Pensions Scotland's Economy Westminster Mismanagement

We should be paying the poor to have more children

The Conservatives seem to have forgotten one of the golden rules of politics: “never put yourself on the wrong side of an ethical decision”. Gordon Brown opposing the rights of former Gurkhas seeking the right to live in Britain comes to mind. More recently the bedroom tax, the faux Living Wage, a lack of care for war refugees, and even refusing to say to EU nationals that they can stay in the UK after Brexit, because you might need them as bargaining chips, are all reflective of a highly unethical trend.

Now trust me this isn’t going to be another column about the “rape clause” and how disgusting it is that women with a third child who require financial support would have to prove they were raped to get said support. Everyone with a soul can just agree that even if only one woman in need of support for her children has to fill out a 13-page form to prove she was raped, then it’s an immoral law. So let’s instead consider something that has been drowned out by the justifiable clamour around the nastiness of the clause and consider the clear fact that capping child tax credits at two children is economically moronic.

The basic idea is that “people shouldn’t have children they can’t afford to”.

It’s a compelling soundbite, but in truth means the Government is trying to restrict the ability to reproduce among lower income families. It stems from the Tory zeitgeist that there are two classes of people: taxpayers and benefit-takers, and that if you require benefits for your children then you are a drain on the economy. It is true that a child born poor is more likely to remain poor, but that assumes that either we can’t change, or don’t want to change our society to one like Denmark’s where there’s major opportunities for social mobility. It’s a divisive and wrong-headed manner of thinking.

Wealthier people are having smaller families and so fewer offspring have been inheriting more assets, and thus increasing income inequality. We also have an ageing population and despite the folklore there is no such thing as a UK pensions pot. Pensions are paid out of the income generated by working age people and fewer young people simply means that a pensions time bomb will explode sooner rather than later. By 2040 as much as 40 per cent of the UK population will be of pension age, across the whole EU it could reach 50 per cent. Already the Tories have refused to commit to maintaining the triple lock on pensions and the pension age is being increased. This is a direct result of a generational trend of increased life expectancy and falling fertility rates.

So looking at this economically you have a choice of two diametrically opposed policies: 1) Encourage people to make more babies, so that there will eventually be enough young people to pay for pensions and the welfare state. This will create a society that increases social mobility so that people born poor don’t have to stay poor.

2) Take a short-term view and try to cut the costs of benefits by introducing policies that limit the birth rate among those on lower incomes. In the longer term this will increase the average age in society to unsustainable levels, you then have to continuously increase the pension age and cut benefits and government expenditure right across the spectrum.

When you step back from the soundbites and headlines its seems simple, if we have a society where people can’t afford to have children then eventually that leads to a society when you can’t afford to retire. One where there will be no social safety net and certainly no publicly owned NHS.

My answer is simple: we need to create sustainable birth rates and lift children from lower income families out of poverty. This will increase the opportunities for social mobility and thus the chance of escaping the low income trap. And to do this we need to pay poor people to have children.

AS far back as 2004, Australia introduced the baby bonus to increase the birth rate, $5,000 per eligible child was paid in 13 fortnightly instalments. In Sweden you can get a large family supplement too. In Germany you get €190 child support each month for the first and second child; €196 for the third; and €221 for the fourth and further children. When a child is born, its parents’ incomes drop and this automatically lowers the birth rate. The cost of government support for those children is significantly lower than the taxes by the time that the child has become a working adult, as long as your society doesn’t trap them in poverty.

The single largest cost of a falling birth rate will actually be the fact that the government will have to pay the entire cost of looking after the elderly poor. Every generation has a duty to care for the generation that came before it, and if low income families have less children, then the poor will become more of a burden on the state in their old age.

The time spent caring for parents and grandparents not only restricts the generation of income among already low income families, but it is also the single biggest ongoing benefit cost saving for the welfare state.

If you want to lower the benefits bill then there are smarter, more ethical ways of doing it than attacking the reproductive rights of the poor. Telling large companies to pay the Real Living Wage would lift millions out destitution, put a major dent in child poverty, make working more attractive, and in Scotland alone generate a combined tax revenue boost and benefits saving of over £1 billion a year. It isn’t the claimants that are fleecing the benefits system, it is major corporations paying wages that are so low that full time workers need to claim benefits just to live that causes the problem.

The Government’s cap on third child tax credits is as economically incompetent as the rape clause is unethical. It focuses on big businesses and subsidising profit-makers, all at the expense of developing a thriving, locally owned SME business base with a Living Wage across the board. And it’s trapping people in poverty. Westminster’s Tory Government has set in place a disastrous cycle of economic incompetence, political ineptitude and societal inhumanity.

About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland he ran a small social media and sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.

2 Comments

  • That’s the way it should work. Unfortunately, where it falls down is the “lift children out of poverty” bit. There is nothing the Tories would like better than a huge pool of the poor willing to take on any job for minimum wage where taxpayers foot the bill to allow these people to live while their (the Tories) mates pick up the profits and transfer them overseas. It may be short term, but it allows the rich to build up enough money that they won’t care.

  • I agree. Wealth comes from people.

    The best investment we can make as a nation is in our people.

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