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6.26 pm

Ms Karen Buck (Regent's Park and Kensington, North): There is another Government trademark to the Bill, and that is their demonstrable commitment to tackling child poverty. We have heard Labour Members refer to that subject but little about it, I am sad to say, from Conservative Members. The Bill must be considered in the context of what the Government have done over the past four years to tackle child poverty. It demonstrates both the commitment and the path to continuing the challenging task that has been set—of eradicating child poverty within a generation.

The figures speak for themselves. In the journal New Economy, the independent experts David Piachet and Holly Sutherland have concluded that more than 1 million children have been lifted out of poverty since 1997 and that there has been a 7 per cent. increase in the number of lone parents working. The Child Poverty Action Group published the document "An End in Sight" before the general election and I am sorry that my right hon. Friend the Member for Birkenhead (Mr. Field) is not present to hear what it said:

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Unlike Conservative Members, I do not believe that that happened entirely by accident and, as the document makes clear, the reduction in child poverty is mainly the result of redistributive social and fiscal policies.

Independent organisations, and organisations that are rightly not slow to criticise the Government when they think that we are taking action that is not beneficial to the poorest people in the country, have confirmed the success of the policies so far. However, although a great deal has been achieved, there is still a very long way to go.

The hon. Member for Arundel and South Downs (Mr. Flight) was quite dismissive about that objective in his speech. If I heard him correctly, he suggested that we could not afford to take effective action to tackle poverty, even though he confused me by asking for assurances that the Government's policy would not result in any losers.

Mr. Flight: My point was very clear. I simply said that, if we were to have massive increases in expenditure on health, transport, education and tax credits, they would together amount to more than the country could afford. I merely asked which of those areas would be chosen for expenditure.

Ms Buck: I am not sure of the extent to which that illustrates the hon. Gentleman's point. The fact is that child poverty—this applies also to pensioner poverty—is an obscenity in the 21st century, especially in a country with the fourth largest economy in the world. That obscenity was allowed to develop and multiply during the years of Conservative Government.

We cannot afford not to tackle poverty, partly because of the cost of maintaining people in workless households, which make a major contribution to poverty, and partly because of what poverty does to our public services. Poverty and public services are two sides of the same coin and cannot be addressed separately. Children born into poverty carry with them a legacy of disadvantage that they will take literally to their graves. People from poor families are 12 to 20 times more likely to die prematurely, of a range of conditions, than those from wealthier families. Poverty is still, sadly, a key determinant of educational achievement. We know that we cannot improve our public service outputs—a healthier and better educated nation—without tackling poverty.

The Government are right to put poverty at the centre of their social and fiscal policies. Tax credit legislation has been an important tool to achieve that end, together with the action that the Government have taken to help the children of families that are out of work, with an 80 per cent. increase in the child component of income support. That important point has not been made. It relates to the Bill, in that there is an explicit understanding that although work is the best way out of poverty for many families—I am evangelical in my support for that objective—many families cannot work, and many children are trapped in poverty as a consequence. There is a clear link not only between worklessness and poverty, but between social security expenditure and poverty, as the United Nations Children's Fund study of child poverty in industrial nations clearly demonstrates. The Government's twin-track policy of promoting work

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incentives in tax credit legislation and supporting children who are in families that are out of work has achieved a great deal.

To digress slightly, this morning's media reports referred to the study by the Joseph Rowntree Foundation. Based on figures that were extant as of April 2000, it concludes that progress—albeit relatively modest—has been made on tackling child poverty. Will the Minister talk to his colleagues to ensure that the statistics on which we base our debates on poverty and the progress we are making to tackle it are up to date? It is nonsensical that such an important debate is informed by a media commentary on statistics that are a year and a half out of date.

My hon. Friend the Member for Clwyd, West (Gareth Thomas) talked about the need to develop an objective policy indicator. The Social Security Select Committee reinforced that when it considered integrated child credits. We will always need a twin-track policy to measure poverty. We need to get closer to an objective that applies a constant benchmark for child poverty, and to an indicator that is based on, and related to, average earnings, so that we measure income inequality as well as objective poverty levels. The Government have been so bold as to set themselves the target of halving child poverty by 2010 and then eradicating it entirely. They have also established multiple indicators of proxies for poverty, such as housing conditions and health, in the "Building on Opportunities . . . for All" document. It is a great shame that they have not taken the further step of commissioning research that will allow us to have that benchmark around which we can conduct the debate.

Tax credits have been successful. Their take-up has been positive, and considerably more people have taken advantage of the WFTC than of the family credit system. In addition to my comments being guided by the statistical evidence, I spent time in the past couple of years sitting in my employment office with personal advisers, listening to people undergoing a better-off assessment and talking about work opportunities. I watched their faces when they were told how much better off they would be if they worked even in relatively low-paid service economy jobs. As a consequence of their housing benefit, school dinners and help with transport costs, they expected to find that there would be almost no difference between benefit entitlements and their take-home pay. They were stunned to discover that they would be £40 a week better off. The small extent to which people know about the benefits that are available to them when they are in work is an important issue.

We know that there are weaknesses in the WFTC. The Select Committee considered the WFTC and, after a heated debate on wallet-to-purse transfers, was fairly relaxed about it. It was always a judgment call as to whether the WFTC would have a detrimental effect on household incomes. On balance, I am pleased to hear that the Government will deal with that.

We also know that the WFTC system is complex. Unlike the hon. Member for Arundel and South Downs. I think that the new system will be simpler. It will not be completely transformed, because anything that does not involve an absolute guarantee of universality and fixed-level payments will never be free of complexity. Although in an ideal world that would be the best way to proceed, unfortunately it is prohibitively expensive. My right hon. Friend the Member for Birkenhead made a

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powerful case about the dangers of a means-tested system, and I had sympathy with some of his concerns. However, he has to recognise that an alternative would be prohibitively expensive. We have discussed that with him at several Select Committee hearings on the contributory principle and pensioner incomes.

My right hon. Friend referred to the parallel dangers in housing benefit, but as I said in my intervention, that is not a fair comparison. It is possible to argue that the big problem with housing benefit was that it signalled a shift from bricks-and-mortar subsidy for millions of council and housing association tenants to a personal subsidy, which had detrimental side effects. The core problem with housing benefit, however, is rooted in housing issues that are not intrinsic to the housing benefit system. I mean not administration, but entitlement and eligibility. We could have many arguments about the abolition of rent controls, but it clearly contributed to the problem. The collapse of new social housing building in areas of high demand across much of the country also pushed up private sector rents.

The Government can do a great deal about these problems. They can proceed with the licensing of homes in multiple occupation and some private sector tenancies, which they are committed to doing. The work on improving administration of housing benefit will also help. Changes could be made, some of them set out in last year's Select Committee's report on housing benefit, to tackle the structural weaknesses in the housing benefit system. I do not agree that housing benefit was of itself a doomed enterprise. Where would we be without it? London has phenomenally high housing costs and high demand, and the private rented market for low-income claimants collapsed in recent years. I cannot imagine what the system would be like in London without the security of a housing benefit system that most people can rely on to meet all their rental costs. The alternative would make households deeply fearful for their security.

Undoubtedly, there are weaknesses in the system, some of which are unavoidable unless we are to spend billions and billions of pounds on a universal system that is adequate to lift families with children out of poverty, and that is not feasible. The integrated child tax credit will have advantages over the existing system, and it will build on the strengths of that system. Much will depend on the level at which it is set, and I share some of the criticism by hon. Members of the fact that we do not have information about thresholds, which would have enabled us to have an informed debate about what are likely to be the crunch points for individual families.

The introduction to the system of a single children's component that is common to families in work and families out of work enables us to deliver a real, targeted increase in benefit to the poorest children in the country, and that in itself is something to be celebrated. It also, as the National Council for One Parent Families has said, gives us the opportunity to exercise a lighter touch in means-testing, and I shall return to that point. There are advantages to the system being proposed, especially when it is compared with the day-to-day changes in the benefits system which have been fiercely resented by many families as highly complex and intrusive.

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The new structure for the child tax credit will also have the positive effect of giving families the security of being able to predict their income. It will be portable between work and unemployment, so families will know that a chunk of their income is untouchable. Anecdotal as well as statistical evidence shows that it will be enormously beneficial and will enhance work incentives.

What, then, are the problems that we need to look out for? As I said, we need to know what level the child tax credit will be set at, and we need to scrutinise that very carefully, particularly to ensure that there will be no losers at the lower end of the income spectrum. The Institute for Fiscal Studies has calculated that if there are to be no losers, families who are currently on income support will need an extra £4.05 a week for the first child, and £3.40 a week for each subsequent child. I certainly hope that such levels are being considered, although I am sure that we will not receive more details from Ministers tonight. Hon. Members have made the point, which I support, that the basic requirement is that there be a levelling up for families on the lowest incomes.

I very much welcome the discounting of child maintenance. Another issue that we will want to scrutinise closely is the passporting of benefits. We have had discussions and disagreements about school dinners, certainly in relation to the working families tax credit. I am familiar with the argument that the school dinners component is factored into the WFTC. It is also possible to argue that parents value the ability to pay for school dinners because it is a symbolic freedom from dependence on benefits. I understand that, but if a parent is paying £13 a week for school dinners for two children out of the working families tax credit at the lower rate, that is a significant chunk out of their income. I would welcome it if the passporting of free school dinners were built into the lower end of the income spectrum for the working tax credit and the child tax credit.

Several hon. Members have referred to the difficulties of an annual assessment. We know that other countries, including Canada, Australia and the USA, have based systems on an annual assessment. The American situation is slightly different, in that there is a cultural difference in the attitude towards annual assessments. The early evidence from Australia, where information is only beginning to feed back, is that, as predicted, the annual assessment has caused hardship for families whose income fluctuations took them over the threshold for the credit, so they found that they were asked to repay significant sums. That is a serious danger. I fear that if we do not consider carefully what can be done to prevent such problems, our surgeries will be full of people who have been asked to repay £1,000 or more out of a relatively low income, something that they were unable to predict. That will cause debt hardship and undermine what is generally an excellent system.

The Select Committee had a few words to say about the annual assessment. Although there is no easy answer, one solution would be to have the widest possible band of income for people on the maximum child tax credit. I sympathise with the points made by hon. Members about having an asymmetric approach to the assessment. We must, at the earliest opportunity, build into the legislation ways of ensuring that if families receive large overpayments, they are not asked to repay a lump sum. Will people in receipt of housing benefit be asked to repay that as well? That problem could quickly become very

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significant, so I hope that Ministers will take it extremely seriously, because I would not want it to undermine the whole tax credits system.

I turn now to an issue that is dear to my heart—regional variations in entitlement. My hon. Friend the Paymaster General is nodding. I have bent her ear to the point of tedium about this on a number of occasions, and I am afraid that I am about to do so again. I thank the House of Commons Library for its excellent work on this matter. Some 10 per cent. of households with children in London and 22 per cent. of such households in Yorkshire receive the working families tax credit. The variation across London and, to a certain extent, other areas in the south-east, is dramatic.

With all due respect to the hon. Member for Richmond Park (Dr. Tonge), we might expect that area to come at the bottom of the table, alongside Chelsea, because we know that in some areas of London the average income is extremely high, as are property prices. We would not expect many people living there to be in poverty or to be entitled to the working families tax credit. However, in Ealing, Acton and Shepherd's Bush, only 3 per cent. of eligible households receive the WFTC, and in Islington, South and Finsbury and in Hammersmith and Fulham, the figure is only 2 per cent.

My constituency, Regent's Park and Kensington, North, is 472nd in the national league table of 641 constituencies where working families tax credit is received, which means that about 3 per cent. of eligible households are in receipt of it. Yet we have the seventh highest eligibility in the country for free school dinners and the 60th highest level of unemployment. Clearly, something is going badly wrong. In London in particular—I do not doubt that other hon. Members can make a similar case for other parts of the country—there is a mismatch between poverty and unemployment, which are extreme in many areas, and the entitlement to working families tax credit.

There are two possible explanations. The first concerns take-up, and it is probably partly true. When I go to nurseries and elsewhere in my constituency and talk to people, I find that there is a profound ignorance of the working families tax credit. People simply do not know whether they are eligible for it. The quality of advice given in employment offices is variable, and not many people get to the Employment Service or other agencies to receive better assessments, so they do not have the figures to show them whether they will be better off with the WFTC.

Secondly, there is an obvious correlation between ethnicity and take-up. When 130 languages are spoken in an area, as in Greater London, it is much more difficult to explain entitlements to all the different communities. It is not just about take-up, however. We must also address structural problems involving entitlement. We know among other things that entry-level wages are slightly higher in London, so the added value of the working families tax credit is not as great there. Housing costs are significant and child care costs have to be taken into account. I have talked about housing benefit, and shall not overstate the point. However, rents in London are obviously higher; 50,000 families are in temporary accommodation, which means that ridiculous sums of money are paid in housing benefit—so almost certainly, those people are never freed up to be able to work.

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A group of clients with a particular problem are families on income support receiving mortgage assistance. In 1996 which, I think, is the last year for which research information is available, 41 per cent. of mortgage holders on income support told the former Department of Social Security that the prospect of losing help with their housing costs was a disincentive to leaving benefit. If that applies to the country as a whole, it is particularly true of London, where the higher cost of mortgages means that the value of the assistance that will be lost is much greater. That is a genuine problem; if we are going to try to get the significant cohort of unemployed households in London off benefit and into work we have to tackle the housing costs both of tenants and of people with mortgages.

The issue of child care costs is dear to my heart. I welcome the fact that the child care component of the working families tax credit was increased significantly last year. However, London child care costs are on average the equivalent of the working families tax credit maximum, and higher earnings in London mean that the credit tapers away much more quickly. In central London, people routinely pay £300 a week for a full-time nursery place. Unfortunately, child minding places are impossible to come by. My early years development partnership is losing child minders faster than it can recruit them. For all the excellent work done by such partnerships, the neighbourhood nurseries initiative and the national child care strategy, in London we are not keeping pace with the demand for child care and certainly not with the demand for affordable child care. That is exacerbated by the fact that, in London, the proportion of households able to call upon family members to provide their child care is about a third lower than in the country as a whole. In many parts of the country, people can call on grandparents and others to help with child care, but that is much less likely in London because of the high social mobility which brings people into the city.

We need more child care, whereas in fact there is less. Establishing it is capital-intensive; recruitment and retention difficulties mean child care workers are at a premium, and we cannot recruit child minders. Taken together, that means that it is genuinely difficult to attract parents with children into the workplace, safe in the knowledge that child care will be available. I am therefore slightly anxious about the child care component of the working tax credit. I fear from what we know about the system that it will not make the situation better; I want to look closely at the tapering to make sure that it will not make matters worse. Unless we use this opportunity to refund people's child care costs virtually in full, in high value areas like London—and, presumably, across the rest of the country—we will simply not overcome that barrier to work.

In summary, we must build on tax credit legislation, which is excellent and has achieved a great deal. The Chancellor and his team are to be congratulated on all that they have done to tackle child poverty. The Bill will advance that effort, but we have a great deal to do on take-up and tackling the problems of housing benefit, thresholds, and/or a significant increase in the earnings disregard. We should tackle the issues of school dinners and of child care; more child care help is needed in London, and we should consider an increase in the percentage reimbursed by the child tax credit, to ensure that families paying London child care costs can draw down the assistance that they need.

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If all this comes together, we will find, depending on the level of credit and trusting that targeting will be generous, that tax credits will do what they were intended to do: they will continue to tackle child poverty, but they will also give us a leg-up in the process of getting another cohort of families, especially lone parents, into the workplace. Without such assistance, the Bill may be valuable, but an opportunity may be lost to enhance work incentives, especially in high-cost areas like London.

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