ithdra al of Universal Credit ould leave the household ith a net gain of 49 a eek. Under our proposal the net gain ould rise to 66 a eek, leaving the household better off by 17 a eek. Our modelling suggests that this change ould cost around 670 million a year if applied to all couples, including those ithout children. One ay of financing this change ould be to increase the taper rate of Universal Credit from 65 to 67 per cent, raising around 740 million. Evidence suggests that financial incentives make a larger impact on decisions about hether to ork at all, rather than hether to earn more (Lawton and Thompson, 2013). Therefore, boosting the ork allo ance should take precedence over a shallo er taper rate. This change alongside an expansion of high-quality, affordable childcare ould clearly signal support for the dual-earner household model. It ould also bring greater coherence to the tax and benefit system for families ith children, follo ing a range of contradictory reforms to income tax, Child Tax Credit, Child Benefit and financial support ith childcare costs. 6

10 This approach ould be deepened by ske ing income transfers to ards families ith younger children, rather than their value being even across the 0 16/18 age range. This ould recognise that orking hours are constrained for parents ith pre-school children, hile using the tax and benefit system to enable more family time at this crucial stage of children s development. Offsetting reductions in income transfers for those ith school-age children ould be justified by the greater potential for parental employment among those ith school-age children. more radical shift ould be to s itch resources currently spent on Child Benefit to raising the value of the child element of Universal Credit, thereby more efficiently targeting resources on tackling child poverty. This ould deal ith the current mess of t o separate means-tested payments for families ith children. It ould also prioritise the defence of universalism in services, like childcare, hich support human relationships, rather than cash benefits hich are transactional in nature. Such a reform could be combined ith a distinct, additional tax allo ance for those ith children, hich ould recognise family life in the tax system and provide some support to orking families ith children (see La ton et al., 2014, pp for further discussion of these options). 7

11 5 Redesigning back-to- ork support for disabled people Through a ne locally-led, supported employment programme for Employment Support llo ance claimants Despite an improving labour market, disabled people continue to face a substantial employment penalty. Just over a third (35 per cent) of disabled people 8 are in paid ork, compared ith over three-quarters (78 per cent) of non-disabled people. Even greater employment gaps are faced by people ith mental health conditions and learning disabilities. hile ork is not a certain route out of poverty, confronting the labour market disadvantage of disabled people must be crucial to any effective anti-poverty strategy (see Cooke et al., 2015 for a longer discussion of the key evidence and trends). Ho ever, current policies to support disabled people into ork are proving ineffective. Only 5 per cent of Employment Support llo ance (ES ) claimants participating in the ork Programme enter employment. The ork Capability ssessment ( C ) remains a benefit gate ay not the start of an employment plan. Support and obligations are structured around benefit categories not personal circumstances, hich Universal Credit ill not materially change. Latest figures sho over half of ne ES recipients are entering the support group (denoting that they are not capable of engaging in orkrelated activity), invariably ending their engagement ith back-to- ork support. More fundamentally, the ork Programme has largely involved extending the kinds of traditional activation strategies that have proved effective for mainstream jobseekers, to those on ES. Ho ever, for those ith reduced ork capacity or no record of employment, a mix of supported job search, CV maintenance and intervie preparation is holly insufficient. There has been little innovation in employment support for disabled people or attempts to dra on lessons from effective practice here and abroad. One lesson from the ork Programme is the limits of contract design and price incentives in responding to complex social and economic issues. In particular, neither of these has enabled or promoted the kinds of supported employment strategies for hich there is good, if still emerging, evidence. These dra on the place, train and maintain model, combining: rapid job search; active employer brokerage; the integration of clinical treatment and employment support; in- ork support; and a positive, proemployment culture. Therefore, IPPR has proposed that hen current contracts expire in 2016, a ork focused but qualitatively different supported employment programme should be established for ES claimants ith a long-term reduction in their capacity to ork 9 (Cooke et al., 2015). Government should establish the basic principles for the programme, but it should be organised and commissioned at a local level; either top tier local authorities or groups of councils orking together on a city- or county- ide basis. 10 This model ould make it possible to overcome the structural eaknesses in the ork Programme. Unlike a narro contract ith accountability up to hitehall, a locally led approach ould enable the integration of employment support ith other vitally important services (such as health, housing, skills, social care and probation). This in turn ould enable greater investment in back-to- ork strategies, by dra ing in resources from other local services (for example to enable specialist employment advisers ith lo er caseloads). To achieve this shift, funding for employment support for ES claimants (via the ork Programme and ork Choice) should be devolved, ith resources matched locally. Local resources for this programme could most obviously come from public health budgets, ith the European Social Fund (ESF) providing further funding. Reducing the number of ES claimants ould bring local economic and social benefits. Ho ever, to sharpen the incentive to pool budgets and integrate services, local areas should share ith central government any financial gain from boosting employment. 11 8

12 If the 200 million a year D P spends on employment programmes for ES claimants as devolved and matched by local resources, 200,000 ES claimants could be supported (at unit funding of 2,000 per participant). 12 If this funding as matched again by resources from clinical commissioning groups and the ESF a ne programme could ork ith 400,000 ES claimants across the country. This ould mean back-to- ork support for more than three times the number currently participating in the ork Programme each year, at almost three times the level of unit funding per participant. Crucial to the success of the kind of programme described here ould be steps to overcome the difficulties disabled people face in finding jobs suitable for them, and employers illing to take them on. This needs active brokering and carving of jobs such as adapting ork patterns or responsibilities to suit potential candidates plus ongoing support in the orkplace (supported by ccess to ork funding). Further steps should also be considered to directly address so-called demand-side barriers. One option ould be for the state to assume the liability for sickness absence of former ES claimants, to counter employer fears and costs (especially among small firms) (see Cooke et al., 2015 for a more detailed explanation of this option). 9

13 6 Preventing a lifetime of exclusion Through a distinct ork, training and benefits track for young people to ensure all are learning or earning Youth unemployment has been falling over the last year, but there are still over a million 18 to 24-yearolds not in employment, full-time education or training (NEET). lmost half (45 per cent) of year-olds ho are NEET do not hold GCSE-level qualifications and almost a quarter (24 per cent) have never had a job. In truth, unemployment among young people began rising in the early 2000s, hen the economy as still strong. nd there is good evidence that the penalty for leaving school ithout decent qualifications or experience of ork has been gro ing over time. period of time being NEET as a young person significantly increases the risk of poverty over an individuals lifetime ( CEVO, 2012). These orrying trends reflect deeper, structural shifts in the labour market and eaknesses in aspects of our education system. Ho ever the challenges faced by disadvantaged young people are exacerbated rather than compensated by the elfare system. Those leaving school ithout a learning or earning destination are faced ith a benefit system designed for adults ho have lost their job, not those starting out in their careers. The priorities for this group are completing their basic education and gaining practical ork experience. But the current out-of- ork benefits actively inhibit these goals (see Cooke 2013 for a longer discussion of these structural problems). Jobseeker s llo ance (JS ) is a ork first benefit, preventing (full-time) continued education or training. There is no system of financial support for those in further education (unlike for those in higher education). Mean hile, ES and Income Support come ith fe participation requirements, risking a drift into long-term inactivity. There is also no limit on ho long young people can claim out-of- ork benefits and be neither orking nor learning. lso, around half of young people ho are NEET are not claiming any out-of- ork benefit, and so have no connection to support in finding a job or returning to education. In response, IPPR has proposed t o core reforms aimed at constructing a distinct ork, training and benefits track for 18 to 21-year-olds ith the aim of preventing any young person being long-term NEET (see Cooke 2013 for a fuller explanation of these core proposals). First, e suggest replacing the existing suite of out-of- ork benefits for this age group ith a youth allo ance, conditional upon participation in learning or job search. 13 This ould enable young people to complete their education, though ith a lever to ensure this is pursed in areas ith real labour market opportunity. There are around 250, to 21-year-olds in non-higher education learning and not receiving an out-of- ork benefit, ho ould be ne ly entitled to financial support under this proposal. nd a further 230, year-olds ho are NEET but not claiming any out-of- ork benefit. 14 This extension of financial support to young people in further education ould impose an additional cost (of around 750 million a year). This could be offset by means-testing the youth allo ance on parental income, as is the case for university grants. This ould mean financial assistance is targeted on those ho cannot be supported by their families. ll young people claiming the youth allo ance should have a personal adviser and an action plan. For those ithout GCSE-level qualification, this should focus on continued learning. For others, it could prioritise further education, self-employment or a job ith training (including an apprenticeship), depending on personal circumstances. pprenticeships should be reserved for ne ly hired young people (up to the age of 25). To maintain quality, they should last at least t o years, lead to a recognised qualification at Level 3 as a minimum, and involve a substantial amount of off-the-job learning. The second element of our proposal is a youth guarantee, for any young person ho is not learning or earning after six months. This should provide them ith up to six months of paid ork experience or a paid traineeship as a backstop to prevent inactivity. 15 Such placements should be based on the 10

14 previous Labour Government s successful Future Jobs Fund programme and the previous Coalition Government s traineeship programme. Participants should receive at least the minimum age, but should not be able to refuse such offers and to continue receiving the youth allo ance. The cost of delivering the youth guarantee ould depend on flo s into education or employment before the six month point. e estimate unit funding for the backstop options ould need to be around 3,000. s a guide, at the end of 2013 there ere around 200, to 21-year-olds ho had been unemployed for over six months. If the youth guarantee as provided for this group, additional funding of 600 million a year ould be needed. This could be financed by ending entitlement to Child Benefit and Child Tax Credit at the end of the academic year in hich a young person turns The effectiveness of the youth guarantee ould depend on strong co-ordination of employment support, further education provision and apprenticeships. This cannot be driven from hitehall. Therefore, hile the government should set national objectives, resources and responsibilities should be gradually devolved. 17 This should start ith Scotland, ales, London, and the five combined authorities in England and any other area able to demonstrate its capability to effectively lead delivery ( orking closely ith their local enterprise partnership) (Cooke, 2013). 11

15 7 Providing access to lo -cost credit and incentives to build up savings Through the creation of an independent affordable credit trust s households have sought to cope ith falling incomes and rising costs, levels of personal debt have risen. Many lo -income households do not have a strong enough credit rating to secure finance from mainstream lenders, hile high street banks do not lend the relatively small amounts that households often need. This has led to increased reliance on forms of very high cost credit, such as payday lending (see La rence and Cooke 2014 for further evidence on these trends). Even a return to strongly rising living standards ould not eliminate the need many households have for relatively quick access to small amounts of credit, repaid over a short period of time. Research has sho n the high degree of fluctuation in household incomes and expenditure pressures, over short periods of time. ccess to affordable credit should, therefore, be a key part of an anti-poverty strategy (especially given the dismantling of the Social Fund). In response to public horror at the orst practices in the payday lending market, the Coalition Government (via the Financial Conduct uthority) announced a number of elcome reforms. These include plans for a legal cap on the total cost of credit, a limit on the number of rollover loans, and a requirement for greater price transparency. Lenders should also have to conduct proper affordability checks before a loan can be agreed and provide a 24-hour cooling off period bet een a loan request and cash being paid out. Ho ever, hile such changes should help to prevent bad things happening, regulation is a poor strategy for promoting good things (see La rence and Cooke 2014 for more on this argument). Therefore steps are also needed to build up affordable alternatives to high-cost lenders. IPPR has proposed an institutional innovation: the creation of an affordable credit trust ( CT), to endo and support nonprofit-making providers of affordable loans for lo to middle income families (see La rence and Cooke 2014 for more detail on this proposal). To achieve this, the CT should issue charters to non-profit-making organisations that ant to offer affordable credit to local people, and hich meet a basic set of conditions. The CT should endo such chartered organisations starting ith credit unions and community finance development initiatives (CFDIs) ith capital to lend to local people according to a set of broad criteria. It ould also provide administrative, technical and IT support, to enable non-profit lenders to compete. To get an CT charter and dra do n capital, organisations ould have to meet a minimum set of conditions (including specifying the geographic area they plan to serve). Individuals should have to become a member of a local organisation before credit could be accessed, so that people enter into a relationship ith it and can have a democratic voice in its governance. e suggest that the CT should be governed by an independent board, comprising representatives of chartered lenders and independent experts. Lending should be rapid but responsible, ith appropriate affordability checks and a 24-hour cooling off period. Loans should be capped at 250 at any one time (the size of the average payday loan). There should be a cap on the lending rate of 3 per cent a month, matching that hich applies to credit unions (equivalent to an PR of 42.6 per cent). s a last resort, chartered institutions should have access to a backstop reclaim mechanism through the benefit system, as as available ith the Social Fund, to reduce the default rate and lo er their costs. 12

16 To provide an initial capital injection, e propose a one-off 450 million levy on the consumer credit industry to capitalise the CT. This ould be equivalent to the level of direct consumer harm the industry caused in one recent year alone. Such a levy should be designed on a polluter pays basis, ith those firms causing the most harm repaying the greatest amount to consumers. 450 million capital injection ould support more than 1.5 million loans of 250 at any one time across a net ork of chartered lenders. Local lending institutions should also take in deposits, just as credit unions do. For example, to build financial resilience, 20p could be matched for each 1 saved up to the first 20 deposited each month. If this option as made available to families in receipt of benefits or tax credits, and a third took it up, the cost ould be around 170 million a year. Such a modest sum could be financed as part of a ider reform of the regressive and poorly targeted 24 billion a year forgone by the Treasury through tax relief on pensions savings (see La rence and Cooke 2014 for more detail). 13

17 8 Conclusion The aim of this paper has been to illustrate the potential for a broadly based anti-poverty strategy, not reliant simply on redistribution through the tax and benefit system. The proposals are founded on the role of social investment strategies that can help to boost employment, productivity and life chances. Consistent ith this approach, the ideas put for ard aim to: expand the social age; promote dual-earner families; boost the employment rate; prevent young people being NEET; protect households from high cost credit and debt. Taken together, these measures aim to address some of the structural drivers of poverty, to complement the vital ongoing role of transfer payments that directly boost the financial position of lo -income households. 14

18 Notes 1 So-called entry level jobs do enable those ith lo er skills or reduced ork capacity to access the labour market. Ho ever, too many people are finding themselves stuck in lo -paid ork for many years, rather than such jobs acting as stepping stones to better paid ork. 2 This term refers to social security expenditure that arises as a result of ider social or economic failures, most often arising from the labour market, housing market and childcare market. 3 This refers to benefits that accrue to households in addition to their direct pay packet, such as access to free or subsidised services that they ould other ise have to fund themselves (for example, education, health and childcare). 4 Since childcare is a devolved issue, the proposals and costings cover England only. 5 This should be combined ith a price cap mechanism to prevent extra demand-side support to parents being offset by increases in provider s prices. In time, childcare funding should move to ards a unit funding/tariff model, as operates for schools and ithin the NHS. 6 Figures assume Universal Credit has been implemented in full. 7 Equivalent to 20 hours a eek at 7 an hour; the second earner ould not be earning enough to pay income tax or national insurance contributions. 8 This refers to people ho both have a disability under the Disability Discrimination ct and ho selfreport a ork-limiting disability. 9 This ould leave those recovering from a temporary health condition participating in a reformed ork Programme. There is a strong case for developing a triaging model based on ork capacity, rather than one structured around benefit categories. 10 The D P should provide strategic guidance and input into the development of local plans and commissioning arrangements. here local areas are not able to demonstrate sufficient local capacity, there should be provision for the D P, via JobcentrePlus, to lead for an interim period. 11 The risks to the Treasury of devolution are limited given that existing expenditure in this area is delivering such poor results and that ES caseloads are not cyclical. 12 The government expected to spend 1,170 per ES claimant on the ork Programme, hile actual unit spending has been 690. s a guide, the unit cost of Individual Placement and Support (IPS) a leading example of supported employment is estimated at just under 1, There ould be exemptions for those ith very young children or a ork-preventing disability. 14 further 340, year-olds currently receive JS, ES or Income Support. 15 This ould mean year-olds not participating in the next iteration of the ork Programme. 16 This is the point at hich access to the youth allo ance ould start, and hen those entering higher education make the transition over to its system of financial support. Consideration should also be given to introducing a youth levy on large firms that do not offer apprenticeships. 17 The youth allo ance ould remain a national payment administered by central government. 15

19 References CEVO (2012) Youth unemployment: The crisis e cannot afford. The CEVO Commission on Youth Unemployment. London: CEVO. vailable at:.cesi.org.uk/sites/default/files/event_do nloads/ CEVO_report.pdf (accessed on 6 pril 2015) Ben-Galim, D. (2014) No more baby steps: a strategy for revolutionising childcare. London: IPPR. vailable at:.ippr.org/publications/no-more-baby-steps-a-strategy-for-revolutionising-childcare (accessed on 6 pril 2015) Cooke, G. and Henehan, K. (2012) Double Dutch: The case against deregulation and demand-led funding in childcare. London: IPPR. vailable at:.ippr.org/publications/double-dutch-the-case-against-deregulation-and-demand-led-funding-inchildcare (accessed on 6 pril 2015) Cooke, G. (2013) No more NEETs: plan for all young people to be earning or learning. London: IPPR. vailable at:.ippr.org/publications/no-more-neets-a-plan-for-all-young-people-to-be-learning-or-earning (accessed on 6 pril 2015) Cooke, G., Pennycook, M. and Stirling,. (2015) Promoting contribution: Boosting employment opportunity for all. London: IPPR. vailable at:.ippr.org/publications/promoting-contribution-boosting-employment-opportunity-for-all (accessed on 6 pril 2015) La ton, K. and Thompson, S. (2013) Tackling in- ork poverty by supporting dual earning families. York: JRF. vailable at:.jrf.org.uk/publications/tackling-poverty-supporting-earning-families (accessed on 6 pril 2015) La ton, K., Cooke, G. and Pearce, N. (2014) The condition of Britain: Strategies for social rene al. London: IPPR. vailable at:.ippr.org/publications/the-condition-of-britain-strategies-for-social-rene al (accessed on 6 pril 2015) La rence, M. and Cooke, G. (2014) Jumping the shark: Building institutions to spread access to affordable credit. London: IPPR. vailable at:.ippr.org/publications/jumping-the-shark-building-institutions-to-spread-access-to-affordable-credit (accessed on 6 pril 2015) 16

20 ckno ledgements The ideas presented in this paper dra heavily on IPPR s flagship 2014 publication Condition of Britain strategies for social rene al. s such I ould like to ackno ledge my t o co-authors, Nick Pearce and Kayte La ton, as ell as many other IPPR colleagues ho contributed their ideas and arguments to that book. bout the author Graeme Cooke is Research Director at IPPR, here he has published research on a range of social policy issues including employment, housing, childcare and elfare reform. He is currently on secondment to Islington Council, developing local strategies to tackle long-term unemployment and orklessness. 17

21 The Joseph Ro ntree Foundation has supported this project as part of its programme of research and innovative development projects, hich it hopes ill be of value to policy makers, practitioners and service users. The facts presented and vie s expressed in this report are, ho ever, those of the author[s] and not necessarily those of JRF. pdf version of this publication is available from the JRF ebsite (.jrf.org.uk). Further copies of this report, or any other JRF publication, can be obtained from the JRF ebsite (.jrf.org.uk/publications) or by ing publications@jrf.org.uk CIP catalogue record for this report is available from the British Library. ll rights reserved. Reproduction of this report by photocopying or electronic means for non-commercial purposes is permitted. Other ise, no part of this report may be reproduced, adapted, stored in a retrieval system or transmitted by any means, electronic, mechanical, photocopying, or other ise ithout the prior ritten permission of the Joseph Ro ntree Foundation. Institute for Public Policy Research 2015 First published June 2015 by the Joseph Ro ntree Foundation ISSN: ISBN Ref: 3117 Cover image: istockphoto Joseph Ro ntree Foundation The Homestead 40 ater End York YO30 6 P.jrf.org.uk 18

22 Inspiring Social Change