Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 447-459)

11 FEBRUARY 2004


  Q447 Chairman: Good morning, ladies and gentlemen. We have an oral session in the course of the Committee's inquiry into child poverty and we are pleased to be joined this morning by the Secretary of State, Andrew Smith, and Mr Tom Taylor who is from the Family Poverty and Financial Exclusion Division in the Department's Working Age and Children Group.

  Q448 Chairman: You are both very welcome and thank you for the written submission which, as always, is immensely helpful. This is a very important part of the Committee's work this year, as indeed it is of the Government's agenda both now and in the future. Secretary of State, I wonder if you could just set the ball rolling by looking a bit forward. I think anybody objective would say that considerable progress has been made and, for the purposes of this morning, I think we should assume that the 2004 targets are more or less met and that is a significant achievement for the Government and I think people understand that. However, I would really like to spend what valuable time we have got this morning looking forward, and that is difficult because the next scheduled target date is a long way in the future, so the assumptions become a wee bit more questionable when you try to do the research and the estimations and the quantification of what happens next. We are worried about two things and I would ask you just briefly to say something right at the beginning of the session on severe and persistent poverty. I think that however well the Government is doing, indeed arguably the easiest bit is the first bit because the people who are nearest to some of these margins are getting floated off through the thresholds and out of poverty and it is easier to do the first two or three cohorts, but it gets harder as the job goes on. Severe and persistent poverty is something that is obviously a concern and indeed the Policy Unit themselves, the Strategy Unit at Number 10, in its own 2003 report highlighted the fact that severe and persistent poverty was something that was a cause for concern and was a challenge for the future, so I wonder if you could say a bit about that and, in the course of doing so, say a bit about how you see the road map, insofar as you can, into the future between now and 2010 in trying to achieve the later ambitious targets which the Government have set themselves.

  Mr Smith: Thank you very much. I welcome the Committee's inquiry and, as you say, this is a very important task we are addressing here, very important not just for the Government, but for the whole country, and I thank you for your recognition of the progress that has been made. I should say that we do not assume targets have been hit until they have been hit. I believe the measures that we have taken will ensure that for 2004-05 we are on track, but we will see that when the statistics actually come out. Looking to the future, you are right to stress that this is a challenging as well as very important objective that we have set ourselves and you are right also to say that of course there are dimensions of poverty which, as you make progress, you are actually encountering harder and more resistant layers. I believe that our goal is achievable. We will need though as we move forward, as we have done already, to learn the lessons of not only what has worked, but also of things which are being piloted that can help us make further progress, so this does have to be evidence-based poverty. On persistence and severity, there is a sense of course with persistence that, by definition, it takes time for you to have an impact on persistence because it is very much a sort of lagging indicator in that sense and, as far as severity is concerned, it is certainly our goal that our policies should give most help to the poorest children and poorest families who need it most and I believe that the measures we are adopting will enable us to analyse and track that and take remedial action where it is necessary. I should say as well that of course whilst I imagine we will focus mainly on income and employment issues here, the whole panoply of dimensions of poverty in terms of housing and education outcomes are very much part of the picture as well.

  Q449 Chairman: I want to return to that in a moment, but, not looking for State secrets, though in fact I am if I can get them, obviously the CSR is an important staging post between now and 2010, so you must be working on some sort of options. Do you believe that after July the profile of measures will look substantially different? You must have some kind of idea of the road map, if you like, looking forward to 2010, there must be some work being done in the Department, whether it is more of the same or whether there are different tactics to deal with the severity and the residual groups that start to emerge as the hard cases. Is there anything you can share with us about that?

  Mr Smith: In terms of preparation for the Spending Review, this is all very much work in progress on our part and in preparation obviously with other government departments as well. As you would expect, we are taking a very thorough look at all the relevant dimensions of what there is to be learned from the progress we have made to date and I am sure you will be coming on to detailed questioning on some of those particular aspects. There is not frankly anything that I could share with you at the moment because it is work in progress.

  Q450 Miss Begg: I want to look at the issue of raising employment rates for parents because obviously if parents are in work, there is a better chance that the children are not in poverty. The Autumn Performance Report indicated that there is a risk that the target to get 70% of lone parents into employment by 2010 might not be achieved. On the basis of the current policies, the ones you have already put in place, what do you expect the employment rate to be by 2010?

  Mr Smith: Well, I want us to hit the target and it is, as you say, a very challenging target. If you just stand back and look at the headline arithmetic, we have made 7 or 8 percentage points progress in what, the last six years and there are six or seven years to go and there are 16 percentage points of progress yet to be made, so you can see how challenging it is. I think again though there is something of a sort of lagged effect here of measures that we have already taken, that it does take time to work through the system. The introduction of the new tax credits, for example. Will have a cumulative effect on sort of shifting the culture of expectations impacting on movements into jobs. There is the roll-out of Jobcentre Plus where we expect to add additional outcomes, there is the extension of the work-focused interview regime, there is what we are learning all the time about what we need to do to improve the New Deals, and there is of course the very important issue of the availability of childcare. These are all fronts on which we are making progress and which I think will enable us to make significant further progress in the future. As you will be aware, there are other things which we are piloting, for example, the Work Search Premium, the In Work Credits and, for example, the combination of extended childcare with more intensive help from Jobcentre Plus which we are launching in three areas. Now, as we learn the difference that these various initiatives make to the rate of movement into jobs, then we will be able obviously to apply that experience in securing the outcomes we need.

  Q451 Miss Begg: Have you made any assessment of to what extent the lack of childcare, the actual supply side of the childcare equation, is still acting as a barrier to getting parents into work?

  Mr Smith: Whilst we are making good progress on expanding the supply of childcare—already I think some 1.4 million children benefiting from the 800,000 extra places made available, on track for 1.6 million to benefit this year, 2 million to benefit by 2006—I do not think anyone would dispute that the availability of childcare remains a constraint and it is very important that our childcare strategy, along with what we are doing on neighbourhood nurseries and Sure Starts, that that provision is further expanded. I refer to the extended childcare pilots as well and I think these are very exciting also. What we are doing here is in a number of areas, Haringey, Lewisham and Bradford, which already have an extended childcare project, we are putting in extra resource so that within those parts of those local authorities where there is a particularly high number of lone parents, we will be able to offer a childcare guarantee 7am to 7pm, 50 weeks a year, and we are coupling that with extra help through Jobcentre Plus and indeed coupling that with the Work Search Premium and the In Work Credit to see, in combination, the removal of the main barrier that people cite, with extra help, with an extra financial incentive, how much difference that will make, so there is further progress we will be able to make through those sorts of initiatives.

  Q452 Miss Begg: You have listed the incentives and the things you are piloting. Is there anything else that you are considering? For instance, are you looking at introducing further compulsion into making sure that lone parents will turn up for the interviews and actually go to the jobs?

  Mr Smith: Well, of course there is compulsion in the system in terms of the requirement to take part in the work-focused interview and one of the things we will be looking at in these extended childcare pilot areas is whether for lone parents whose children are older a more intensive serious of interviews, advice and help might prepare them better for the point where their children are 16 and they would re-enter the JSA regime. If you ask lone parents and indeed couples as well what the barriers are, I think a lot of them do cite childcare and I think it is very important that we are able to address childcare provision. After all, 90% of lone parents say that they want to work. We have already made very significant progress, and I have said that the future is challenging, but we have made significant progress in helping more into work and I think with the right array of support and with the right incentives, I believe very many more will choose to work and be able to.

  Q453 Miss Begg: You talked about parents with older children moving towards the JSA regime. Do you mean by that the same constraints or obligations under the JSA or that you would actually transfer them on to the JSA?

  Mr Smith: No, what I was saying is, as you will be aware, when the youngest child becomes 16, someone will transfer on to JSA anyway, so it does make sense to help prepare them for that point. Now, if, as a consequence of that, with the children already being older, people decide they can get a job now, then all well and good and I think increasing numbers will.

  Q454 Miss Begg: The Autumn Performance Report indicates that the target to reduce the proportion of children in workless households is at risk. Is that still the case?

  Mr Smith: Again that is a demanding target and I believe we will hit it with the sorts of measures I have outlined, but it is demanding.

  Q455 Mr Goodman: What allowance do your plans make for lone parents who want to look after their kids when they are growing up, say, under 18 months?

  Mr Smith: Well, of course the system recognises that people can and do make that choice and it is a choice for them to make. As I say, the evidence shows that the bulk of lone parents do want to work. Obviously the younger the children are, I think probably on average the more the priority of parents that is likely to attach to the child and obviously is especially important where they are a lone parent. If you actually look at the evidence on the impact of maternal or, in the minority of cases, paternal absence at work for lone parents, I think the evidence is that above 18 months there is not a negative effect and even below 18 months the benefits to the child and the family of the additional income may offset other disbenefits. That is a rather sort of arid way of calculating something which in practice, as we know, is a very intense and emotional relationship, and I would not want to encroach on people's right to be able to make those choices for themselves.

  Q456 Mr Goodman: But given, as you say, that mums with younger kids will by and large want to provide the childcare themselves, is it sensible to include them in a target of getting 70% in to work by 2010?

  Mr Smith: Well, given that the parents of many young children do choose to work, I think it would be a bit arbitrary to exclude them from a target, but I would look at further evidence and argument on that.

  Q457 Andrew Selous: Just following on that question from Paul, there is a second point I want to make. You talked about choice in that area and you said that it is a personal decision and that young parents should have choice. Choice is only enabled if it is financially possible for people to take, and there are a number of Scandinavian countries which do make that choice financially possible. Do you have any comment at all to make on the choices that, say, Finland, Norway and Sweden have available, particularly for children in the first year and a half which Paul Goodman referred to?

  Mr Smith: Of course we have already very substantially increased the expenditure among children, I think, by some £10 billion or 72% in real terms, so we have been giving extra support for children, both lone-parent children and the children of couples and you can always make an argument for doing more. One thing I would say about choice though, and the availability of quality childcare and the childcare which parents trust is very important, is that in a flexible labour market like ours with an array of part-time work available, it does at least open up the possibility of choices where you are still spending substantial time with young children, but are also able to do some work as well. Whilst I accept that it is a particularly crucial relationship obviously in the case of lone parents, it is not as though other parents do not face these sorts of choices and trade-offs as well. I think people do feel pressured, but they try and get the best of both worlds with the additional income to maintain the living standards that they want for their family while at the same time making time available to their family and it is not easy, I acknowledge that.

  Q458 Andrew Selous: I would like to look at the effect now on work incentives of tax credits. Both Mike Brewer of the IFS and Professor Holly Sutherland have flagged up to the Committee the dangers of reducing incentives to work as the Child Tax Credit increases. Is this something that you are concerned about or you have noticed in the Department's data in this area?

  Mr Smith: It is something which the IFS is doing work on for us and when we are in a position to publish it, I will do so.

  Q459 Andrew Selous: So that is under active consideration?

  Mr Smith: It is under active consideration. I would say that as far as work incentives are concerned, we have substantially reduced marginal rates of deduction of course and there is a balance to be struck in these matters, how much you spend, how high up the earnings distribution your tapers go, that kind of thing.

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