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We should follow the science on poverty and give cash grants to those in need

Cash, not physical goods, can give those in need dignity and personal responsibility - and allow them to change their lives.

We should follow the science on poverty and give cash grants to those in need
people standing in front of brown cardboard boxes
Photo by Joel Muniz on Unsplash
Iqbal Nasim MBE is CEO of the National Zakat Foundation

The recent scandal involving UK government food parcels to disadvantaged families where a £30 'hamper' looked so bare as to be described as 'woefully inadequate' by many - has raised a deeper question about how both governments and charities can best deliver welfare and support.

In my experience at the National Zakat Foundation, cash grants - rather than physical goods - are more efficient and effective, affording recipients a sense of personal responsibility and dignity, enabling them to improve their lives on their own terms.

Decision-makers sense something isn't working. Boris Johnson has ordered an inquiry into the food parcels and devoted another £170m to the winter grant scheme, £220m for holiday activities and food programmes, along with a rollout of a national voucher scheme. While these schemes are commendable, why not just give families in need cash directly?

Efficiency alone is reason enough. The government entrusted a third-party provider, Clerkwells, with putting together the hamper to meet the varying dietary needs of millions of different families. As well as inserting an unnecessary 'middle man', this one-size-fits-all approach often fits no one.

READ: How the 0.7% law is affecting residents in the UK during the pandemic

How the 0.7% law is affecting residents in the UK during the pandemic

The 0.7% law states a proud, rich country like the U.K. can afford to give just 7 pence of every £10 to help people living on less than £1 a day. It also means when we have less money, the aid budget automatically goes down

Many in the charity sector, where we are often expected to achieve the most with finite resources, know there is a better way. For example, Save the Children says, "cash transfers are one of the more cost-effective ways of delivering aid. They support the local economy and, unlike food parcels, you don't need to build an entirely new production line from scratch." Centrally organised food parcels are seldom adequate for any family, do nothing for the local economy, and are a significant drain on public resources.

In devolved governments, things have already shifted with most of Scotland and Wales using cash injection schemes.

The UK government should follow suit, particularly since they have no problem allowing the millions of furloughed people to choose what they should spend their money on.

The furlough scheme is cold hard cash, not an 'unemployment package' consisting of food, colouring books, and a Netflix subscription. It seems implicit in the policy that the government believes that once someone slips below the poverty line, they can no longer be trusted to spend money responsibly.

Margaret Thatcher famously said that "poverty is a character defect," i.e., that if low-income families were financially responsible, they wouldn't be low-income families in the first place.

Although some low-income families may have issues with alcohol or drug dependency, that is not representative. In any case, it has complex causes, including low self-esteem - something not helped by being robbed of your ability to choose what to have for dinner. Unfortunately, some charities, as well as governments, seem to be falling for this gross caricature.

In 2014, the Chinese billionaire Chen Guangbiao arranged a lunch for the homeless people of New York. He intended to give each of the participants $300 to spend as they wished. The organisation involved, Rescue Mission, stepped in and accepted the total figure of $90,000 on their behalf, expressing their fears the money would be spent on drugs and alcohol.

This strategy - and the concerns behind it - isn't backed up by the data. The World Bank conducted a meta-analysis on cash injection schemes for homeless people in 19 different countries and found that the purchase of nicotine and alcohol increased in only two cases, and even then, the evidence was mixed.

Countless examples of evidence from around the world show that cash injections are a more effective way of relieving hunger and stimulating local economies, which has a cyclically-virtuous impact on the whole community. Just as we 'follow the science' regarding the pandemic, we should follow the evidence regarding poverty.

Aside from efficiencies, which are much-loved by governments of all stripes, cash support has an important psychological dimension.

Giving people dignity and autonomy allows them to make better decisions. Going from handout to handout, rather than managing a household budget, changes the way our brains function and entrench poverty.

When the brain perceives scarcity (e.g., there is a hamper and all the food our family has), it makes poor decisions. Princeton psychologist Eldar Shafir has documented many examples of the 'scarcity mindset' in his book "Scarcity: Why Having Too Little Means So Much."

Shafir explains how the perception of scarcity consumes 'mental bandwidth', which uses energy that would otherwise go to longer-term problem solving or planning. The compound benefit of a little extra financial cushion would allow low-income families to plan and work towards a better future.

We need to accept that, in general, individuals know what they need better than governments do. We seem delighted to fund direct cash transfers to alleviate food poverty abroad. Isn't it time we tried that at home?

Iqbal Nasim MBE is the CEO of National Zakat Foundation.

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