Examination of witnesses (Questions 20 - 39)
WEDNESDAY 25 FEBRUARY 1998
RT HON
HARRIET HARMAN,
MP and RT
HON FRANK
FIELD, MP
Chairman
20. Can I go back to something Edward said? It is on
the important question of DLA on which we are doing a short report.
Is it possible for ministers to attend, or could you perhaps arrange
for ministers to talk to us about this disability living allowance?
(Ms Harman) Absolutely. We would be glad to do
that.
Mr Leigh
21. How does an affluence test differ from a means test?
(Ms Harman) You have to look at the experience
of other countries, who have different definitions, different
ways of dealing with and trying to focus the system. You have
to look around at the experience of other countries to see how
they have done it.
22. Can you rule out taxing child benefit?
(Ms Harman) We have this clearly in our manifesto
that child benefit is going to remain universal, where it is now,
which is up to 16, and we are going to increase it at least in
line with prices. On taxation issues, you will have to ask the
Chancellor to come before the Committee to answer those.
Ms Hewitt
23. I want to pick up the question of people living in
poverty because like the Secretary of State and the Minister of
State I represent a constituency with a very large number of people
living in poverty, people in retirement as well as people who
are either out of work or doing desperately low paid jobs. It
leaps out from the focus files that over the last 18 years, the
poorest people in the community have been getting a lower and
lower share of the social security budget. Actually the richest
people have been increasing their share somewhat. Is it a central
objective of this Government's policy of welfare reform to reduce
the levels of poverty in this country and what targets might the
Government intend to publish and use in order to measure your
success in reducing poverty and over what time scale would you
expect to see a reduction in poverty?
(Mr Field) The Green Paper will be listing our
first attempts at devising success measurements and we hope this
Committee will be one of a number of organisations which seriously
tries to take forward that discussion. We have not done this approach
before. It is new territory and it is important that people realise
that this is our first stab at it. We want part of the Green Paper
discussion to suggest how we can improve on that. Therefore, what
you say, Patricia, will be reflected in how the Committee responds
to the Green Paper. Should we be going for an arbitrary definition
of poverty, trying to move people above that line, or should we
be looking more generally at distribution of income, which was
the first part of your question, or should we adopt the view that
Income Support is the poverty level? It goes back to the point
that Harriet and I were making to Edward. We are committed to
seek out the poorest pensioners who are not claiming. You could
then have the farcical position of a real success, that the whole
country would applaud of ensuring that our oldest and frailest
pensioners are gaining more money, and yet some politicians might
want to say it is a terrible failure because the numbers on Income
Support have gone up. I hope we will not try to knot ourselves
in that fashion. When you draw attention to the focus files, about
the distribution of incomes, very significant things have happened
in the last 20 years. The previous Secretary of State, in two
of his lectures, drew attention to both the very significant changes
and the growing inequality between individual income. I think
that the growing inequality in household income is more significant
than individual income. All I am doing is really drawing attention
to what Harriet said about how our reforms will be about trying
to help those in one aspect of it, workless households, enter
the labour market. But the reason why the distribution of income
showed up in the benefit way, the way you described, was two fold.
One is because there was a very rapid increase in top incomes
during the last 20 odd years which actually pulled the average
up, and, therefore, the distribution changes further down the
scale. As all of us know, in this room, there are only so many
people you can fit into the lowest decile. They then spill over
into the next decile, and over into the third decile, depending
on what the overall distribution of income is doing. So it looked
as though help was moving up the income scale because there were
more people living in households below half average income. The
second is due to major reforms, started under Keith Joseph, which
were about moving away from benefits through insurance, to benefits
means testing, and benefits to meet particular needs of people.
That is really people who have long term sickness and disability.
You would, therefore, expect, for example, if you are doing it
on categories of need rather than categories of income, that some
of your social security expenditure would begin to move up the
income scale as a result. You would also expect with regard to
those pensioners who thank goodness when they come to retire,
also have good second pensions and as we were mentioning earlier
on, that we would want to spread that success—will take
their disability benefits with them into retirement, so that this
group are also moving up the income scale. It is an important
point that you make. It does underscore that it is sometimes more
complicated, than a quick look at the figures might suggest, but
there are reasons for that. It does not in any way undermine what
Harriet was saying that there is overall commitment of the Government
both to protect and promote the interests of the poor.
24. I am not going to pursue a lot of the fascinating
themes that you raise there, but does that mean that in the Green
Paper and its implementation, we can expect to see proposals of
quite precise targets that are measurable and time scales to accompany
them?
(Mr Field) Can I give you an example? The Green
Paper will not be finalised until we publish. Edward had a momentary
relapse in recalling what he might have read in newspapers a moment
ago. I worked on the Green Paper, its next stage, over the weekend.
Harriet saw that in her box last night. As we walked over here
today Harriet went through the points that I had made over the
weekend, and said what her views were to be taken to the next
stage. One of the issues that we are discussing is, do we want
to present the Green Paper as the work of a group of know-alls—we
know everything but we are calling it a Green Paper—or are
we going to start a debate saying that these are the areas which
we wish to measure? We would like your views on them. My view
is the latter, but Harriet and I along with other members of the
Government, are still discussing this.
(Ms Harman) As Frank said, he is in the process
of thinking it through. We are also in the process of finding
it out, so, for example, the action research pilots to find out
the poorest pensioners will tell us what the targets might need
to be. The results of the new deal for the long term sick and
disabled, the pilot projects which will identify what opportunities
there are for getting people with different sorts of health and
disabilities into work, will tell us not only whether we are able
to do it, but actually what progress we will be able to make and
how fast we will be able to make progress. Certainly, as Frank
said, we want to make ourselves accountable and make our objectives
clear, and for people to be able to judge us against those objectives
and those targets. I think it is partly the process of under standing
how we formulate those targets.
25. Obviously, some of the people who are the poorest,
and those families with children, living on income support, whatever
the Government does with the best will in the world will not all
find themselves in a job tomorrow. I wondered whether you would
like to take this opportunity to comment on reports in this morning's
newspapers about possible increases in income support levels and
in particular the level of family premium for two-parent and one-parent
families?
(Ms Harman) Thank you for that question, Patricia.
That is Budget speculation which you would not expect Frank and
I to comment on. I think we are clear that we have established
a view that whilst lone parents do have extra costs, those extra
costs are largely the costs of child care and we aim to meet those
extra costs through the provision of help with the cost of child
care and help with the supply of child care. As for benefits for
people out of work, then married women and women in couples where
there is no one in the house in work and where there are children,
and lone parents with children where there is no one in the house
in work will get the same rate of benefit per child. So there
is an equalisation of the benefit rate, but the extra help in
providing the child care would be particularly important for lone
parents.
Chairman
26. I do not want to get into Budget speculation either.
It is a very interesting model. If you look at the fact that you
have a three tier situation where you are putting money into families
in work and those on income support, you are actually leaving
those who are above the levels for income support in a different
situation, because there will be single parents, if speculation
is true, who will be worse off. If you extrapolate that kind of
model to Disability Living Allowance, for example, you will find
that you are putting money into those who are in low paid work
on income support and leaving those with a high level of income.
Is that a model that is in ministerial minds?
(Mr Field) We would be very happy to come back
after the Budget and discuss how the Budget does actually impact
on the concerns which all of us have.
Mrs Stuart
27. Frank earlier mentioned this new look at citizenship
which requires a contract between the individual and the state.
It does require integrity in actions both by government and by
a variety of providers. When we look at pensions and providing
for retirement these are extremely long-term decisions. In America
they look in 75-year terms, whereas we seem to be satisfied just
with a couple of years. In the last 15 years we have seen an erosion
of trust, both in terms of the private sector insurance providers
but also in terms of the state being consistent. So as we ask
people to save and provide for their old age and really ask them
to take very long-term perspectives, what I would like to get
is an idea that when people come towards the end of their life,
pensions and the needs of pensioners change, in a sense. It is
not basic income, it is long-term health care. The last two years
of life are the most expensive ones, which brings us to the question
of to what extent would the state expect the individual to totally
exhaust their own resources before the state steps in? This is
a very significant question. Do we still subscribe to John Major's
notion of wealth cascading down the nation, or do we say we will
redefine the individual responsibility and are quite clear how
we do see that towards the end of the life-span?
(Mr Field) The Government has established a Royal
Commission to look precisely at the issues you raise. I think
it is important that we are, ourselves, clear about the framework
within which that Royal Commission is operating. The earlier part
of your question was about: how do people try and strike contracts
which give them a claim for future national income? There is actually
no guarantee that you can do that. This requires real judgment.
It is clear that just because Members of Parliament decide to
strike a contract, and think there is a consensus, that consensus
may not necessarily hold. The best consensus that can be formed
is one where a policy has so much support in the country that
even ambitious politicians do not think it is in their interests
to break up that policy. If you look at future claims on national
income, one very important one is, in a sense, claims through
our families that we have; both in the sense that they forgo things
in the care of us, and also in the way that they are concerned
with our financial support. History in periods of low inflation,
teaches us that the next safest way is the ownership of capital.
That is why Harriet was again emphasising, earlier on, that there
is now a consensus in the country. As we try to extend the success
there has been in pensions from the many to everybody, we are
looking at ways in which the ownership of capital—people
accumulating capital—can be extended. The third safest way
of claims is through insurance. Historically, in the last 20 or
so years, there has been a claim that we make directly through
taxpayers. That seems to me the most vulnerable. Although you
say (and rightly) that if we sadly have a long-term decline before
we die, then our last couple of years are the most expensive,
most of us actually do not end up like that. In fact, it is between
one in five or one in six of us who do actually need long-term
care. Therefore, one of the questions which the Royal Commissioners
will have to consider is: is it proper to try and encourage savings
to cover long-term care costs, or is this a proper area for insurance?
That takes us back to the question that Malcolm raised; that it
is possible for the Royal Commission to be thinking about forms
of insurance which cover all of us, but which are not necessarily
run by the Government. That is in the province of the Royal Commission
which I know you have a particular interest in because it is so
crucial. But I would merely underscore the point that I talked
to Malcolm in one dimension about citizenship, from this universal
idea to concentrating more on contract, and by doing that, trying
to maintain the universal view as well. In other words, people
say, "These people do understand what is going on."
We are on their side, and we do support them. You have a whole
package there which is being put forward; but you, by raising
this as well, raised the question about contract through generations.
I do believe one of the changes that we have seen is that people
are less secure about making that contract through generations,
if it is through paying tax rather than the ownership of capital.
Therefore, I do believe that we view inter-generational trust
as a scarce resource. It may be something that we should be concentrating
on and use that scarce resource for long-term care. As people
are increasingly making their own provision, individually and
collectively through pensions, through capital and savings, it
seems a wrong use of inter-generational trust to try to apply
it in an area where people are already telling the Government
how they should actually advance collectively in this area.
28. May I just make one follow-up on that. The one group
of pensioners who are the poorest are women. Many of them were
simply excluded from the system because it was based on taxable
income; it was based on steady employment. Even if they had wanted
to provide for their old age, they could not. From what you have
just said, I still feel that women will be the ones that are left
out. I would like to know to what extent you will recognise the
contribution of women as carers, as the people who look after
their families, which is not otherwise recognised in terms of
taxable earned income. There is not a cash transaction but it
is the role they are playing in society.
(Ms Harman) One of the problems that we have identified,
as one of the key challenges that has to be met by our Pensions
Review, is not just the growing inequality of pensioner income,
but also the widening pensions gap between men's and women's income
in retirement which, of course, as you indicate, is a direct result
of the gap of income for people of working age. You have the combination
of women being in work but intermittently, perhaps part-time,
perhaps low paid work. Therefore, even if they are working, they
are below the lower earnings limit for national insurance purposes
and therefore not contributing through the national insurance
system into their pensions. If they are working and paying national
insurance and there is an occupational scheme in their workplace,
it might be that if they have worked part-time they have not been
included in that occupational scheme and there has been discrimination
there. There have been moves to extend occupational schemes but
that has been a very great problem. Then there has been a large
number of women who are working but are not doing paid work. They
are working to care for an elderly or disabled relative. So we
have said we want to tackle the issue of the growing divide between
men and women's incomes in retirement in a number of ways. Firstly,
for today's pensioners. The poorest pensioners are the oldest
women pensioners living on their own. We have said we want to
find ways of delivering more automatic help to get round the problem
of proud, independent-minded women living on their own, who do
not want to fill in a 35-page income support form, which asks
them for more information about their dead husband than they ever
thought to ask him while he was alive. These forms are a ridiculous
challenge and are felt by many as an indignity. That is why we
want to get more automatic help to the poorest pensioners, particularly
the oldest ones. One of the things that our pilot projects will
help us work out is whether or not there is some age-related way
that we can perhaps get more automatic help, for example, to the
over-75s. That is one way, in terms of women's income retirement,
for women who are currently retired. We want to be making progress.
For women who are currently in work, the pre-retirement strategy,
to ensure that we do not have the next generation of women of
working age themselves becoming the poorest pensioners when they
retire, dependent on the basic state pension and means-testing,
there are a number of strategies that we have already indicated
which we are going to pursue, together with further work which
is under consideration with the Pensions Review. The first is
to develop the stakeholder pension. One of the problems for women
who have not had access to an occupational pension but who have
had the ability to have an income to save for their retirement,
is that the private personal pension market has served women with
intermittent earnings extremely badly. There are figures whereby
you can see that people for whom one pound in every four that
they are putting aside for their retirement is in costs and charges;
for some women, depending on whether they break their career to
care for children or for an elderly relative, that can go up to
one in two. We want to encourage people to save for their retirement.
We have to make that a rational and sensible decision, which for
many women it is not. They know that they are on the pensions
Titanic. They are sailing towards their retirement. They know
they need to be saving for their retirement but they have not
got any vehicle by which they can do that, because their employers
do not run a scheme and the private pensions industry does not
serve them. That is the basis behind our manifesto commitment
on which we are moving forward with the stakeholder pension, where
we want good value for money, second tier pensions, stakeholder
pensions, collectively provided. We have issued a consultation
document on that, on the specific details. We have received many
responses. There is now a clear consensus. When we first mooted
the stakeholder pension, many people said it was unworkable and
it was a barmy idea. Now there is a clear consensus that it is
not only a good idea but it is workable as well. So we expect
to make good progress on that and announce the outcome as part
of our Pensions Review. The other issue which you raised is women
as carers. What we want is for people to be able to retire with
a second pension in their own right. That is where we get to our
citizenship pension, where we are exploring the opportunity more
widely of crediting carers into SERPS, so they develop their own
second pension on the basis of their contribution to society,
not through going out to do paid work but through caring for elderly
and disabled relatives. That is very much part of the work that
has been undertaken by the Pensions Review. For the first time
a government has identified the gap between men and women's income
in retirement and set itself the challenge as part of its pension
reform to narrow that gap.
29. Credited into SERPS. You see a continuing significant
role for SERPS?
(Ms Harman) We have said in our manifesto that
we would retain SERPS as an option for those who wish to remain
within it. We are looking at what the options for the citizenship
pension could be. One of those options could be SERPS but there
are others under consideration.
Mr Gibb
30. One of the things you are trying to do in your report
is to set out the principles of Workfare reform. I was going to
ask you, Frank, about the principle of compulsion, particularly
with regard to the New Deal for Lone Parents. In a speech you
made in New Zealand in March last year you said: "Every single
mother with children over four will be expected to look for work
or undertake training." Do you still hold to that view, or
have the realities of Government and New Labour, party politics,
changed your mind on that?
(Mr Field) I thought that was the proposal the
Government is actually implementing and Harriet is spearheading.
We are about extending opportunities. We have a number of pilots
of inviting single mothers to come in to see what opportunities
there are for them and to take the discussion from there. The
role of compulsion does not arise. We are about seeing what opportunities
can be created. I think that is a sensible approach. We do have
compulsion for 18 to 24-year-olds, who are on the Welfare to Work
programme. As people who have heard me speak before know, I believe
compulsion has to play a part in the system. However, I also hope
I get over in those discussions that the use of compulsion, in
a sense, is an act of failure. The reason that compulsion for
18 to 24-year-olds is required is, in a sense, to help to change
the climate in which people are approaching the issues. It may
be that one has to apply compulsion, but it is presumably like
smacking children. If that happens there is a sense of failure,
although, sometimes in the most extreme circumstances, it may
be necessary. We are not trying to do a tally; that we have applied
compulsion and we are showing what a really tough government we
are. We are about changing the whole culture in which people operate,
and that both sides—both government and the individual—can
be more clear about their responsibilities.
31. It does appear to me that you have changed your view
because it does say "expected to look " not "will
be encouraged to look".
(Mr Field) Is the view now not tougher? I think
from what you say, the Government line is stronger than I said
there.
32. You said "expected". The Government's policy
is to encourage. There is a difference. You personally seem to
have moved away from your support of compulsion.
(Mr Field) No, we expect people to take a chance
on the opportunities that they have. As it is Ash Wednesday I
suppose you can make the most of getting it out of your system
for the rest of Lent. We are engaged in the most serious discussion
about trying to change the political welfare culture in this country.
We want to do that sensitively because, previously, when governments
have been gung-ho about this, the results of being brave before
these committees can sometimes mean you just mess up, permanently,
people's lives. Harriet has spearheaded this initiative and this
year those initiatives roll out nationally. I would hope this
Committee would be trying to seek opportunities to stress the
positive side of what we are doing in extending opportunities.
That is what we are in business for rather than trying to do a
tally.
33. Frank, the New Deal is not working, is it? The scheme
so far has produced 6.2 per cent return to work rates. Do you
not concede that an element of obligation for lone parents—as
you say in this speech, for lone parents with children—would
make this scheme work, which clearly it is not now. I will ask
Frank this question, before I come on to the Secretary of State.
(Mr Field) You can see how we divide up our work
in the Department in how we have been answering questions. You
know perfectly well that this is a crucial area for Harriet and
that Harriet is anxious to answer the questions. I am anxious
for us not to behave like medieval theologians, looking at the
text and saying, "Does this word mean that or something else?"
The broad drift of government policy is about extending opportunities.
We do not think the role of government by signing people off for
a life on benefit, is a proper one. We are about saying that while
it may be crucially necessary for people to draw benefit, that
this is the beginning of opportunity rather than the end of the
whole operation.
34. Language is important, Frank, because elections are
won on what politicians say. May I now return to the Secretary
of State. Do you regard the New Deal for Lone Parents as a success,
when only 6.2 per cent of lone parents approached have returned
to work as a result?
(Ms Harman) I think the approach we have taken
in the New Deal for Lone Parents is absolutely right. Looking
back from where we are now, people regard it as inconceivable
that for all those years the policy of lone parents was to say,
"Stay on benefit until your youngest child is 16." The
consequence of that policy and that inaction was to have more
than 1 million lone mothers bringing up 2.2 million children on
income support; social exclusion; children being brought up in
households where they never saw the world of work; long duration
on benefit; and a very high cost to the public purse as well for
that dependency, reaching towards £10 billion. Now I hope
you would agree with Frank and me, Nick, that it was absolutely
right that we said this is wrong, that we have to tackle this
dependency. We have to extend opportunities, particularly against
a background of increasing numbers of married women with children
moving into the workforce. So when you look at the figures and
you see over 50 per cent of married women with children under
five working, where their husbands are working so they are not
trapped by the benefits system, and only 25 per cent, i.e. half
that amount of lone parents working—when they are more likely
to need the money and certainly need to provide the role model
of the working household—I hope you will agree with us that
it was absolutely right that we made it a priority for the Government
to tackle it to stand by our purpose and to ask you to stand by
that purpose as well and secondly, to stand by the approach. The
approach is—and this is completely new because the previous
Government said, "Stay on income support"—our
approach is to write to all lone parents starting with lone parents
whose children are over five and say, "Think about working.
Do you want to come and talk about the opportunity of paid work
for 16 hours backed up by family credit or subsequently the working
family tax credit?" We are putting out an agenda for them
to work and help them to work. I am immensely proud of the work
the Department has done to get this under way. I am immensely
proud of the pioneering work which the personal advisers have
done. I know you are going to meet them in Halesowen and you too
will be inspired by their enthusiasm and by their determination
to make the benefits system something that helps people rather
than simply gives them a hand-out and traps them. I am also very
proud of those women who after five, ten, 15 years of dependency
on income support, have taken the plunge, gone nervously in to
meet to meet their personal adviser, and have been prepared to
go out and start working. So, Nick, I would say, that to say that
this programme is a write- off——
35. What would you regard as a success? What is the benchmark
you would set for the numbers returning to work? What percentage?
(Ms Harman) The first thing I would say for success
is that we have clearly put on the agenda the fact that the Government
is there to backup and help lone parents into work. I regard that
as successful. I think the climate has changed.
36. What benchmark have you set to regard these pilot
projects as successful?
(Ms Harman) We have not set a benchmark yet.
37. Why not? It is a pilot scheme.
(Ms Harman) Because we are going about it sensibly
and intelligently. We are spending the best part of a million
pounds with an academic evaluation of what are the possibilities;
what is the additionality. It would be nonsense to set the targets
in advance of the evaluation, but I do say this to you, Nick.
I am keeping my eye very firmly on those income support figures
for lone mothers on income support. I hope and expect that they
will start going down. They will go down not just because of individual
personal advisers, although they are doing heroic cross-departmental
pioneering work of which I am very proud. They will go down because
we have changed the culture where we are actually questioning
that automatic dependence on benefit. If I can just say, referring
to Frank, the genesis of this New Deal programme: I have my constituents
in Peckham coming into me and saying, "We want to work. We
are climbing the walls just looking after the kids 24 hours a
day and living on the breadline. We do not want to be dependent
on benefits." I well remember meeting Frank in the corridor
one day (you probably do not remember this, Frank) and he had
a draft copy of the Select Committee's report on the growth of
income support for people of working age. He said, "Here,
you are interested in lone parents, aren't you? Take a look at
what is happening with lone parents on income support." It
was a problem that needed tackling. The Government is tackling
it and I am very proud of our approach. I would suggest, Nick,
that you do not really agree with the position you are trying
to put in this Committee. Really you are in favour of this because
it is a good thing.
38. Will you rule out compulsion for lone parents for
the rest of this Parliament? Is that what you are doing?
(Ms Harman) One in five lone parents, who have
been invited for interview, have come down. We are starting a
process. We are making the suggestion that has never been made
before. As Frank has said, compulsion is absolutely not the issue.
There is conditionality of benefits in relation to lone parents;
for example, on co-operation with the Child Support Agency. Lone
parents do have some obligations attached to the receipt of their
benefits. One is co-operating with the Child Support Agency. I
know in other countries that although they do not compel lone
parents to do jobs, they do require them as a condition of their
benefits to come down for interview. We do not require them to
come for interview. At the moment we are inviting them.
39. Of the 433 people who in your report said had got
jobs as result of the 8,651 letters going out, how many of the
433 people in work are still in work since this report was published?
(Ms Harman) I think you have asked me a Parliamentary
Question about that, Nick, and I think I have answered it. All
but 49 remain in work, although some might have moved off the
income support figures by repartnering. But I assume that all
of those, except something like 49, which is the number back on
income support. Those are the three-month figures. We will shortly
be publishing the six-month figures. I do suggest that we welcome
constructive criticism but I hope it will be constructive criticism,
not carping. I hope that you will listen to what the lone mothers
and the personal advisers say in Halesowen tomorrow and think
again about the approach you have been taking. Meanwhile, please
carry on asking the Parliamentary Questions and I will continue
answering them.
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