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Paul Flynn (Newport, West) (Lab): Given the definition of poverty with which we are saddled, if everyone in the country became a millionaire tomorrow the proportion of people in poverty would be the same as it is now. Can the hon. Gentleman exercise one of his many brains and suggest a better definition that would reflect the real situation?
Mr. Willetts: I am not sure whether that follows, but I agree that if everyone had an extra £1 million, the proportion of people with below 60 per cent. of median income would remain the same. I am happy to accept the general, conventional assumption that that is the relevant measurement. There are many othersthere are relative measures, absolute measures, measures that change over time and measures that do notbut the
In what was perhaps a fruitless endeavour, I was trying to take the House through the finer points of equivalence scales in the measurement of poverty. This, in my view, is one of the problems faced by the Secretary of State. I am pleased to observe Ministers' rapt attention. The measurement of poverty used in the document reflects changes in family structure. If, for example, a household contains two adults rather than one, the income that it will need to achieve a given standard of living will be greater than that of a household containing one adult. Similarly, a household containing three children will need a greater income than a household containing only one. Equivalence scales are needed for the measurement of poverty. However, the structure of the child tax credit introduced by the Chancellor does not match the pattern of equivalent scales used by the DWP to measure poverty. The Chancellor is not using instruments that can tackle poverty as the Government measure it in their annual report.
Mr. Andrew Smith: I hesitate to interrupt the hon. Gentleman's lecture, but as he will have noted from our December publication on the measurement of child poverty, it has been proposed that we move to the OECD's basis for the equivalent scale. Does he agree with that, and what does he expect its impact to be?
Mr. Willetts: I am happy for the Government to adjust their equivalence scales in line with international standards, provided that the Secretary of State undertakes to urge on the Chancellor that the structure of child tax credit, and the other tax credits he has introduced, also reflect more clearly the way in which all Members understand poverty and its effects on households with different structures.
One of the main reasons for the failure of the Chancellor's measures to reduce poverty is the fact that the Chancellor takes no account, in his structure of child tax credit, of the second adult in a household that contains a couple. Two adults receive no more child tax credit than one. When the Secretary of State for Work and Pensions measures poverty, he naturally expects a family containing two adults to need a higher gross income in order to achieve a given living standard than a family containing only one adult. Will he tell the Chancellor that his tax credit should reflect more accurately the way in which all of us here measure poverty? I should welcome an intervention from him if he wishes to respond.
If that change is not made, the Chancellor will not be able to meet his own child poverty objectives because he will be using instruments that do not reflect the way in which the Secretary of State's Department measures poverty. I should have thought that the Secretary of State would be able to stand up for the measurement that he has deployed for the past five years.
The fact that the Secretary of State does not wish to intervene suggests to me that he knows there is a problem, but is not willing to assure the House that he will raise it with the Treasury and the Chancellor so that something can be done.
The English translation of what the hon. Gentleman has just said is that the war on lone parents is back on. He says that the tax credit system does not provide extra money for the second adult in a two-parent family, and that the Chancellor should give more to two-parent families than to one-parent families; but he has also made an important point about persistent child poverty. I genuinely do not know the answer to this question: is persistent child poverty, which is the most worrying sort, more concentrated among one-parent families? If so, would not his proposed system give less priority to the severe and persistent poverty faced by children in one-parent families?
Mr. Willetts: It is true that the problem of persistent poverty is more concentrated among lone-parent households. But it is also true that although lone parents are more likely to be poor, in absolute terms a majority of the 3 million-plus poor families are headed by couples. One of the Chancellor's problems is that his child tax credit is extremely harsh on families headed by couples. That is why he is making so little progress with his child poverty target.
Mr. Andrew Smith: May I return the discussion from its present academic level to a level that actually means something to people in communities? If the hon. Gentleman accepts, as he did in replying to the hon. Member for Northavon (Mr. Webb), that the problems for lone parents are more severe, how can he imagine for a moment that the Conservative party's commitment to abolishing the new deal for lone parents can do anything other than make that poverty worse?
Mr. Willetts: I am pleased that the Secretary of State has mentioned that, because it gives me an opportunity to move from the measurement of child poverty to a second subject that I wanted to raise with him: the performance of the new deal and, more widely, the problem of economic inactivity. This is one of the paradoxes of the current Government. We remember all the arguments about the problem of worklessness when they were in opposition; there has been very little progress in reducing the number of workless households
Mr. Willetts: The Secretary of State has made a serious mistake in raising this issue. The big problem that we face is people being trapped on incapacity benefit for longer and longer periods, and that is happening because the Secretary of State changed the rules in order to means-test incapacity benefit. As a result, if someone leaves incapacity benefit under the old rules, holds down a job for a while and goes back on to incapacity benefit, they do so on the new, means-tested basis. His changes have created a new obstacle to people leaving incapacity benefit because they are afraid that they will return to it on that new basis. We warned about that at the time, and I am afraid that the figures have borne out that warning.
Mr. Willetts: I regard the new deal for disabled people as one of the more effective new deals. We have not said that we will abolish the new deal for disabled people. However, the Government's welfare-to-work programmes simply have not delivered what the rhetoric claims. Indeed, as recently as a few days ago, yet another report showed exactly how ineffective they are. The Policy Studies Institute's evaluation of work-focused interviews for lone parents showed that less than 1 per cent. of lone parents taking part in that scheme had exited income support as a result of doing so. Page 12 of the report states that
Perhaps I might ask the Secretary of State about a third issuehousing benefit. I have some sympathy with the aim of reforming housing benefit. I shall watch with interest the results of the pilot projects that have already been launched. However, it is a pity that we have heard so little from Ministers about how those pilots are
I invite the Minister for Work to tell us a little about the state of Child Support Agency work. We have read reports of continuing problems with the new computer system; indeed, it was even claimedI am not sure whether the claim was based on an accurate interpretation of what the Secretary of State said to the Select Committeethat the Government had encountered such problems with it that they might have to abandon it entirely. Will the Minister say how well the system is working and whether there is any prospect of transferring the existing case load to the new computers? We need to know whether that it feasible, and whether the Government are still committed to doing so.
I also want to ask the Secretary of State about pensions and pensioners. We are proposing to increase the value of the basic state pension because we do not want to live in a country in which more than half of all pensioners are dependent on means-tested benefits. The evidence of the low take-up of means-tested benefits shows that most people remain uncomfortable about claiming such benefits, however much the Secretary of State's Department spends on advertising them. The take-up of means-tested benefits is still shockingly low. Indeed, the Secretary of State has had the honesty to admit that council tax benefit take-up is too low, and that he wants to raise it. The take-up rate for the old minimum income guarantee was just over 70 per cent. This is not good enough. It is extremely risky for the Government to put increasing weight on means-tested benefits to try to help poor people, given that the evidence shows that it is very difficult to increase take-up, despite Ministers' best efforts.
We are proposing to help take pensioners off means-tested benefits by increasing the value of the basic state pension. That would tackle a widespread grievance among pensioners and provide a solid basis for the savings industry to sell its products to future generations of pensioners. The industry says that it cannot encourage people to save because many are worried about being caught out on means-tested benefits when they retire. Our proposal would offer a better deal for pensioners, and it would provide a better way of encouraging people to save for the future.