The cost of poverty

This is an edited version of an article that appeared in The Yorkshire Post on 9 July 2025 in which Matt Bromley argues that poverty doesn’t just cost those with limited financial means, it also costs the country …

It may sound like a riddle, but it’s true: Life costs more when you’re poor. 

It’s called the ‘poverty premium’. If you’re poor, you’re likely to pay more in living costs. For example, energy costs more when you’re forced to use a prepayment meter – not to mention that low consumption equals higher fixed costs. Home and car insurance cost more when you live in a deprived area. Food costs more when you can’t afford or access transport to a large supermarket so rely on higher-cost local shops. And everything costs more when you lack the banking facilities to make direct debit payments. 

Poverty also impairs cognitive function, making it more likely that someone with limited financial means will make bad fiscal decisions. This is, in part, because poverty-related concerns consume mental energy, leaving less resource for other tasks. 

But poverty doesn’t just come at a premium to those living with limited financial means; it also costs the country. 

In fact, a recent report by the Trussell Trust found that failing to address poverty is costing the UK economy £75.6 billion a year. This includes £13.7 billion in additional public service spending and £38 billion in lost productivity and employment. 

The report demands urgent policy change, including:

• An ‘essentials guarantee’ on Universal Credit to ensure 2.2 million fewer people are at risk of hunger and hardship by 2027, including 720,000 children. This would lead to a reduction in costs to the economy of £17.6 billion.

• The abolition of the two-child limit on benefits which would lift 670,000 people out of hunger and hardship, including 470,000 children. This would also lead to a reduction in costs to the economy of over £3 billion. 

The Trussell Trust argues that, if the benefits system was simplified and every family was helped to claim the support that they’re eligible for, then 565,000 people would be lifted out of hunger and hardship and there would be a £5 billion saving to the economy.

A report by the IFS published in May, meanwhile, found that Sure Start centres – established in 1999 as ‘one stop shops’ for early years, health, and family support services – provided £2 of savings for every £1 in costs. At their peak, they produced £2.8bn savings and the positive impact of the scheme was long-lasting, with an average lifetime post-tax earnings boost of £7800. The IFS also found that Sure Start improved health and educational outcomes, including better GCSE results, as well as reduced school absences. 

In short, social injustice is not only a moral failure but a costly one. Put another way, tackling poverty is not just about compassion; it also makes good economic sense.

Those who argue against reforming the welfare system and removing caps often do so in the belief that people on benefits are scroungers and frauds. But the facts simply don’t support this view. 

Yes, of course, some people abuse the system, but you can’t punish the majority because a minority take advantage. The latest figures suggest only 2.8% of benefits are claimed fraudulently, which admittedly costs the taxpayer a lot of money (c £7.4 billion in 2023/24), but this loss is approximately six times lower than the amount lost to tax evasion and avoidance by the wealthiest in society; in fact, tax evasive costs tens of billions more each year than benefits fraud. 

So, if we want to cut the cost to taxpayers of fraudulent activity, we’d be better making the tax system fairer and more progressive, closing loopholes and prosecuting evaders, rather than cutting welfare spend for the poorest in society. We can use the savings from this to lift people out of poverty, then reap the financial rewards over the long-term. 

This is our moral duty as a society. Indeed, search for synonyms of ‘society’ and you’ll find ‘humanity’ and ‘civilisation’ among the list – words associated with people banding together and helping each other. 

So, we must tackle poverty, not just because that’s what a civil society does, but because doing so will save taxpayers money! It’s a win-win. 

About the author

Matt Bromley is CEO of bee and Chair of the Building Equity in Education Campaign. He is an education journalist, author, and advisor with over twenty-five years’ experience in teaching and leadership including as a headteacher. He is now a public speaker, trainer, initial teacher training lecturer, and school improvement advisor, and remains a practising teacher. Matt writes for various magazines, is the author of numerous best-selling books on education, and co-hosts an award-winning podcast. Find out more at bee-online.uk

Matt’s latest book, which is out now and published by Routledge, is called Why School Doesn’t Work for Every Child and explores ways of creating more inclusive schools.