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Welfare reimagined: could cash transfers combat child poverty?

It’s a challenging time for the UK’s children. Almost 4 million are living in poverty and over a million of them are babies and children under five.

Children are particularly vulnerable to the effects of poverty. By age three, children from poorer backgrounds are at greater risk of falling behind in cognitive and socio-emotional development. Growing up in disadvantage also increases the chances of negative impacts on adult health, wellbeing and income. That’s why improving the life chances of children born into disadvantage is so important for society.

While governments provide a range of social security benefits for families with children, benefits as they currently stand are simply not enough to lift children out of poverty. The welfare system can be challenging to navigate and support often comes with eligibility requirements and conditions. Even in Scotland, where families with children receive more generous benefits than in other parts of the UK, 1 in 4 children still live in poverty.

But what if we could reduce the pressure on parents? What if we could give families the resources they need to thrive, directly and unconditionally? What if we could empower parents to focus on creating the best opportunities for their children to learn and flourish? This is the argument put forward by advocates of cash transfers – an idea with the potential to transform the lives of the nation’s poorest children.

Child cash transfers are a form of social welfare in which payments are given directly to parents to spend as they see fit, without conditions. Advocates say a simple cash-based approach makes it easier for people to access the money they are entitled to and allows them more control over their finances. It could also make the process of transferring money from government to recipient simpler, quicker and cheaper to run.

“In the economic insecurity that has followed the financial crisis, a decade of austerity, the pandemic and the current cost of living crisis, cash transfers can offer a lot more than their monetary value alone,” explains Kate Pickett, professor of epidemiology at the University of York.

“They can offer families a greater sense of security, agency and choice, giving people opportunities to support their children's development and at the same time reassuring them that their family's wellbeing is important to the state and to their society.”

Cash transfers are not unprecedented in the UK. Child benefit and the Scottish Child Payments are cash transfers programmes, although the real-term value and reach of child benefit has fallen by 20% since 2010 and is now worth less than it was in 1999.

The Scottish Child Payment offers parents £25 each week for every child. Modelling suggests full uptake of the offer could lift 40,000 children out of poverty, but there has yet to be a robust study carried out to evaluate whether the scheme has been effective in improving outcomes for the poorest children.

“In Scotland, we believe cash transfers can play a key role in boosting early cognitive development, preventing inequalities in early childhood and thus preventing poverty in the long-term,” says Claire Telfer of Save the Children Scotland.

“We think there needs to be a stronger recognition of the role of money in supporting children’s development in the early years. Research into the potential impact of tackling poverty and increasing incomes is under-explored and ripe for investigation.”

Much of the provision targeting families with young children in the UK is in the form of benefits-in-kind; this includes interventions such as childcare vouchers, free school meals, parenting support and food banks. Politicians often want to exert more control on what recipients spend their money on, but the international evidence around cash transfers demonstrates that, when afforded the independence to choose how to spend funds, parents tend to make choices that directly benefit their children.

Trials from North America, Africa and Asia suggest that cash transfer programs reduce poverty, increase uptake of health services by expectant mothers and young children, improve school outcomes and bolster child nutrition.

In the United States, research is ongoing into the long-term impact of generous cash transfers on child development. A large-scale randomised controlled trial – known as Baby’s First Years – is the largest to date, testing cash-transfers in four different cities: New Orleans, New York City, Omaha and Minneapolis/St. Paul. The trial is still underway, and it’s too early to see effects on child development, but early findings suggest a significant uptick in brain activity amongst children from families in receipt of monthly payments.

“Global evidence is thin on how children are affected by cash transfers, especially with respect to very young children,” explains Lisa Gennetian, study co-investigator and professor of public policy and early learning policy at Duke University.

“This is mostly because it is so hard and expensive to objectively capture children's development. This study's findings on infant brain activity are unprecedented and really speak to how anti-poverty policies… can and should be viewed as investments in children.”

Co-investigator Sarah Halpern-Meekin adds: “We know that distributing unconditional income support can get resources into families' hands with minimal bureaucratic hurdles; but we need research like this to quantify the long-term impact of that approach on children, so that policymakers can make informed decisions.”

But while the international research looks favourable, there is currently a major gap in the evidence: there has never been a randomised controlled trial of cash transfers for young children in the UK. The socio-political landscape across the UK is decidedly different from that of the United States. We have different welfare provisions, childcare systems – the entire policy infrastructure surrounding child development is distinct and varies across the UK nations. And that’s a problem that can only be solved through research.

“Internationally there is lots of evidence that shows cash transfers are an impactful way to give aid, and Baby’s First Years will provide powerful evidence from America. What we don’t know is whether and how they would work here,” explains Patricia Lucas, who researches childhood inequalities for Nesta.

“We’d hope to see improved parental wellbeing and reduced stress –factors we know have a big impact on child development. The payments could support parents to afford healthier food for their children and to enhance the home learning environment with toys and educational resources.”

“But if we want to know for sure whether similar cash transfers could help the nation’s poorest children to thrive, we have to carry out a robust evaluation. We need a UK trial.”

Ultimately, public policy needs to be based on evidence. The truth is, we don’t know whether cash transfers to families with young children will effectively improve child development in the UK context, but we do know that they merit exploration.

It’s time for governments across the UK to explore new ways of providing the resources families need to build a better life for themselves and their children. If we want to close the development gap and avoid the lifelong impact of childhood inequality, we need to trial and test different approaches.

Child poverty is not inevitable, and nor is the cycle of disadvantage that it creates. We need research, we need evidence and we need the will to explore solutions that create a fairer start for all children.


Mary Cruse

Mary Cruse

Mary Cruse

Editorial Manager

As editorial manager, Mary was responsible for telling Nesta’s story through blogs, op-eds, and other editorial content.

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Louise Bazalgette

Louise Bazalgette

Louise Bazalgette

Deputy Director, fairer start mission

Louise works as part of a multi-disciplinary innovation team focused on narrowing the outcome gap for disadvantaged children.

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