The Bishops have been preparing a policy ask for Government on the topic of tackling child poverty and they asked a number of charities, including us, to identify issues and suggest solutions which they could include in their proposals. This is what Purple Shoots suggested.

Much has been written about tackling poverty, including the importance of long-term planning and investment. While we agree with this approach, we also believe that long term planning shouldn’t preclude action right now.

This paper focuses in particular on how increasing family income can tackle some of the underlying causes of poverty and create longer-term, sustainable solutions. We describe the specific approaches we have used, and make recommendations for near-term policy changes that would make programmes like ours even more effective.  We also include broader, long-term policy proposals that could have a far reaching effect.

Purple Shoots

It is probably self-evident that an underlying cause of child poverty is insufficient household income. When resources are insufficient, as happens when employment is precarious, zero-houred or at the minimum wage (or less), or when benefits levels are too low or are inflexible, families can become impoverished. In addition to economic hardship, worries around making ends meet create enormous stress and anxiety within households which are problems in themselves but can also lead to poor decision-making. Poverty also pushes people into the arms of high cost or, worse, illegal lenders to help them cover crisis or even essential needs.

We have found through our work that people in poverty are not passively waiting for help, but are desperately trying to change their situations – what they lack is often just an opportunity and the wherewithal to seize it.

Purple Shoots tackles poverty, isolation, unemployment and financial exclusion, encouraging entrepreneurship, independence and self-reliance, amongst people who are often the most marginalized in our communities, including those on benefits, people with disabilities, long term health conditions or mental health issues. Much of our work has been in areas with high levels of multiple deprivation, but these issues can be found in most communities.

Our work seeks to tackle these issues in two main ways.

1. Self-reliant Groups

People stuck in a vicious cycle of isolation and poverty who want to change their lives, but don’t know where to begin, need support from others in their community.  Self-reliant groups enable people to use their own resources, skills and knowledge to take positive action in a self-determined way.  Initially Purple Shoots provides guidance, support and structure, then gradually cedes full control of the group to its members.  People save money—often for the first time ever—and use that pot of funds to develop an enterprise or to help group members avoid predatory lenders.  In the process they develop self confidence, improved mental health, increased determination and commitment and much greater resilience.  Through the groups’ training and enterprise activities they gain new skills and put themselves—and their families—on a path toward economic independence.

Self-reliant groups are also a means to support people with disabilities or additional needs, who often face isolation and poverty, but must also contend with additional barriers stemming from their disabilities.

Our groups are highly effective, but there are barriers in the benefits system that prevent group members from reaching their full potential.  For example:

• People on PIP (Personal Independence Payments) are allowed to earn some money without it affecting their benefits. However, any signs that the disabled person might be able to do something for themselves will trigger a review by the DWP. This jeopardizes all the hard won benefits and causes enormous stress for the people who have to go through what is a very cruel system. As a result, people in our groups who are on PIP are afraid to take any action which might improve their circumstances.
• People on other forms of benefit have to declare any income earned and this is then deducted from their benefits – so that rather than improving their financial circumstances through group activities, they are left exactly where they were. This is very disheartening and does not encourage the entrepreneurial spirit which the groups often engender in their members. Any earned income reported will trigger a review of benefits (which means they stop whilst the review goes on) or even worse, a sanction.

If we want people to be able to eventually move away from benefits, we must support and incentivise activities that help them to do so.

2. Microfinance

We offer small, ethical business start-up or expansion loans to individuals who cannot get their funding from anywhere else, usually because of a poor credit score (often arising due to health problems or family responsibilities) and/or having no funds to contribute or no assets on which to secure the loan. 96% of the people we support are on benefits at the time they receive our loan, and many are in debt to high cost providers.

Our loans are transformative, enabling people to create a pathway out of poverty. We have many stories of people who were struggling and in debt who have been able to repay all the debt and to build a better life for themselves and their families through the business they have created. The loans also benefit local economies: wealth created tends to stay there, with local people employed and local suppliers used (with the added benefit of a much smaller carbon footprint).

We are unique in the UK; nobody else is supporting this client group into self-employment.  Money we use for microlending has a long term impact – we can lend it over and over again to support more and more people, and as loans are repaid and the money goes round again.

But raising funds is enormously challenging.  It is wishful thinking that anyone can generate surpluses—or even break even—when lending to a highly disadvantaged client group without charging very high rates of interest, which we believe would be wrong and counterproductive.

We could do so much more to help lift families out of poverty if we could successfully raise more capital and revenue funding. We have a plan to replicate Purple Shoots around the UK, creating far-reaching and sustainable benefits for thousands of families.  The cost is low and the impact is high. The economic impact of our loans, using a recognized tool is 10 times the money loaned (£1.48million loaned to date with an impact of almost £15million) and a study (admittedly dated now – from 2012) of the gain to HM Treasury of this type of lending indicated that for every £1 lent, there is a net gain to HMT of £4 on average. It ought to be attractive to any Government to support this activity – but at present they don’t see it and don’t value the many very small businesses which in fact make up a substantial part of our economy.

Microbusinesses can also be a boost to women’s income in particular, which will have a strong knock-on effect for child poverty.  Across the UK 32% of new businesses were started by women in 2020. However, at Purple Shoots over the last six months, 75% of our micro-loans have been to women. Enabling the poorest women to increase their incomes is fundamental to combat child poverty.

But there is a benefits issue here too which needs to be tackled:

• For a self-employed person on benefits, the benefits payments taper down much too quickly so that the business owner is no better off for many months. Apart from being a disincentive and very disheartening, it also jeopardizes the success of the business because there is no chance to build any sort of cushion to cope with unforeseen circumstances whilst the business is in its vulnerable early stages, and the owner and his or her family continue to struggle with poverty.

Microfinance has proved a successful tool in many parts of the world – but it needs support to be able to do it effectively and affordably. In the US, for example, there is legislation which forces large financial institutions to give some of their profits to the microfinance sector – as a result, the sector is strong in America. Most Governments in Europe provide some support to the microfinance sector, but the UK does not.

The Responsible Finance Association are approaching Government both for legislation similar to that of the US mentioned above and for a fund for the sector – any support for this would be very welcome.

The Wider Economy

To achieve many of the steps that we and no doubt other organizations suggest, there needs to be a reset of economic thinking. The belief persists that growth will benefit everyone, trickling down from the wealthiest to the poorest, when the evidence of the last 50 years or so demonstrates that wealth concentrates in the hands of the already wealthy, leaving the already poor further and further behind.  Growth can be beneficial, but on its own it will not tackle poverty. Economic policy needs a different focus, one which sees a successful economy as one which improves the well-being of everyone.

The corona virus has emphasized the huge inequalities in our society and has made the need for a “levelling up” agenda even more pressing. However there is one thing at the macro-level – a change to Company Law – which could be implemented relatively easily and quickly which would encourage a more humane economy and begin to tackle poverty.

The traditional view is that it is the shareholders who have taken the risk in any company by investing their money in it and so they should control what it does and reap the rewards of any profits. Enshrined in Company Law is the obligation on all directors to maximize profit for their shareholders. BUT should profit be the sole motivation? There are other risk takers involved in companies – long term employees who develop skills useful for the company but not easily transferrable elsewhere, all employees who organize their lives around a job at the company, customers, lenders and the wider community where the company or its suppliers are located and which is impacted by what it does – and yet none of these people have any say in what the company does nor any share in its benefits, although they do bear the brunt of any failings.

There needs to be a change in Company Law which forces directors to consider other things as well as maximizing profit for their shareholders – such as environmental impact, the good of their employees and their impact and contribution to local communities, with sanctions if they fail to do so.

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Policy Changes to Tackle Child and Family Poverty