Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 480-499)

11 FEBRUARY 2004


  Q480 Mrs Humble: Just to continue on this theme, you will be aware that the IFS has come up with a proposal for what they call a "large family premium" in the Child Tax Credit and they suggested a premium of £845 a year for families with three or more children and they say it would cost £1 billion. Given that you have just said that the issue is a lot more complex for large families, do you then think that the IFS proposal is not really the best way to address the problems that such families face?

  Mr Smith: Well, in terms of what the Government has done to date, there is a sort of revealed preference here, is there not, in the additional resource that the Chancellor put in at the time of the PBR which we put in to increasing the Child Tax Credit which, as I said, does give a particular benefit to larger families. We consider carefully the analysis and recommendations of the IFS, as of other bodies, and bear this closely in mind as part of the ongoing work in this area, but there are these other complexities to which I refer and I think it does point to the need for further research.

  Q481 Mrs Humble: Going back to your comments and the references in the Department's submission to barriers to work for parents in larger families, Karen has already mentioned the issue of childcare, but is it simply childcare or are there other issues that you are looking at or other areas which are preventing the parents going into work?

  Mr Smith: There certainly are other issues as well. I have already listed those factors which are associated with large family size which have an impact on poverty and have an impact on employment as well, notably ethnicity of course and whilst there are variations across the different ethnic sub-groups with those of Indian and Chinese origin having, for ethnic minorities, relatively high rates of employment, those of Pakistani and Bangladeshi origin having higher rates of non-employment, on average there is an obstinately persistent gap in the employment rates of the community at large and the average of ethnic minorities, and I think this is one of the biggest social challenges this country faces. Now, we have a number of initiatives underway to attempt to address this following the Strategy Unit's study on ethnic minority disadvantage and the work of the Task Force which the Minister of Employment, Des Browne, leads. The answer to your question is that that will be a big factor because if large families are largely from ethnic minority backgrounds and ethnic minorities are significantly less likely to be employed, then those barriers of ethnicity might be mistaken for barriers of family size.

  Q482 Mrs Humble: I do not want to go down the avenue of questioning you on how the Department is dealing with ethnic minority families, but can I just ask for an assurance from you that you are looking at the wide range of issues that affect all families, regardless of their ethnic background, and larger families in order to see how the Department specifically can help?

  Mr Smith: Yes, and it was because I was concerned about this that we did devote that chapter to it in Opportunity For All and, as I say, that did point to the need for further work and I can give you the assurance that we will carry that forward.

  Q483 Miss Begg: According to the Labour Force Survey, there are over two million parents who have disabilities, of whom 50% or more than 50% are actually workless. I know that the Department is doing quite a lot of work to get disabled people into work, but is there anything that you are looking at or do you think there is any specific help that disabled parents should receive or incentives that we could put their way to encourage them to go into work?

  Mr Smith: Well, of course we are providing additional help and indeed additional incentives, for example, through the disability element of the tax credit. I think the measures more generally we are taking to promote equality of opportunity for disabled people, the enforcement of legislation, we have already put in place the forthcoming Bill, what we are learning also from the New Deal for Disabled People and indeed the very large number of disabled people who have got work through the other New Deals as well, I think these are all important pointers as to how the employment rate of disabled people, which has been rising and indeed the gap, and I was just referring to the gap between ethnic minorities as a whole and the average which has proved obstinately persistent, the gap in relation to disabled people has been narrowing. As parents, they will of course benefit from the general measures to help disabled people into work.

  Q484 Miss Begg: Do you think you are going to hit the PSA target of getting disabled people into work?

  Mr Smith: Yes, I think we will.

  Q485 Miss Begg: Obviously there are issues around disability and parenting, and childcare is the obvious one, and whether it is the parent who is disabled or indeed the child who is disabled, then the difficulties of accessing appropriate childcare is amplified. Is the Department looking at anything which could be very specifically targeted either at parents with disabilities or at parents who have disabled children?

  Mr Smith: Well, of course there is the help that is presently available not only through the tax credits, but through DLA as well. I would certainly be interested in looking to see if there are specific particular barriers that can be targeted in the way you suggest.

  Q486 Miss Begg: Because obviously there are disabled parents who will never be able to work. The reason for this line of questioning is that 43% of children in households, which included a disabled adult, are poor, whereas the figure for families with no disabled adults was 27%, so obviously there is a large proportion of those who are living in poverty who have some kind of disability in the home and perhaps there is a need to look at those more specific barriers or problems that are caused either because they will never be able to work or get into work or get the childcare associated with work.

  Mr Smith: I agree with you that we should focus on this.

  Q487 Rob Marris: On employment and child poverty in minority ethnic families, why are you having such difficulty in lessening the differential employment rates which have steadily stayed at about 17% between the overall employment rate and that of black and minority ethnic families, particularly since I have just understood you to say that it was one of the biggest social challenges facing this country when you replied to Joan Humble?

  Mr Smith: That is why, as I say, a lot of effort is being put into this area. When you analyse the disadvantage, crudely half of it can be accounted for by education and skills under-attainment which is the great challenge for the education and training system there. The half which cannot be accounted for in that way, the analysis we have done of the New Deals where for the first time we have brought in ethnic monitoring showed that in terms of access to help and in terms of putting people forward for vacancies, there was parity, so what it leads you to conclude sadly, and I think this would be endorsed by members of the ethnic minority communities themselves, is that prejudice and discrimination is still a very important factor out there which has to be countered. One very interesting thing from our programmes where I have asked for further work to be done, and I am sure the Select Committee would be interested as well, is that of our various initiatives, the one which does best in terms of parity of outcome for ethnic minorities' not only movement into jobs, but actually better than parity on sustainability of jobs is the Employment Zone approach. When I have looked into the reasons why this is, it appears to be that they are better connected with the network of local employers in the areas they serve, their own staff are more representative of the ethnic mix of the areas they serve and they are helping a bigger proportion of their clients into small businesses which of course are the big job generators, so there may be some very useful pointers there.

  Q488 Rob Marris: So you are going to extend the Employment Zones?

  Mr Smith: Well, we have been extending the Employment Zone approach, but we are also looking at how we can apply the lessons in terms of personal advisers and front-line discretion which are applied in Employment Zones and applying those to our New Deal programmes as well.

  Q489 Rob Marris: If there were no changes in the benefits and tax credits system between now and 2010 and if you met your employment targets for lone parents, people with disabilities and black and minority ethnic people, how far would that take you in reaching the 2010 child poverty target?

  Mr Smith: That is virtually impossible to estimate with any accuracy.

  Q490 Rob Marris: Well, the only real variable there is how much people earn if they do get into employment, is it not, and I said assuming no changes to benefits and the tax credits?

  Mr Smith: You have got to make a lot of other assumptions though.

  Q491 Rob Marris: If you assume you meet your employment targets, then you can make some reasonable assumption as to how much people will earn and, therefore, you can look at whether that is likely to reduce child poverty. We are talking about gross statistics here with not many variables.

  Mr Smith: Yes, but I think that there are a lot of assumptions there and I am not convinced it is wise to speculate.

  Q492 Rob Marris: Then why is it worth having the targets if you do not know whether they are going to contribute anything?

  Mr Smith: Because progressively, as I was saying earlier, you measure the progress you are making, you see the additional leverage which other initiatives we are piloting make, you do further analysis on the contribution of income transfers as well as movements into employment, and you refine the approach over time to hit your target. What I am loth to do on quite a wide range of assumptions is to get drawn into making what I think would be misleadingly precise forecasts of how close or how far away from the poverty target we would be.

  Q493 Rob Marris: Surely you do not know what to do about income transfers unless you kind of nail down a bit on the employment side in terms of your projections over the next six years?

  Mr Smith: Well, that is why I say to you that you keep track of where you are and the progress you are making and the leverage that the different policy instruments at your disposal, including new ones that we develop, can give, but what I am loth to do is to get drawn into what I think could be a misleadingly specific forecast of where we are going to be. Indeed when I asked these questions of our officials, that is what they told me as well.

  Q494 Mr Goodman: Is it the Government's intention to move from having a tax and benefit system that supports families with children through Child Benefit to one that mainly supports poor families with children through the Child Tax Credit? I simply ask because Child Benefit was last increased in real terms in 1999 when there was the big increase in the child element of the Child Tax Credit in the Pre-Budget Statement.

  Mr Smith: No is the answer to your question. What we are doing is maintaining a combination of universal help and targeted help on the poorest and I think both are important for children and families, social cohesion and frankly, in a sort of non-Party sense, the broader public, political support for this sort of work.

  Q495 Mr Goodman: If the answer is no, surely that would imply at some point increasing Child Benefit in real terms, otherwise there is a danger that Child Benefit could wither on the vine.

  Mr Smith: I am certainly not ruling out increasing Child Benefit in real terms in the future, but neither am I in a position to commit.

  Q496 Mr Goodman: All right. That does not sound like a very definitive answer to—

  Mr Smith: No, I do want to be definitive, but this is about providing help for all families definitely, but for reasons we would all, I hope, here understand and share, the particular importance of helping poor families.

  Q497 Mr Goodman: Do you have any comment on something Holly Sutherland said to us when she was giving evidence which was this: ". . . I think it is also worth noting that the more one puts into means-testing, the harder it is to move away from it . . . it is more cost-effective to put resources into a Child Tax Credit rather than, say, Child Benefit if all one wants to do is to reduce child poverty as measured".

  Mr Smith: I see the argument and I would not dispute the technical expertise of Holly Sutherland. I can really go back to what I said to you previously, that I think in terms of public support and indeed the overall effectiveness of policies to help the family, a combination of universal and targeted/means-tested support makes sense.

  Q498 Mr Goodman: In your memorandum you outlined five key measures which were introduced and targeted at children and one of them was the introduction of the new child support system in March 2003. Now, given the million families that are still waiting to be transferred to the new system, what effect is this making on your ability to hit your target?

  Mr Smith: Certainly the under-performance of the child support system, the new technology that separately the Committee is looking into certainly does not help, and the frustrations of getting the new system up and running properly so that we can transfer existing cases on to it are certainly some of the biggest that I have encountered since I have been Secretary of State and I share the disappointment of the Committee that faster and further progress has not been made. I am in a position to give you, and literally these only came to me last night, the latest figures on the Child Support Agency and obviously it is legitimate for me to tell you that, and I will put them in the House tomorrow, things are improved, but they are still not good enough and on the new system the figures are something like 100,000 clearances now of which 60,000 are calculations, 40,000 are closures, 17,000 first payments have been made and 9,500 job maintenance premia paid. Now, this is substantially better than the last quarter which was in turn substantially better than the first quarter, but it still leaves us some way to go.

  Q499 Mr Goodman: So how many cases are still waiting to be transferred to the new system, therefore?

  Mr Smith: Tom may be able to check the exact figure. Actually a very large number of course are the old cases still waiting to be transferred, and I was not sure whether you were asking me how many were sort of still snarled up in the new system awaiting determination.

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