Examination of witnesses (Questions 240
WEDNESDAY 13 DECEMBER 2000
and MR NICK
240. It is not your fault, it is not the fault
of present Government
(Ms Ghosh) Two points on that. Clearly the pensioner
poverty issue is a rather different one in thatwell, I
know we are encouraging grey work and all thatbut there
is not an option there which is that we want, in fact, to encourage
people back into work. The other point I would make in relation
to ICC is that what we are constructing here is a model. We are
constructing a system. We are not, at this point, making any assumption
about what the various figures that we feed into that system,
are. Obviously we want to maintain the work incentive element.
(Mr Macpherson) I would not really accept this dichotomy
between pensioners and children. There have been a lot of very
helpful contributions to the debate on what is an adequate income
for pensioners and those clearly inform Government policy. Similarly,
the Sue Middleton work on children also informs Government policy.
The issue you are raising is whether we should go back to a 1960s
world where you have a Supplementary Benefits Commission, which
then spends many years discussing what a minimum income standard
should be. Clearly that is an option but my basic worry on that
is that if you talk to academics, they tend to have very different
views on what an adequate level is. There is a whole raft of issues
about what should go in the basket, some of which are relative
rather than absolute. For example, "Do you need a holiday?"
241. You are not saying that guesswork is a
better basis for setting a benchmark?
(Mr Macpherson) No, I am not saying that. We are not
guessing anything here. As I say, we watch and encourage this
debate. It is excellent that Sue Middleton has done that work.
I have attended seminars with her and I find the results very
interesting. Those results inform policy but you have to take
a fairly broadly based approach which will also, I am afraid,
be informed by cost. Resources are finite. A large amount of resources
have been put into this area in recent years to the extent that
there are quite big effects. The poorest family with two children
on Income Support is something like £1,500 a year better
off as a result of the changes the Government has made. I think
that there are potential risks in getting sidelined by a long
debate about adequacy.
242. How many times in your professional career
do you get a chance to look de novo at the adequacy of
the cost of the benefit? This is an opportunity that will come
once in your lifetime. What you are saying to me is, "Don't
worry if it turns out to be quite generous and we will get 1500
quid." No-one will be better off. Karen's question is absolutely
crucial for us. If we do not do it now; if someone does not take
a step back from all of this and say, "What does it actually
cost?" okay, it is five quid here and five quid there, depending
on what academic you talk to, but you are missing a huge opportunity,
are you not?
(Ms Ghosh) I thought that what Nick and I were saying
is that we are not missing that opportunity. Ministers are taking
all these sorts of debates into account. As I say, we are constructing
a system, a scheme, into which we can feed figures in due course.
As Nick says, the Government has made very clear its significant
commitment to abolishing child povertyand, indeed, family
povertythrough all the money it has been putting in. I
am always reminded of when I joined the DSS a year ago somebody
said, "You have a good brand." What they meant is that
this Government commitment to abolish child poverty in 20 years
is an immensely political driving force. That is the context in
which we will be judging the figures to feed into the scheme we
243. But that is missing the point, is it not?
I am the last person to be making a critique of the Government's
approach to the abolition of child poverty, which I think is excellent,
but the point is that we do not know what poverty is. We are approaching
(and this is right) a basket of indicators because we know cash
is not the only dimension of poverty, and inequality is not the
only dimension of poverty, but at the heart of this, the idea
that there can be some kind of an indicatorhowever approximate,
however open to challengeof what is an acceptable basic
income for families, is missing as a part of policy. That is what
(Ms Ghosh) Yes. In a sense I think you have said all
there is to say on that. Obviously that is something which Ministers
can take into account when they are deciding what figures to feed
into their model.
244. There are a few more points. I also accept
that there is a profound difference between coming up with a benchmark
figure for pensioners and for children. That is much more difficult
for families with children. One of the reasons why it is much
more difficult for families with children is because, by definition,
you are talking about a more complex household dynamic. We know
from Sue Middleton's research and other research that parents
have done a remarkable job on whatever level of income they have,
(but particularly the low income families), at protecting their
children and their children's interests, completely at their own
expense, because something has to give. Is your thinking, at the
moment, about looking at the wider issue of child poverty within
a family context, and how the ICC relates to what we do to make
sure that families, as a whole, are raised out of poverty?.
(Mr Macpherson) First, I would emphasise that all
our statistics on child poverty ultimately hinge around the family.
We do not separate children from the rest of the family and just
look at the costs associated with their upbringing. When we are
looking at the four million children who live under one definition
of the poverty line, they are part of households. You are looking
at the households' relation to that poverty line. One is taking
into account, through that calculation, the costs and income of
the parents; so, to that extent, we do pick up the incomes of
the whole family.
245. Would you agree then that the progress
which is being made on tackling the child dimension of poverty
through this tax credit, needs also to be matched by a greater
recognition of the costs of households with low incomes, the adults,
if you are going to tackle child poverty?
(Mr Macpherson) Clearly we have to look at the incomes
of the whole household. You have to look at them in terms of identifying
policy responses. You have to take a fairly multi-dimensional
approach, both on the income tax and National Insurance side and
through tax credits, and also through the residue of the social
246. Do you worry about the huge numbers of
families living below Income Support level?
(Mr Macpherson) In what sense?
247. One of the things that worries me, and
the Chairman is very conscious of, and the Committee, is that
we have set Income Support as the level below which families should
not fall, yet we have (I do not have this figure at my fingertips)
a substantial number of households who, for reasons to do with
Housing Benefit restrictions or for other reasons, are falling
substantially below that level. Now if we are going to tackle
child poverty and the serious problems, how are we going to do
(Mr Macpherson) We have to look at those issues and
we do look at those issues. Another area relates to pensioners,
where people have been interested in the take-up of the Minimum
Income Guarantee. One thing we are very concerned to ensure is
that we get as high a take-up as possible.
248. But this is not a take-up issue. This is
an issue where there is this interaction of policies between local
government, national government, whatever. We are quite consciously
undermining what the Government is doing on the one hand and policies
on the other, particularly in relation to housing costs.
(Ms Ghosh) I was going to say, Housing Benefit is
obviously an important part of that. Clearly we will have to look
in the context of the tax credits programme and the inter-relationship
between the two. We do not want to make marginal deduction rates
worse than they are at the moment. There are curious relationships
at the edge between these two things. Another aspect of that,
of course, is the Social Fund, which might have an important part
to play and which we are reviewing.
249. Would you agree that we should be aiming
for a system where all the policies of different Government Agencies
are working together to ensure that no households are trying to
survive below Income Support?
(Mr Macpherson) We clearly need to focus on that.
I do think that housing is a big issue. I do not think that anyone
would claim that the existing system of housing support is the
most brilliant and efficient system in the world. We continue
to consider how we could change that. You raise an interesting
point. Are you saying that if someone chooses to live in a house
in Westminster, which has a rent of £1 million a year, somehow
we should pick up the rental bill through the Housing Benefit
system, so that that person's Income Support is fully protected?
250. I think, with respect, you are choosing
an example which could not happen. That is simply not the issue.
(Mr Macpherson) I recognise that is not the issue.
251. Living in North Wales and in the north
west on very low income in sub-standard property, well below the
level of Income Support.
(Mr Macpherson) I accept that but it is by coming
out with that rather ridiculous example that you begin to home
in on what are the limits of this policy. If you were to guarantee
everybody's Housing Benefit, what sort of Housing Benefit are
we talking about? All I am saying is that there are issues around
how you use resources in relation to housing.
252. We are not discussing Housing Benefit.
The point I wanted to put upon the table is that we do have a
real substantial issue. Setting aside margins where people are
clearly playing the system, (and we all accept that can happen),
there are a substantial number of people who, through no fault
of their own, are living below Income Support. I think if we are
serious about eradicating child poverty that has to be tackled.
On the question of the integration of child credit and Child Benefit,
will there come a time in the foreseeable future when Child Benefit
will be brought in and truly integrated into that system?
(Mr Macpherson) The Government has made it very clear
that the ICC will sit on top. It will be built on the foundation
of a universal Child Benefit. Indeed, Child Benefit has been a
key part of Government strategy on child poverty and has been
increased quite considerably in real terms. Clearly, in terms
of delivery, we need to ensure that the Integrated Child Credit
and Child Benefit are working sensibly together. Ideally, it would
be nice if they came in one income stream even though Child Benefit
would still be readily identifiable as a universal payment. We
want to make life easier for the recipients to access support
from the Government but this will be built on a universal Child
253. Obviously with the advantage of making
them administratively connected. You are assuring us that there
is not going to be a point at which Child Benefit will be tapered?
That is the implication of what you are saying.
(Mr Macpherson) That is, indeed, the implication of
what I am saying.
254. So putting them together as an administrative
package could help you reach the take-up at the passport level?
(Ms Ghosh) Which is already very high and something
we would wish to achieve, yes.
(Mr Macpherson) The critical thing is the gateway
into the system. Why is there such high take-up of Child Benefit?
This is because the mother has a baby and in hospital someone
gives her a form to access the benefit. Clearly we must try to
make the links here, so that as well as filling in the Child Benefit
form, you can fill in your child credit form. You then have this
simple entry point into the system.
(Ms Ghosh) Of course, using the Working Age gateway
for all Income Support applicants also means that we will achieve
a very high level of take-up of ICC for that group with the lowest
incomes. As you probably know from the figures published yesterday,
there is something like 94 per cent take-up of Income Support
from families with children, so we should be able to crack that
one through using a single Working Age gateway.
255. Just on the different benefits which have
different passporting arrangements and different relationships
with each other, things like Child Support, are you expecting
the ICC to discount Child Support payments in the same way as
Working Families Tax Credit does? How do you see issues like Income
Support passporting, or Families Tax Credit? How do you see those?
(Mr Macpherson) It is precisely those sorts of issues
which we are considering at the moment. The maintenance disregard
in Working Families Tax Credit does seem to have been quite successful,
both in terms of enhancing incomes of lone parents but also from
a work incentive perspective. So we need to look at that. We need
to take it into account. Similarly, with issues like free school
meals, NHS prescription charges and other things, this represents
an opportunity to look at these again. I should say that a lot
of these passports are not actually a function of the social security
or tax system. There are more other Departments choosing to piggy-back
onto our system in order to provide these benefits. It involves
us working closely with the Department of Health, the Home Office,
and so on, in order to get that right.
256. That is a very interesting point. You are
saying decisions have not yet been made, so obviously we will
want to come back to this. In terms of joined-up thinking, what
we do not want is a successful ICC instantly undermined by the
small print on prescription charges.
(Mr Macpherson) You are absolutely right. We fully
share that objective and the Treasury is uniquely placed to draw
out these connections. Some of my colleagues are working on these
even as I speak.
(Mr Orhnial) As it takes shape, clearly other Departments
will need to know a little bit more about the detail before they
can say whether or not the ICC is a suitable passport for their
257. Can I return to Child Benefit, which of
course is higher for the first child than the second child, and
there may well be very good reasons for that, particularly when
one of the parents (usually the mother) stops work to have a child
so there is a logic there. When we start to build the integrated
Child Benefit do you think that logic remains?
(Mr Macpherson) This is an important issue and it
is one on which debate has gone on for a very long time. Child
Benefit recognises that the first child carries greater costs
and you get a higher level of support. It is also implicit in
the Income Support system and the Working Families Tax Credit
and it is also implicit in the new Children's Tax Credit that
comes in from April. So my guess is that we would continue with
that principle, but no final decisions have been taken, and if
the view began to prevail that this is a bad use of resources
and real life is not like that, then we would want to come back
to it. I do not think it is a necessary design of the system but
I think it is probably quite a sensible one.
(Ms Ghosh) There are similar sorts of issues that
some of the evidence to the Committee has pointed out about the
disproportionate representation of larger families in the category
below 60 per cent of median income.
258. That answers the next question I wanted
to ask. I was going to ask about the smaller families and larger
families, but in the same way we are taking evidence from you
now, how are you going to take evidence in order to decide whether
smaller or larger families should be paid the same, or more, and
on the position regarding first, second or third child? How are
you going to take your evidence?
(Mr Macpherson) Apart from listening to the views
of this Committee we will continue our very successfulat
least I think it is successfuldialogue with academics but
also with groups who spend a lot of time thinking about this:
for example, the Child Poverty Action Group. So we will have a
fairly active dialogue. Another angle on this is age. In the old
system you tended to get more support as children got older and
we have had a big debate about that. People argue that younger
children carry a higher cost than older ones and other people
take the opposite view. In the end we have tended to split the
difference and tried to create a single rate of Child Support
simply because that is simpler and gives that level of support
a higher profile and makes debate about it easier. I think this
debate will run and run and we will look at any evidence.
(Ms Ghosh) Obviously we do also have access to our
own internal analytical tools in forms of things like the Family
Resources Survey, including households of below average income.
For instance, being published early in the New Year is the Survey
of Low Income Families (which I think the Inland Revenue put money
into) which is looking particularly at all those sorts of dynamic
and spending issues and indeed hardship issues with a statistically
significant group of families and that will come out in time to
feed into this.
259. It will be a broadly-based consultation
exercise rather wider than Mr Macpherson referred to?
(Mr Orhnial) I think that what is not always appreciated
are the communities of interest that we have managed to establish
since 1997 and early 1998 when we first got involved in the debate
about WFTC and the like. We are in constant contact with the main
interested parties and it is more than a question of simply asking,
"Have you any ideas?"
7 Will be published in late February early March by
the DSS Analytical Services Division. Back