Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 520-528)

11 FEBRUARY 2004


  Q520 Ms Buck: Would you commission a very specific piece of research to look at that, because I agree and know that there are some people who make overambitious choices about their housing, which I accept, and in the area of high housing demand in particular, which we saw in North Wales and Joan's area and also in the private rented sector in other parts of the country, but overall that is not the case. Overall people are struggling with their housing costs and, the higher the housing cost area, the more they will struggle. I think we are being overly relaxed about all of this. Why can you not make a commitment that, if we are going to go ahead with this change of emphasis, you will commission some research that says, "Let's really get to bottom of who these people are, where they are, what their regional distribution is, what their characteristics are, how they make their housing choices"?

  Mr Smith: I would certainly be happy to look at the case for further research in this area, and I will check the research we already have under way. I accept that could be very useful. The point I wanted to come back to, though, was that what you are saying and the force of your argument I do not think detracts from the fact that, given that we have all these indicators, and to have a composite measure you have to fasten on some of them, the ones we have selected will give a fair measure of progress and a fair composite measure of poverty, but it does not mean that we do not take all these other dimensions into account as well.

  Mr Taylor: Just to add some clarification, our very own Families and Children Study does an awful lot of what you are asking there in terms of looking at the housing circumstances of families. We also have the administrative data which indicates those cases that are on income support and housing benefit, and I would like to draw your attention, if I may, to a statement in the National Statistics publication, HBAI, which summarises basically that it is not true to say that after housing cost is a more valid measure than before housing cost. The national statisticians in their usual way say that they are both equally invalid in the sense that they are both imperfect measures of living standards. If we had a perfect way of getting at the point that Andrew was making, "What is a legitimate amount of quality of housing to have and what is personal choice", if we could determine that methodologically then we would probably only have one income measure. The truth lies somewhere between BHC and AHC.

  Q521 Ms Buck: We might have completed the housing benefit reform of Aneurin Bevan instead of it being something to be put off for the future! I accept all that; that is extremely difficult, but the points with this are twofold. Firstly, it is different, and therefore the Government has to be very clear that it defends itself against a moving-the-goalposts argument, I think that is right, but secondly, by the Government's own recognition, there are people who may be caught by having overinflated living standards because of their housing costs. We know there are all these people living below income support level and subsidising their housing costs but why would anybody do that? Why would people go short of food and fuel and children's clothing in order to pay their rent for the most part?

  Mr Smith: To the extent that that happens I am confident it is going to show up in our material deprivation index.

  Mr Taylor: It is the very same data that is used to measure the after housing cost series that we have at the moment, so you will have the after housing cost series but also this extra rich information material on deprivation from the largest household sample in the country.

  Q522 Ms Buck: On the Social Fund, you will remember that this Committee published a report in the Social Fund in 2001 which I do not think could be fairly described as having praised the Social Fund, and in response to that the Government said that the Social Fund was being kept "under review". I just wondered what "under review" meant now in the context of three years on.

  Mr Smith: We continue to examine how it can be improved, and the case for resourcing it better as well. Obviously I am alert to the criticisms, including by this Select Committee, of the Social Fund but I would say this: that it does succeed in getting substantial extra help to significant numbers of people who really need that help, and because it is recycling the money it is making good use of the resource available. As you will be aware, the Chancellor announced an extra £90 million to go into the Fund as well in the three years to 2005-06.

  Q523 Ms Buck: That is also fair and was recognised, and I certainly do not want to rehearse the arguments but there were a lot of issues about the regional lottery and the calendar lottery and the rigidity and inflexibility of some of the rules, as well as some of the administration and the gatekeeping processes which we were extremely concerned about. What we were concerned about then, and remain concerned about, is the impact on people's poverty of the lumpy items problem, not being able to save up and build a budget to accommodate for emergencies or major purchases or major life transformations, and that the Social Fund was very limited, partly because of money and partly because of rules, in being able to assist that. You will know the Child Poverty Action Group's proposals as an alternative to this, and I just wondered whether you were still considering that sort of policy change? Are you in terms of the Comprehensive Review thinking of putting forward a further bid for more radical reform?

  Mr Smith: We certainly keep under review, and this is part of the review, the case, for example, for more of the community care grant approach or grants for particular items. One of the reservations I have about this, though, is that you could elaborate the system, albeit at considerable extra cost, and we are getting back towards the old single payments type regime—"You can have money for this, money for that, money for the other"—and a sort of rule-governed approach that says, "You have a right to this but maybe you do not have a right to that", and whilst in terms of consistency and people knowing what they are entitled to there might be some advantages to that, in terms of sensitivity to the particular circumstances facing an individual at any one time I think that there might be some loss. In other areas we are saying how good it is to have more discretion towards the front end and whilst, of course, that discretion must be exercised within a consistent series of rules, it would be a mistake to take away too much discretion here because you would have the gains of people knowing where they stood but you would also have the loss of the individual who faces some particular crisis, and just because of the way the rules work and the money is carved up it does not cater for their particular circumstance. So there is a balance to be struck and we keep that under review.

  Q524 Ms Buck: Is there anything in the monitoring of the Social Fund that concerns you? Are you happy, with the postcode and calendar lotteries, that there are no groups who appear to be disproportionately losing out?

  Mr Smith: I do not think it is perfect but I do not think it is so imperfect that we should abandon it.

  Q525 Ms Buck: Or fundamentally change it?

  Mr Smith: There is a case which we continue to examine for reform. There are careful judgments to be made here in the way I have just been attempting to set out between the resource we have available and sensitivity to individuals and circumstances. There are other things, of course, that we are doing in this area that are very important as well in terms of improving the advice and education in management of money that is available to people, and in terms of what we are doing more generally on consumer credit to attack the loan sharks and those who abuse people who are vulnerable and in desperate need of money. That is very much part of this agenda as well. Promotion of credit unions as well is very important.

  Q526 Chairman: The system has, I think arguably in the past, for perfectly understandable reasons, been a coherent, nationwide, United Kingdomwide system of an edifice of taxable rights and benefits, and I do not think any administration in the future between now and 2010 can seriously ignore the differences that exist now in the kind of communities that Andrew Dismore was talking about in inner cities, places like London, and the costs associated with living there, and the living conditions in the leafy suburbs of the home counties. I seriously think that if you are really passionate, as you seem to be, about eradicating poverty, the systems that you use are going to have to be much more targeted. That leads you, does it not, inexorably to a differential system that works, and in Andrew Dismore's area that he described they are getting worse, and I think there are arguments that say they are, compared to other parts of the country which are doing arguably really very well. Is there any plan under consideration in the Department that looks at regionalisation of the benefit system?

  Mr Smith: Not regionalisation as such in that sense. In this area there are aspects of what we are responsible for, where people do expect some national consistency. You sometimes hear advocates of some regional premia on benefits: you rarely hear anyone arguing for regional reductions and, relatively speaking, it is the territory that someone who wanted to advocate regional variation would have to go on. There are certain elements you maintain as a national standard—basic framework of benefits, of rights and responsibilities, the operation of the work-based interview regime and all of that. There are elements though where there is a case to be more sensitive to variations in local costs, and the work has been done on regional price indices and we will certainly be bearing that closely in mind as we look towards the future and we are seeing how reliable and how big the variations are. I agree that there needs—and we are trying to do this—to be a particularly concerted attack on poverty where you get all of these factors coming together, notably in the inner city areas, and it does mean joining up what we have tried to do on New Deal for communities and the neighbourhood approach, and joining up regeneration with what we do to help individuals make the most of their potential and what we do to raise up the standards of public services in other ways—housing, education—that I was talking to you about, as well as, and this is very important in all of this, tackling racial discrimination which is difficult to combat but we are not going to crack these problems unless we do that as well. I would make one qualification, though: whenever we do adopt that locally-based, targeted, focused approach, for example where we locate our Children Centres and Sure Start Centres and so on, quite reasonably people point out that even in the leafy suburbs, even in the more affluent areas of the country, there are pockets of poverty and deprivation, and it is very important that we have policies that address the needs of those people as well. Let's remember also there are certain concentrations of disadvantage in London and one of the great ironies is that cheek by jowl with that disadvantage are very tight labour markets and booming economic conditions, and what we can do to ensure that within London the inequalities are addressed is as important as what you do with inequalities across regions. Indeed, as a general consequence of our economic and employment policies, it is just worth underlining that unemployment has fallen furthest where it was highest and variations within regions, including within London, are now more important than variations between them. It does not mean that both do not have to be addressed: they do.

  Q527 Chairman: As a wrap-up question, what impresses me most with this is the public expenditure flows of money that the Government have been putting in, and that is all good news, but when you get down to the local level you often find that, with all the progress that has been made in that direction, and there has been arguably a lot, people on the ground are suffering with horrendous levels of debt, even in my own constituency, and I guess that will not be the worst, it is a rural part of south east Scotland, and I often feel that the statistical framework and edifice within which we work really has no measure or concept. The evidence from the CAB around the country, the one thing they scream at you when you go and see them, is the extent to which debts are spiralling, and none of this seems to be taken into account when we are looking at what income households need. If they are all freed of their debt maybe they would be better off but there is a real disjunction between the experience of high streets in the small towns throughout the United Kingdom, on the one hand, and the fact that the Government is making public expenditure more available. Is there anything you can do to try and get a more consistent handle on the level of debt and start to address that between now and 2010 because, if you do not, I do not think you will get down to the levels of severe and persistent poverty that you really need to address to arrive at the targets.

  Mr Smith: I have already referred to initiatives we are taking on consumer protection to tackle the loan sharks, and sending teams out there to try directly to combat that. There is no short cut to financial literacy—sometimes called financial numeracy—but that is very important as well, ensuring that people have access to money advice so they know how they can get their way out of debt by rescheduling and taking sensible steps. We are ensuring that a suggestion made at the All Party Poverty Group is being followed up, that people coming to the Social Fund are given information about where they can get money advice, but we also have to address income, employment, consumer protection and education and access to advice and it is not easy.

  Q528 Chairman: Can I say that that has been most helpful. This is an important piece of work for us as a Committee, as I said at the beginning, and I hope and am sure that the Department already knows that we are seriously interested in pursuing this through the CSR in July and beyond. I hope we will be able to get a report available to ministers in time for it to be taken into consideration for the CSR deliberations later in the summer; that is our intention. We are trying to be helpful, as always, and your appearance this morning has helped us a lot.

  Mr Smith: That will be very helpful and I am grateful for the Committee's interest. I found your questions helpful as well. This process of scrutiny really does strengthen the work we are doing in Government, so thank you.

  Chairman: I am pleased to hear it. Thank you.

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