The report by the Joseph Rowntree foundation estimated children’s services departments spent £4.5 billion a year addressing issues caused by poverty – around 58% of total council expenditure on these services.

Researchers estimated that 26% of adult social services budgets are spent addressing issues relating to poverty, with £2.4 billion spent on younger adults and £2.2 billion on older adults.

The report focused on spending incurred “as a consequence of poverty’s existence”.

“This study shows that over four per cent of GDP (£78 billion) can be associated with the cost of poverty. This is slightly more than the entire public deficit last year,” the report concluded.

Illustrating problems

The evidence was found by comparing spending levels across small areas with different poverty rates, and researchers said the findings should be seen as an illustration of the amount of public spending in this area.

“Poverty and social disadvantage affect people’s lives in various ways that trigger additional public expenditure. In some cases, this is because of damage that poverty does to people’s lives, such as the worse health of people in poverty,” the report said.

Spending to intervene early in averting poverty’s potential consequences, and help people overcome reduced opportunity as a result of poverty, were other areas money was being spent.

“What all this spending has in common is that it tries to compensate for the damage caused by poverty, whether in terms of outcomes or opportunities,” it said.

Huge rewards

Donald Hirsch, one of the report’s authors, said the figures showed a “very large, tangible effect on the public purse”.

“The experience of poverty, for example, makes it more likely that you’ll suffer ill health or that you’ll grow up with poor employment prospects and rely more on the state for your income.”

The report said “about a fifth of spending on public services is associated with poverty”. It added how tackling poverty would bring “huge rewards”.