Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 500-519)

11 FEBRUARY 2004


  Q500 Mr Goodman: I was asking about news on the old cases. I was under the impression you have just given us that, but you have not, have you? You were referring to new cases?

  Mr Smith: I was referring to the performance of the new system which, as I said, has improved, but it still is not good enough.

  Q501 Mr Goodman: So where are we on these new cases? You come before us again and again and Doug Smith comes before us again and again and we were told when Doug Smith last came that new software was expected that would enable the transfer to take place, but we also read that there are some 40 million mistaken items which are holding up the transfer of the old cases to the new system. Now, where are we on this and do you have a timetable for transfer?

  Mr Smith: It is not that there are particular items holding it up. The fundamental problem here is that the new system still is not working well enough and that is because of design and software failings. Obviously we are continuing first of all to withhold significant payments from EDS. Obviously the Chief Executive, others and myself have had EDS in. We have been assured that there is a recovery programme in place, that we will be seeing the milestones against which that recovery can be judged, and that the system is retrievable, in other words, can be made to work properly rather than needing to be scrapped, but I am certainly very impatient to see delivery by EDS of the commitments they have made.

  Q502 Mr Goodman: But you have not got a date? You have just said that the system is retrievable, but you have no date by when?

  Mr Smith: We have actually got a programme for the recovery of the system to a satisfactory operating standard of some six to nine months, so we are talking about by the autumn of this year.

  Q503 Mr Goodman: From now?

  Mr Smith: No, from the beginning of the year.

  Chairman: Thank you. I really do not want this turned into a Child Support Agency inquiry because we are doing that in another context. This is about child poverty.

  Q504 Andrew Selous: Another aspect of the CSA which I am still at a loss to understand the Government's policy on is the enforcement side of it. Given that we know that 70% of parents with care are either getting nothing at all or less than they should be, and I accept the problems with old and new systems but where there is a calculation in place and parents know what they should be getting, 70% either get nothing or get less than they should. You have a range of enforcement powers at your disposal that you are very loathe to use. Could you elaborate on that? Does that make a critical difference?

  Mr Smith: I share your concern about this. When I was last in front of you I said I would take a personal interest in it, and I have been doing that. I told you there was a review of enforcement under way, as indeed there has been: that will be complete next month and when we have the report I will share it with the Committee.

  Q505 Mr Dismore: Going back to what you just said a couple of answers ago, has consideration been given to scrapping the new system?

  Mr Smith: If it could not be made to work properly you would not have an alternative, would you?

  Q506 Mr Dismore: Because what you said was, going back to the previous answer, you seemed to be inferring that thought had already been given to the possibility of scrapping it?

  Mr Smith: I think I can add to what I have just said. Clearly when you have been through the sort of experience we and all the clients of the CSA have been through on this you ask some hard questions about whether it really can be made to work, given that the original design and original commitments that were made were not fulfilled. Now, we are assured that it can be but, if that turned out not to be the case, then you might have an alternative.

  Q507 Mr Dismore: Moving on to the questions I really wanted to focus on which are some of the regional issues relating to child poverty, if one looks at the figures, half of the wards in London fall into the most deprived 20%; London has the greatest percentage of wards in the most deprived 20%; if you look at the highest rates of income, deprived children comparatively in 1999 one London borough was in the top four, and in 1999 there were eleven London boroughs in the top twenty. If you look at the figures for 2001 we now have three out of four London boroughs in the top four; five out of six in the top six, and thirteen out of twenty in the top twenty—or bottom twenty depending on how you look at it. Why?

  Mr Smith: I agree with you that there is a particular challenge in London, both on poverty and on employment. I think the costs and the barriers to moving into work in London in a number of respects are high, and where other urban conglomerations, including as they all do inner city areas, exhibit some of the barriers to moving into work, London exhibits just about all of them—factors like costs of travel to work: the interaction, we have discussed previously, of housing benefit with work incentives: readiness and affordability of people to travel across London's labour markets: the ethnic composition of the capital, therefore replicating some of the other barriers, including discrimination, which I referred to earlier.

  Q508 Mr Dismore: On that basis, would you accept that unless we can make real inroads into child poverty in London, the prospect of the Government achieving its targets, bearing in mind how many of the children live in London compared to nationally, is not possible?

  Mr Smith: Yes, I would agree that progress in London is an absolutely necessary condition towards hitting our target.

  Q509 Mr Dismore: So does it make sense for so much of London's resources to be taken out of London to other parts of the country whilst we are still trying to tackle these serious problems here?

  Mr Smith: Well, there is a substantial resource being spent in London. I would, though, point to some of the initiatives I have already mentioned, where I would put it to you that we have acknowledged the strength of the case that you are making and which London has. In relation to costs, for example, the fact that the in-work credit, the extra £40 a week for the first year of employment for lone parents is to be rolled out in general across London with the exception of the employment retention and advancement project area in north east London, is an acknowledgement of that. I referred earlier to the extended childcare pilots. Two of those are in London, in Lewisham and in Hackney, and other measures that we are taking, for example the work I referred to under way to tackle barriers to ethnic minority employment, will help us address this challenge.

  Q510 Mr Dismore: The problem, Andrew, is this: it used to be an East End problem and that is how it was perceived, but now the problem is in east London, west London, central London, south London and north London. It is a pan London problem if you look at the top twenty boroughs and districts that have child poverty, and that is before you even get into the question of pockets of deprivation in what have always been perceived as the wealthier boroughs. My borough, Barnet, has been perceived as one of the wealthier ones but we have real significant pockets of deprivation at ward level and below on a district level. My concern is that the position is getting worse despite the measures the Government has been taking, not getting better, not standing still, and the figures I have put to you show that the position is getting worse. Now, I imagine you are going to tell me the 2003 figures are going to show a miraculous change; how are we really going to make enough impact in the very short time left to start to get the Government's targets met?

  Mr Smith: By ensuring that the range of measures we already have in place work even more effectively in London. It is one of the reasons why we, for example, transferred the bulk of the New Deal for Lone Parent provision in London to employment zones. There is the in-work premium to which I have already referred. It is not just a figure plucked out of the air: that £40 difference is something which survey work we have done shows in London in particular could make a crucial difference in terms of the gains and incentives to move into work, but we have to do more on the other initiatives we are taking and do better, frankly, on the wider determinants of poverty that I mentioned right at the beginning of this session, which again particularly focus in London around education, around health, and around housing.

  Q511 Mr Dismore: Obviously the £40 is a welcome initiative but if one just looks at the question of the differential in child care costs in London, never mind the travel to work costs which you also mentioned, frankly it is not going to meet the difference?

  Mr Smith: But, of course, they will on average, and I think the figures bear this out, be receiving more in relation to child care costs. I accept that the child care costs are particularly high and that these are issues on which rapidly the analysis which we are able to undertake and review of policies for the future will need fully to take into account.

  Q512 Mr Dismore: Can I infer from that that the data is going to be made available much more quickly and more localised as well, so that we can get a much better handle more quickly on what is going on in the boroughs?

  Mr Smith: Yes, insofar as we can, certainly. What I was trying to signal there is that I do appreciate the urgency of the challenge

  Q513 Ms Buck: You will not be surprised to know that we wanted to ask you a few questions about the definition issue about housing costs which was in the media today, and I think very much this argument fits into the questions we have just been asking you about regional variations. I understand that the argument is to bring the definition into line with that of other European countries, although when we were discussing earlier some of the issues about measurement of poverty and about an approach which is both relative and based on budget standards, it was pointed out that other countries do develop a budget standard approach which we seem to find difficult, so I am not entirely sure that the binding nature of bringing things into line and having a definition with other EU countries is always inviolate. Could you tell us a bit more about why you made this decision, and could you also tell us what you think the impact of that decision is going to be?

  Mr Smith: Certainly if we are to judge whether we are amongst the best in Europe it makes sense to be looking at the relative component on the same basis of measurement as the rest of Europe is using, but one thing I would stress on the new measure is that it has these different components but we have to look at it in the round and I believe that, as you do so, especially taking account of part of the combined material deprivation of relative measure, if there are particular variations because of variations in housing costs then it will be picked up there.

  Q514 Ms Buck: So are you giving us an absolute commitment that you will continue to produce and measure the after-housing cost statistics so that we are able to continue monitoring what the variation is between BHC and AHC?

  Mr Smith: Certainly, as far as the Government is concerned, that is our intention. The proviso I have to put in this is national statistics and independence and all of that, but I think it is right that information should be available.

  Mr Taylor: Adding to that, I asked my national statistics colleague who controls the HBAI publication whether National Statistics has any plans to move away from publishing both before housing costs and after housing costs, and he said, "No, definitively not".

  Q515 Ms Buck: That is reassuring, but will you as a Government as well continue to at least demonstrate to us so that in addition to whatever EU comparisons we are making we are able to see a trend over time based on before and after housing costs? When Helen John was giving evidence last week I asked her if the Treasury had a view as to whether there was a potential by widening gap between the numbers as measured before housing costs and after, and she was not sure. My worry is that this is likely to be the case given the issue about variable housing costs and the trends in housing costs in different parts of the country.

  Mr Taylor: I think it is important that the information is available and that people can reach a judgment on these issues, including the trend in the gap, but the point I was making earlier—and I think this has been missed in some of the commentary—is that if you assume for the purposes of argument the housing costs are particularly high, of growing importance in the way you suggest, and that this is somehow overstating our progress on poverty because the before housing costs measure is being used, then because of the interaction with material deprivation what you would expect is that, even though people might have nominally quite a high before housing cost income—one that puts them over the threshold—if, because of the extent of their housing costs, the kids cannot afford to have friends round or a swimming lesson or heat the house adequately, which are the sorts of effect you would expect, those will be picked up in the material deprivation survey. If, on the other hand, you found that there were quite high housing costs but they were not having that sort of effect on the constellation of indicators that reliably indicate material deprivation, then clearly there would not be so much of a problem. What I am saying is there is a discriminator there which is meaningful in terms of the progress we are making, meaningful in terms of popular understanding of what poverty is about, that will highlight this problem even if the main relative measure is on a before housing cost basis.

  Q516 Ms Buck: "Up to a point, Lord Copper", I would have thought is the answer to that because yes, that is an additional useful set of indicators, but what would worry me very much is that we were replacing a very hard, very visible, very clear measurement of household income with a basket of goods approach which may or may not give you that range of data?

  Mr Smith: It is not simply replacing the basket of goods approach because you have the other components of the measure as well but careful statistical work goes—it is not just a random collection of goods and services—into identifying those which really are the best indicators of poverty.

  Q517 Ms Buck: What worries me is this: you know I am all for Britain on this subject but when it comes to the measurement of exactly this issue in respect of private rented accommodation, we know how many people are meeting part of the cost of their rent out of their income support—it is a well known fact, we know next to nothing about it other than by going out and doing specific local research in places like Brent. We know there are hundreds of thousands of families subsidising their rent at income support level and we know next to nothing about their characteristics, and I have always thought that was, frankly, a disgrace, and it would really worry me if, by adopting this change, we made it harder to grasp that minority—and I completely accept it is—that very needy, very vulnerable minority who can get below the radar.

  Mr Smith: As I was saying, I believe this will be picked up in the surveys on which goods and services people cannot afford because of the impact it would have and the circumstances you describe on what people have got money to spend on, but I am not disputing that to have an after housing cost measure out there as another check on this and another pointer to areas of research is useful, as I said earlier, we will maintain the other series of indicators that we use in opportunity for all, as well as the other statistics that are available nationally. It will enable people to make a rounded judgment and if, over time, there are particular issues like this then more intensive work can be done to show the gains we are making, or the lack of progress, if that is what there is.

  Q518 Ms Buck: But do you accept that at the moment we know very little indeed about the pressures and characteristics of the families living below the income support standard? We know how many there are—we have a statistical measurement of that—but we know next to nothing about them. Do we accept that we do have a bit of a gap in knowledge there?

  Mr Smith: I certainly accept that more knowledge in this area would be helpful. I am also putting it to you, though, that our proposed tiered approach composite measure is going to be telling us more about this in certain respects than the measures we are using at the moment.

  Q519 Ms Buck: So you are confident that, having already recognised that there is a possibility that there will be households with high housing costs where we overstate their living standards with the present measures, your approach will track them, identify the numbers and identify their characteristics?

  Mr Smith: I certainly accept that pressure on housing costs. Where I think you start to run into a difficulty is how far some of those housing costs are discretionary. I accept many people have very little choice about these matters but there is some choice and, of course, as you know, we are bringing forward the local housing allowance to enable people to exercise those choices. It is not as though there are no other components of some people's budgets about which you might make a similar argument. Extra costs of disability, for example, might be one of them. We have to judge these issues in the round: our proposed measure is a sound way of capturing the essence of poverty. Of course, the more that is amplified by a more diverse specific range of statistics, including the after housing cost measures, including surveys of the choices that are facing people in those poor households, and what the impact is on their living standards, the health and welfare of themselves and their children is all valuable as well. It all goes towards the rounded judgment that we and the public need to make.

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