Select Committee on Work and Pensions Written Evidence

Memorandum submitted by Adrian Sinfield (CP 25)

PREVENTING POVERTY

The Neglected Part of the Strategy against Child Poverty

  (a)  Child poverty will not be significantly reduced unless the ways to prevent poverty from occurring and re-occurring are substantially strengthened. Prevention is not only cheaper than cure, but it is generally easier and more democratic. Policies do not have to depend on targeting those who have already been singled out by lack of resources, although good preventive policies may use other criteria to target.

  (b)  Preventing poverty requires more attention to the underlying causes of poverty and the factors which help to perpetuate it if a successful attack on the problem is to be sustained over time. This includes a closer attention to the causes of the geographical variations in the extent, depth and persistence of child poverty.

  (c)  If paid work is to be "the best form of welfare" ending poverty, the problems which cause people to lose or leave work need to be tackled. More attention must be given to removing low pay, very long hours and other family-unfriendly working conditions which make it very difficult for families to escape from the disadvantages of poverty.

  (d)  Good benefits are needed to help people to avoid or escape from poverty: a decent level of benefits enables people to cope and to plan more easily when faced with problems which interrupt or limit earnings. Benefits combined with tax credits should be set above the poverty line and in accordance with established Minimum Income Standards. The long-term harm created by inadequate benefits and frozen disregards must be recognized and remedied.

  (e)  The widening and persistence of inequalities combined with declining mobility handicap antipoverty policies. More work needs to be done in analysing and tackling these structural factors which can undermine government effort.

  (f)  Joined-up problems require a joined-up response. So far this has not been applied consistently across government at all levels. This must aim at reversing perverse effects such as the unequal burden of total taxation which falls more heavily on poorer than better-off income groups. The regressive impact of council and indirect taxes on those in or very close to poverty must be removed. In addition, upside-down tax policies targeted to help those with higher incomes should be recognized to be reinforcing inequalities at the expense of those more vulnerable to poverty and tackled accordingly.

  (g)  An independent Commission is needed to review policies, progress and problems and publish regular reports.

INTRODUCTION

  1.  The recognition by the Government of the importance and scale of child poverty in this country is to be welcomed. Its commitment to ending child poverty in 20 years and the adoption of goals enshrined in a Public Service Agreement are valuable democratic steps forward.

  2.  Major policy changes have been introduced and are having some impact on a problem which is proving stubbornly persistent. Part of the reason for this is the lack of fit between different policies and broader changes which are undermining the potential of reforms.

  3.  This response argues that much closer attention is needed to the prevention of child poverty and the strategies, policies, research etc needed to bring it about. My discussion of these issues and the changes that need to be made are set out in eight sections below. Although this has become considerably longer than it should be, I am very conscious that I have only touched on a few of the issues central to the development of policies to end child poverty:

     I

  para 4  The need to "mainstream" preventing poverty.

  II

  para 21  The preventive role of high, and preferably full, employment.

  III

  para 35  "Promoting work as the best form of welfare".

   IV

  para 50  The preventive role of a good social security system.

   V

  para 78  Wide and persisting inequality as a major cause perpetuating child poverty.

   VI

  para 86  The need for more transparent and consistent joined-up policymaking.

VII

  para 94  "Reversing perverse effects".

VIII

  para 115  The need for a clear, long-term strategy.

I—THE NEED TO "MAINSTREAM" PREVENTING POVERTY

  4.  A strategy to achieve as great a change as the eradication of child poverty requires the development of a "broad enabling framework . . . to create a positive environment to support the fight against poverty reduction" (DFID, 2001, pp 128ff). In many statements the Government has recognised the need for such a broadly-developed and long-term strategy but it has not always carried it through in policy and practice.

  5.  In a society which has suffered such a major increase in the extent, depth and duration of poverty as ours, a central part of the strategy has to be concerned with lifting children and their families out of poverty. But this can only be a part of the plan. If progress is to be maintained over time, then much more attention than has been must be given to the prevention of poverty in the first place and also to prevent it re-occurring.

  6.  Now that prevention and early intervention have been given a central part in the recent English Green Paper, Every Child Matters, the case is even stronger for more application of these issues to tackling child poverty.

Causes of Poverty

  7.  Consideration of strategies of prevention requires careful examination of the causes of poverty. For many years emphasis on individual responsibility for poverty led to the neglect of wider, structural causes and a consequent neglect of the role which government at all levels can play in preventing poverty. This has been changing with the introduction of such measures as a national minimum wage and the tax credits.

  8.  There has been some recognition of the need for broad structural analysis in government thinking (notably, Treasury 1999). Discussion of prevention and the causes of poverty also appeared in, for example, the Government's first report on Opportunity for All in 1999 which had a major heading "Tackling the causes of poverty and social exclusion, not just the symptoms". This was immediately followed by:

"Our aim is to prevent poverty and social exclusion occurring and recurring as well as alleviating the symptoms" (DSS, 1999b, p 31).

  However, the main focus was on the individual causes rather than the many structural ones. Interestingly, the broader focus was most evident in the section concerned with world poverty, "Action to eliminate poverty and social exclusion overseas" (ibid, p 35).

  9.  Overall, however, there have been very few instances of government discussing prevention in relation to poverty. A clear exception occurred in 2001 when the Social Exclusion Unit produced a report promisingly called Preventing Social Exclusion. (Curiously, calls to The Stationery Office reveal that it is not listed by title alone as publications normally are: it has to be searched for under the Unit's authorship. It is now only available on line.) Posing the question "why had social exclusion become so bad?", the Social Exclusion Unit argued that:

"to start to tackle the problem of social exclusion effectively, it was important to understand why it had become so pronounced in this country. Some of the causes were forces that affected most western countries in the last two decades, such as the move to high-skill, high-tech industries; and increasing rates of family breakdown" (SEU, 2001, Summary, para 9).

  10.  There is only a very short chapter (two and a half pages of large script) on the causes of social exclusion. Underlying economic and social causes are presented very briefly, and largely as inevitable and irreversible changes with the result that the focus is on targeting those at greatest risk, putting "preventative measures in place for those most at risk of exclusion" (SEU, 2001, 6.1). The identification of poverty in these high risk groups is odd, indicating little understanding of the significance of the structural causes of poverty—for example, "there was no concerted preventive action by government to try to reduce the known risk of social exclusion for certain groups such as those expelled from school, leaving care, living on low incomes, or leaving prisons" (SEU, 2001, 3.8).

  11.  The whole report provides strong support for the conclusion reached by Catherine Howarth and colleagues after their year-long study of the Government's anti-poverty strategy:

"the current programme relies too heavily on projects and initiatives administered, and paid for, by government itself. This appears to reflect an analysis of the causes of poverty which attributes it chiefly to malfunctions within welfare state institutions" (Howarth et al, 2001, p 2).

  12.  In fact, much of the SEU report is not as much concerned with prevention as with the other two elements it considers:

—  reintegrating the most excluded groups and;

—  delivering basic minimum standards in, for example, "education, crime fighting and health for the poorest areas, or to tackle exclusion from private sector services such as banking" (SEU, 2001, 3.8).

  The preventive value of this second element is not picked up as clearly as it might be.

  13.  A particular strength of the report is the theme that "joined-up problems of social exclusion did not receive a joined-up response"; and this paper will argue that this point is particularly relevant to tackling child poverty. It also acknowledges "the likelihood that investment in prevention would save money in the long term" (paras 9 and 10). As the old adage goes, prevention is cheaper than cure, but this does not appear to have fed through into later reports and policymaking. Broadly-based prevention is also more democratic than cure as it does not involve targeting specific groups.

  14.  In September 2002 the Fourth Report of Opportunity for All makes explicit reference to causes—and perhaps prevention in the form of mitigation—in the first chapter on "How are we tackling poverty?"

"An effective strategy to combat poverty should have a number of elements. It will home in on the causes of poverty, not just its symptoms; on worklessness; on low incomes; on a lack of opportunities; and poor services. It will target those people most at risk of poverty. And it will seek to mitigate those factors that we know place people at greatest risk of falling into poverty whilst building on those factors that lift people out" (Para 1:40).

  15.  However, the text quoted has just been preceded by a section headed: "Who are the poor and why are they poor?" Less than four columns long, it is much more concerned with identifying the groups at risk than identifying the underlying causes of their poverty. Some of these are mentioned but are not integrated into the discussion of policies either there or throughout the report.

  16.  The EC Joint Report on Social Inclusion also recognises some role for prevention, as in "objective 2: To prevent the risks of exclusion". This incorporates three sub-sections of remarkably different dimensions on "promoting e-Inclusion; preventing over-indebtedness and homelessness"; and "preserving family solidarity" (EC, 2002b, section 3.2). The last of these has a very broad range of issues which deserve much fuller discussion than they are given as many have great preventive potential (ibid, pp 60-61). Unfortunately they seem to be largely taken for granted, and there is a tendency to move on and devote more space to measures for high risk groups. "Objective 1: to facilitate participation in access by all to resources, rights, goods and services" also has a sub-category "to prevent the exclusion of people from the world of work by improving employability" (ibid, p 32). This is more focused on getting people into employment and so lifting them out of poverty, although once again there is potential for more development of these factors.

  17.  Recently the UK Government has published its response in its National Action Plan on Social Inclusion 2003-05. Despite reference to "action to prevent life-crises leading to exclusion" (UK, 2003, p 12) and "preventing the risk of exclusion in rural areas" (ibid, p 31), setting out the measures to help high-risk groups out of poverty is the dominant theme. This is not really complemented by indication of policies which could save families from becoming poor or excluded. There is a tendency to discuss many of the programmes such as Sure Start as if they were widely spread throughout the population, and I think that this helps to obscure the limited contribution which are being made by such measures. Clearer recognition of this would perhaps help to encourage closer attention to the value of a complementary preventive strategy.

  18.  I have taken the space to spell out this picture of few and generally very limited and undeveloped references to preventive strategies because I believe that the related issues of preventing poverty and identifying the underlying causes are central to sustaining a successful attack on poverty over time. Unless they are carefully and systematically built into the overall strategy, the value of work on poverty reduction becomes vulnerable to many factors, including an economic downturn. Scrutiny of the documents shows that the emphasis is virtually exclusively on lifting people out of poverty with very little attention to preventing its occurrence or recurrence (even, for example, in Treasury, 2001).

  19.  The analysis needs to be pushed much further than it is in these reports which reveal at best a focus on secondary or even tertiary prevention, concerned with targeting individual causes of poverty:

"What is produced, how it is produced and where it is produced have important effects on the production or elimination of poverty. (We need) to move toward economic development paths that are more poverty preventive" (Miller, 1999, p 1, emphasis in the original).

  This is a neglected area of economic analysis which must be pursued if the commitment to end child poverty is going to be securely attained.

  20.  Given the importance of employment in distributing income and other resources, and the fact that "work for those who can" is the central part of the Government's anti-poverty strategy, the need to strengthen preventive strategies in the labour market must be high priority. This is therefore given particular attention in the next section.

II—THE PREVENTIVE ROLE OF HIGH, AND PREFERABLY FULL, EMPLOYMENT

  21.  The importance of work—paid work—in getting people out of poverty has received recognition, but not the equally great importance of avoiding unemployment and keeping people in paid work as a key measure for preventing poverty. The topic of full employment has at last been receiving closer attention again after its neglect for many years, but there has been a failure to spell out its value in preventing poverty.

  22.  Some may object that it is obvious that this is one of the main reasons for seeking to bring unemployment lower. In very general terms this is probably true. Reducing unemployment and keeping it low has to be a major part of any country's strategy for preventing poverty (Sinfield, 1984). But a more deliberate examination of this is needed and would, I believe, lead to greater attention to the variations in the level of unemployment and prolonged unemployment across different areas and among different groups by age, gender and ethnic grouping.

  23.  An important part of the cause of persistently high levels of poverty in, for example, some parts of Scotland are the higher levels of unemployment and economic inactivity (for example, Webster, 1997 and 2003). There has been a failure to bring about a sustained long-term reduction in the differences in unemployment across the whole of the United Kingdom, despite some success at the regional level. In consequence, the pressures from areas "over-heating" with much lower levels of unemployment have frequently weakened attempts to bring down the higher rates in the hardest-hit areas.

  24.  The failure to build recognition of preventing the loss of work into the strategic framework can be clearly seen in the latest Opportunity for All. Immediately after the passage already quoted from chapter One which acknowledges that "An effective strategy to combat poverty should have a number of elements. It will home in on the causes of poverty, not just its symptoms" (DWP, 2002, para 1:40), the report continues:

"Ensuring that Work that Pays is Possible":

"41.  A good example of this is illustrated by the recent work of Jenkins and Rigg that looked at how people moved in and out of low income. This work highlights some of the events that were most related with movements in and out of low income.

"42. For families with children and those of working age, losing a job is the most significant event related to moving into low income." (DWP, 2002, Chapter 1, paras 41 and 42).

  25.  This is a clear statement of cause which is drawn from research commissioned by the Department of Work and Pensions itself. It is all the more surprising to search in vain for any reference to that issue throughout the 36 pages of the following chapter, Chapter 2, which is devoted to analysing labour market issues in relation to poverty. I could find no mention of any policy response concerned with tackling this "most significant event" of "losing a job". In all, there only appears to be a couple of references to helping people retain work, both in relation to disability.

  26.  By contrast the chapter is full of discussion of how to get people into work, with frequent reference to "removing the barriers to employment" and "lifting people out of poverty". Of course, given the scale of unemployment and economic inactivity the Government inherited, the importance given to this is understandable: it is vital to give close attention to reducing these problems. But it is short-sighted and inefficient to concentrate only on curing people's problems and not even to discuss how to prevent their occurring in the first place.

  27.  This source has been taken as it is probably the fullest, up-to-date account that the Government regularly provides of its labour market strategies in its campaign to end poverty. Examination of the more recent National Plan for 2003-05 submitted to the EU this summer only confirms the picture (UK, 2002).

  28.  To tackle the job losses that threaten to plunge families back into poverty it is important to examine trends in the labour market. Greater labour market flexibility is seen by government as an important part of its goal in maintaining the restructuring of the labour market: promoting flexibility, it is constantly telling its European partners, is the secret to its success in raising employment rates.

  29.  However successful flexibility has been (and this has been challenged), it is important to take account of the undesirable side-effects of any policy. The burden of this greater flexibility is falling unequally in the labour market according to a careful comparison of workforce experience in 1992 and 2000 based on large samples (Taylor, 2002, p 13). While the average length of a job has increased, the same analysis shows that long-lasting jobs are lasting longer and short-term jobs are ending even sooner than they were (I am grateful to Michael White who gave me access to unpublished data).

  30.  There appears to be a clear class differential. Those who are likely to be in the shorter jobs are at greater risk of poverty, all the more so as they are more likely to be in unskilled or semi-skilled work with lower rates of pay.

  31.  There do not appear to be any analyses of poverty by class—probably because it is assumed that poverty and class are highly negatively correlated. Although this may be less so with older people, it is highly likely for parents who still have dependent children in the home and this needs to be built into the policymaking. When this is related to the DWP's own study on the great significance of losing a job for moving into low income, the case for closer policy attention to reducing the loss of employment for those in lower-paying jobs is only underlined.

  32.  This has been recognised to the extent that the DWP commissioned Karen Kellard and her colleagues at Loughborough to carry out a review of other countries' experience (2002). From job seekers to job keepers: job retention, advancement and the role of in-work support programmes was published last year. This is an important start to filling in a gap with valuable evidence on helping those who have got jobs through programmes like the New Deal to keep their jobs. However, policies have yet to be developed and these need to be concerned not only with "after-care" but also with preventing unemployment in the first place.

  33.  People who are vulnerable to problems generally become more vulnerable once they are out of work. Keeping them in work benefits them; and also helps to keep down public service costs which might otherwise continue for many years. Measures to help people with disabilities, for example, to stay in employment would help to protect them from poverty, as Lorna Reith of the Disability Alliance has argued:

"We need to move to a system where people can move from full-time to part-time work as their disability increases, to work reduced hours or undertake lighter duties with a reduction in pay" (quoted in Fletcher, 1998, p 18).

  There is evidence that we are not as good as many other countries in keeping people who develop some disability in paid work. One study found that one in six of these lost their jobs.

  34.  Letting the most vulnerable wait until they become long-term unemployed to qualify for special services or even attention can compound their problems—again a more preventive, pro-active strategy is needed. This is not a new finding. A cross-national OECD study in the late 1960s drew attention to the benefits of just such a strategy for "special groups" in the labour market (Williams, 1967, pp 37-38). This was particularly endorsed at the time in the unpublished country report from the United Kingdom.

III—"PROMOTING WORK AS THE BEST FORM OF WELFARE"

  35.  "Work as the best form of welfare" is the central strategy of DWP and Jobcentre Plus. It is given clear priority in the current Business Plan and is a key Public Service Agreement objective:

Objective II "promote work as the best form of welfare for people of working age, whilst protecting the position of those in greatest need" (JCP, 2003, p 7).

  This is the Government's preferred route out of poverty but it is not at all clear that the Government, and not just Jobcentre Plus, has engaged with the challenges it poses if it is to be successful.

  36.  First of all, the stubbornly high levels of poverty are in part due to the fact that a significant proportion (40%) of households in poverty are still in poverty even though they have at least one person of working age who is already in work. The fact that two out of every five households in poverty already have some earnings raises important questions. From the Households Below Average Income surveys this seems to have received much less attention than it should have done, although it appears to have been picked up well in a recent Cabinet Office paper. Of course some of these working poor are not working long enough, but some at least are working not only average but above average hours. There need to be more analyses of the available data and improvements to the data on low pay.

Making Work Pay

  37.  The national minimum wage has been a very important step forward which many doubted would ever happen. However, David Metcalf, a member of the Low Pay Commission, has acknowledged the inadequacy of its current level. This left many families more dependent on the old Working Families Tax Credit and will continue to do so on the new tax credits. Tax credits are an important boost to low wages, more than Family Credit. But how far is it correct to promote work as "the best form of welfare", when taxpayers including those in poverty (see below) have to give up so much in tax credits to subsidise poor wages? It is crucial to ensure that the extra help given to families through the credits is not being "captured" by employers as a subsidy to low-paying industries, a subsidy to industry that the CBI never mentions in its complaints about the costs imposed by the Government.

  38.  If the theme is "work is the best form of welfare", how far does work in fact promote welfare and keep people out of poverty? This is not only a matter of hours and pay. We need more evidence on the actual quality of the work which people have to do. Why do people lose jobs? In-work support can be very important, as Karen Kellard and her team have shown, but the nature of the work which people are doing is also vital. That question was neglected in the evaluations they were able to find.

  39.  "A more critical view of the jobs that are available is needed. The quality of jobs and experience of work for many people is still very poor, undermining the effectiveness of what is being attempted" (Howarth et al, 2001, p 2).

The Vicious Cycle of Poor Work, Unemployment and Inactivity

  40.  Recent work discussed in the last two annual reports of the European Commission, Employment in Europe, has been making use of the European Community Household Panel surveys up to 1997-98 to explore the significance of quality in work:

"One of the main lessons to emerge . . . is that quality in work goes hand in hand with both productivity and overall employment performance, and that policies for improving the quality of work can also help to increase the number of jobs. Today, however, still up to a quarter of all full-time employed and more than two thirds of those involuntarily in part-time work are in low quality jobs—ie low-paid, low-productivity jobs that do not offer any of the following: job security, access to training, career development opportunities.

"While in many cases, such low quality jobs might ease the access of unemployed people into the labour market, those employed in jobs of relatively low quality face a much higher risk of unemployment and inactivity than those in jobs of higher quality. Indeed, more than half of them remain in jobs of low quality for over two years and up to 25% become either unemployed or inactive—five times as many as in the case of high quality jobs. Once in unemployment, they also face a much lower probability of moving back into employment in general, and into higher quality jobs in particular, implying the risk of "vicious circles" between low quality employment and unemployment" (EC, 2002a, p 81).

  41.  The study relates to the whole of the European Union with little detail published on the individual countries but the qualitative data available suggest that the problems are very likely to be found in the UK. (It is worth noting that the evidence is based on the age-group, 25-54, as this excludes those younger and older, and so those who for one reason or another are more likely to have less stable working careers or to leave the labour force.)

  42.  Those people who are in high-quality work and those who are outside the labour force in one year are very likely to be so one year later. However, there is much more movement among those who are unemployed or in low-quality jobs. The much greater risk of becoming unemployed or inactive among those in the poorer-quality jobs deserves particular attention.

  43.  This is vividly documented in qualitative accounts such as Polly Toynbee's Hard Work. (2003). This describes her own recent experiences doing low paid work in London when she was challenged to live on the national minimum wage for Lent. She demonstrates vividly the poor quality of much employment available to the low-skilled and low-paid today. She is particularly good on the problems of getting jobs in the low-paid sector as, for example, hospital porter and cleaner, call-centre operator and reveals the family-unfriendly impact on work-life balance of such jobs. This actually works against inclusion and fosters exclusion, threatens health and any idea of a career as opposed to a job. In other words, jobs can be harmful—and far from the best form of welfare.

  44.  One argument frequently heard is that low-paying jobs are only "entry-level" and give access to better-paying work so that few people stay on very low earnings for long. The term "entry-level" is deceptive, obscuring the fact that many, and especially women, are locked into these for a very long time.

"Low pay is also fair enough if these jobs can be labeled `entry-level', just a first step on a ladder" (Toynbee, 2003, p 5).

  There is increasing evidence that the chance of moving up in the labour market is less than it was; that people in poor jobs are very likely to be caught up in a cycle of unemployment and low pay in dirty jobs—and often sweated ones. New Earnings Survey data show that women are much more likely than men to be trapped long-term in low-paid, insecure work: so this is a particular problem for many single parents and their children who are vulnerable to both longer and more frequent periods of poverty (Jenkins and Rigg, 2001).

  45.  How much this is being reduced by the introduction of the national minimum wage and similar changes we do not know. If workers are trapped, then the level of the minimum wage and the quality of the working conditions in those jobs becomes even more important.

  46.  Both quantitative and qualitative evidence raise important policy and research issues central to Jobcentre Plus and government strategies more broadly. The solution of unemployment by any job, whatever its qualities, is not supported by the evidence. Taking a job without training opportunities not only keeps a high risk of returning to unemployment but it also "increases the probability of subsequent withdrawal from the labour force by almost a factor of three" (EC, 2002, p 94).

  47.  This problem is compounded by the increasing evidence of another polarisation. At the same time as "the quality and security of jobs at the bottom end of the labour market is getting worse . . . access to workplace training—traditionally a way-out of insecurity for many workers—also appears to be getting more unequal" (Bewick and Somerville, 2003, p 25).

  48.  This is an issue for joined-up policymaking for the Department of Work and Pensions and at least two other central government departments as well as their Northern Irish, Scottish and Welsh counterparts. The Department for Trade and Industry is making the running with work-life balance although that is not listed in its objectives or performance targets. The Department for Education and Skills has the responsibility for training, and safety at work is now back with the Department for the Work and Pensions.

  49.  The vicious cycle described above must be tackled before poverty in the labour market can be successfully eliminated. But at present this appears to be one of the most neglected areas both in government and in social science research. In consequence, there does not appear to be good systematic and regular evidence on the problem to inform policymaking.

IV—THE PREVENTIVE ROLE OF A GOOD SOCIAL SECURITY SYSTEM

  50.  Because of the long neglect of preventive strategies in this area, measures against poverty have been considered within too narrow a perspective. This has meant that the role of the social security system in preventing poverty in the first place, and not simply alleviating it, has received insufficient attention. Indeed in this country the alleviating role of social security was very severely weakened over many years.

  51.  In comparison to many other European countries which make much less use of means-testing to target resources where they are most needed, the UK has been much less successful in preventing poverty (Berghman, 2000). By contrast, most of these countries rely more on universal and contributory social security programmes to keep people out of poverty. (Unfortunately I have not been able to obtain more up-to-date information than these based on data for the mid-1990s; see also Hirsch, 1998 which looks at the impact of both social security and taxation).

  52.  The UK welfare state "may be `efficient' (in limiting benefits only to the lowest income bands) but . . . not `effective' (in delivering enough benefits to allow claimants to escape from poverty" (ISER, 2003, p 3). The reason is simple: basic benefit levels alone have been insufficient to prevent people falling into poverty. It is surprising that this cause of poverty has received so little attention. Other countries with, for example, as high unemployment have not allowed poverty to rise so high because of a much better preventive system of unemployment insurance. Denmark is an outstanding example with higher rates of unemployment but much lower rates of poverty (Gallie and Paugam, 2000). In consequence, such countries do not suffer the long-term costs of poverty which can disadvantage and handicap children as they grow up in poverty prolonged over many years. This also has substantial public spending costs.

  53.  Much can be gained from a closer comparison of child poverty and measures to tackle it within the UK and other European countries. I am frequently told that Cabinet ministers and civil servants alike are much less interested in, and aware of, what has been achieved in other European countries than in English-speaking countries, and in particular the United States. If this is the case, I would urge the Committee to involve experts in the rest of Europe in advising on progress against child poverty in the UK.

How much is enough—and for what?

  54.  Discussion of the adequacy of social security benefits was taken firmly off the policy and research agenda by previous UK Governments. Even before 1979 there was considerable evidence that basic benefit levels did not provide enough to keep people out of poverty. The raising of benefits against prices since then, while earnings increased faster, has meant that the standard of living of people surviving on them has fallen even further behind the average and well below the Government's own measures of poverty.

  55.  "Adequacy can be measured only in terms of questions such as `for what and for how long', `for whom?', and `from whose point of view'" (Veit-Wilson, 1998). Minimum Income Standards (MIS) are already being used by many countries to help provide yardsticks against which benefit levels can be judged, as John Veit-Wilson's comparative study has shown. Although the European Commission recommended their establishment some 10 years ago, the UK Government has still not acted. The introduction of MIS for the UK is long overdue (Veit-Wilson, 2000a and b, and his response to this inquiry).

  56.  The question of "how long?" should be given particular attention because it has particular policy relevance to the UK. Many children, many families and many communities have had to endure a remarkable depth and persistence of poverty over many years. Across the United Kingdom as a whole there has been much higher prolonged poverty than in most OECD member-countries, according to a special OECD study using panel data over the six years, 1991 to 1996 (Denny, 2000). Here 6.1% of people were below the poverty line for all six years, compared with 4.6% in the United States, under 2% in Sweden and Germany and less than 1% in the Netherlands. This high national average means that some groups and some areas have long had particularly serious and intransigent problems which have to be tackled if they are to be lifted fully and permanently out of poverty.

  57.  The long-term harm and costs cannot be overcome in one quick advance. The health impact alone is already evident in, for example, the reports of widening inequalities in mortality rates between rich and poor areas and in the signs of chronic malnutrition among young people admitted to hospital in Glasgow and young homeless in Edinburgh (for example, Shaw et al eds, 1999; Scotsman, 2000; Kirk et al, 1991). Much can be achieved and quickly by increasing the net resources of poor people, but this must be maintained over time. This is one more reason for strengthening the measures which prevent families falling back into poverty. These will be needed for those who have borne the worst impoverishment for many years.

The Distorting Effect of "Active-Over-Passive" Strategies

  58.  Benefits are the least visible part of the current Jobcentre Plus Business Plan. They are rarely mentioned except in the most limited reference to paying the correct amount and cutting down on fraud and error. In line with the published DWP objectives this shows a concern with efficiency in delivering benefits. But there is nothing in the Business Plan on the effectiveness of benefits in doing anything.

  59.  Recognition of the positive, poverty-preventing potential of social security in this country is made more difficult by routine use of the current policy slogans of "active" labour market measures which help people into work and "passive" benefits which encourage dependency.

"Jobcentre Plus aims to accelerate the move from a welfare system that primarily provided passive support to one that provides active support to help people become more independent" (DWP, 2002b, ch 2, p 8).

  60.  Particularly since the OECD Jobs Study of 1994, debates over labour market policies has been conducted with these two adjectives. Every public service system providing social insurance or assistance for people in the labour market which I have examined has had a variety of activating requirements built in from the very beginning, but the OECD version with its emphasis on active-versus-passive has different implications and a different impact.

  61.  What has become the conventional differentiation between "active" and "passive" is mistaken, misleading and politically loaded (Sinfield, 2001 and 1997):

(i)

mistaken because there are many features of a benefits system which can assist and promote activity. A good benefits system may actually help people to avoid or escape from poverty in a variety of ways and it protects any children. A decent level of benefits enables people to cope and to plan more easily when faced with problems which interrupt or limit earnings. There are also elements of labour market policies which can work against renewed employment activity and the best interests of the individual and the wider society. It can, for example, shift people in poverty from unemployment to unhealthy, family-unfriendly work without significantly reducing their poverty. It is difficult to see how their children will benefit from such activation.

(ii)

misleading because the routine use of the terms—especially the inclusion of "active" in the phrase, Active Labour Market Policies, and even more its abbreviation into ALMPs—discourages any systematic consideration of the form and extent of activity achieved. The assumption of action is built in, and any failure is transferred to those who are the object of the policy rather than the policy itself. The unemployed are seen as failing the programmes.

(iii)

politically loaded because of the way that the two terms resonate in public debate. No politician is going to speak in favour of "passive" measures when there are "active" ones available. In consequence, what is classified as "passive" becomes condemned to lower priority with second-class status and funding at best, and to stigmatising dismissal, ever-tightening and humiliating conditions and continual cuts, if not abolition, at worst. Connecting "passive" to benefits fosters a picture of those out of work "resting on benefits", as one Conservative Minister of Employment put it (Hansard, 28 June 1994, column 677). It helps to delegitimise both the benefit and the recipient, making it easier for government to justify further cutbacks, restrictions and controls. This policy closure provides an outstanding example of what Murrary Edelman calls Political Language and the subtitle to his book, "words that succeed and policies that fail" (Edelman, 1977).

  62.  In consequence, successful activity becomes assumed of labour market policies while the provision of benefits is cast in a very different light—without necessarily good evidence to support either viewpoint (drawing on Sinfield, 2001, pp 223-224). While the active/passive discourse can be powerful politically, it needs to be recognised that the distinction does not stand up to scientific analysis and its use in policymaking can lead to unbalanced policies.

  63.  While the rhetoric of active-over-passive has appeared in policy debates across Europe and elsewhere, the extent of policy change has varied greatly, even within quite similar welfare systems. But in many countries and in major international agencies the result of the combination of active and passive discourse in policy discussions has been a neglect of many aspects of benefit policy.

  64.  In the UK there was, and continues to be, a distortion of benefit consideration for people out of work. Consideration of the adequacy of benefits became displaced by a concern with the disincentive affects of income out of work and there was a neglect of many other issues such as "take-up" to ensure that all those who are entitled to receive their benefit.

  65.  In consequence the benefits became very far from passive. That bland word concealed the harm that a poor benefits system could do to potential workers and their families. The ways in which poor, insufficient, benefits could increase the problems of people out of work and any dependants became remarkably neglected, along with the ways in which increased policing and regulation could compound the difficulties of those remaining out of work. In this and other ways the actual operation of benefit systems helped to de-activate those who became trapped in the labour market or even outside it, among the economically inactive (see, for example, research quoted in Sinfield, 2001 or 1997).

  66.  The political climate encouraged the delegitimisation of benefits for those in the labour market, fostering stigmatisation of those already suffering from the pressures of unemployment. This acted to weaken public and political support for measures to tackle unemployment beyond creating greater and sharper "sticks" to get the economic donkey back to work.

  67.  Since 1997 there have been more carrots for "Making Work Pay", but by no means have all the sticks been abandoned. There is much policing, with some blunter sticks perhaps. The incomes of those out of work with younger dependent children has been improved in recent years and will be improved further by the new Child Tax Credit if very high take-up can be achieved. But the importance of lifting the incomes of those without dependent children out of work must not be overlooked. In terms of ending child poverty, this is excellent preventive practice since many of these people may already have family responsibilities as absent parents or will go on to become parents. The value of most "disregards" also need to be maintained but have been allowed to fall considerably.

  68.  The harm done to young people in particular by limited benefits at 16 and 17 was openly and vigorously criticised by current members of the Cabinet when they were in opposition. But no significant change has been made to what the Social Security Advisory Committee called "the disentitling" of young people from 1988 on (Kirk et al, 1991). In fact, some of the benefits and training have not even been increased in line with inflation for many years.

  69.  It is not surprising; therefore, that Social Security has at last been removed as a government department title: the term can hardly be found at all in government documents now. Building on the Conservatives' demolition of much of the social insurance structure, Labour has moved from protection to support and social security has become "hollowed out" (Carmel and Papadopoulos, 2003). This has meant a significant shift in the balance of rights and responsibilities.

  70.  Sadly this fits with the way that standards for take-up are not included among DWP, Jobcentre Plus and Inland Revenue Public Service Agreements and targets. Given that more use is being made of targeting, efficiency in targeting and succeeding in delivering the service to all those targeted becomes crucial. The problems of persisting poverty for those not getting their full benefits or tax credits is much greater than when there is a high level of universal income benefits that protect all. As the Government has said, Every Child Matters. That places a heavy responsibility on the deliverers of benefits and credits to reach all children who are entitled. This makes a strong case for greater use of child benefit, which in these respects is clearly more efficient, reaching more families and costing much less to administer.

The Need to Break "A Vicious Cycle of Disadvantage"

  71.  The need for a good benefits system is all the stronger given that those most liable to unemployment and inactivity are already among the least secure, those in poorly-paid and low status jobs, the very young and the oldest in the labour force, ethnic, racial or religious minorities, people with disabilities and handicaps and generally those with the least skills and living in the most depressed areas. In addition the actual experience of unemployment may trap many in poverty at the bottom of society.

  72.  The long-established link between class and unemployment persists. Those in classes six and seven are twice as likely to have any experience of unemployment and four times more likely to have 12 months or more accumulated unemployment [over the eight years] compared to those in classes one and two (from the British Household Panel Survey using the new NS-SEC classification, ISER, 2002, p 7).

  73.  This evidence on the "accumulation" of unemployment is, I believe, very important. Official statistics pay little attention to the repeated experience of unemployment and its accumulation over time. While there is much on the duration of the current spell of unemployment, there is little on the length of completed spells. These blinkers are all the more important when there is evidence that both accumulation and repetition are socially patterned increasing the risk of poverty and the problems of escaping from it.

  74.  When those who generally earn less than others are not only more vulnerable to unemployment but are also more likely to have more time out of work, they are even less likely to have built up the resources to help them cope with unemployment. The impact on certain communities will be harsher than on others, given the concentration of lower-class families. Evidence suggests that in the UK in the 1980s the promotion of home ownership, combined with new measures for council-house selling, increased this concentration of those with lower resources so that whole communities were more likely to become run down with the much higher rates of unemployment and economic inactivity.

  75.  The increasing use of panel surveys has helped analyses to move beyond the snapshot picture and this has led to more emphasis on structural and institutional factors. Analyses of the ECHPS data from 1994-96 show that:

"There is a vicious cycle of disadvantage, whereby people can be progressively marginalised from the employment structure. But the central factor underlying this process is poverty. Unemployment heightens the risk of people falling into poverty, and poverty in turn makes it more difficult for people to return to work. This process appears to operate in a similar way across the different countries of the EU" (Gallie, Paugam and Jacobs, 2002, p 18, emphasis added).

  76.  The particular failure of the UK to protect those out of work against poverty is brought out very clearly by analyses across countries. They bring out the importance of policy responses to unemployment and the very different degree to which those out of work are protected against poverty by the workings of benefit systems. The lesson to be drawn in terms of the Government's question "What Works?" is that poverty works. It keeps people poor and it keeps them out of work.

  77.  This is not an argument against developing better policies to help people get into decent jobs, but it is a caution against reliance on activation tactics alone. The focus on activity has not only neglected the value of good benefits but it has also led to a downplaying of demand issues and policies directed to stimulating or maintaining demand both generally and specifically. These can complement the so-called "active" labour market policies. The one-sided approach has reinforced a supply-side focus where bringing unemployment down is seen as a matter of getting people to take jobs, and not also a matter of promoting job supply. The unintended consequence may be more and longer unemployment with higher associated costs of poverty.

V—WIDE AND PERSISTING INEQUALITY AS A MAJOR CAUSE PERPETUATING CHILD POVERTY

  78.  Over the last quarter of a century inequality in the UK has widened dramatically, even by the limited official figures. "Income inequality over the past two years has been higher than in any other period covered by our data" (Shephard, 2003, p 4). This is in part an international trend: inequalities are widening in many countries but by no means all. In addition, the unequal growth has been much sharper in the UK than most countries, including the United States. There has been surprisingly little detailed research into the patterns of distribution of income and wealth, and apparently very little new research undertaken or commissioned by the Government given the significance of the problem.

  79.  "Average earnings for the top-half of the workforce have increased by 100% in real terms since 1970" against an increase of only 3% for low-paid workers (Bewick and Somerville, 2003, citing evidence in Toynbee). Many of the workers in the low-pay, poor-quality jobs which Toynbee describes are carrying out essential jobs in the public services but they are doubly hit by declining real wages and limited access to skilled jobs. "Three in four new jobs now require a level three qualification, compared to only one in 34 years ago" (Bewick and Somerville, 2003, p 25).

  80.  In the UK the widening inequality has combined with declining mobility. Comparisons of children born in 1958 with those born in 1970 showed that social mobility had sharply fallen between the two generations:

"The 1970 children are following more certainly in their fathers' footsteps, with less chance of movement either up or down the social or wages scale" (Toynbee, 2003, p 4, citing Blanden et al, 2002).

"A new survey shows that marriage is now rarer between young middle- and working-class adults" (Toynbee, 2003, p 5, citing Ermisch and Francesconi, 2002).

  More recently Jonathan Gershuny has demonstrated the particular widening in inequality for women (ISER, 2003).

  81.  The importance of this "counter-intuitive" evidence has been brought out well by Toynbee, setting her own study in context.

"It should have been as obvious as it was inevitable, yet until research was published recently, it was the wicked secret of the last 20 years. As the income gap between top and bottom widened, so social mobility up (and down) shuddered to a halt. It is as if the escalator has slowed, even jammed. The people at the bottom will never get any nearer the top" (Toynbee, 2003, p 4).

  82.  In consequence these trends are working against the Government's strategies to end child poverty, making it more difficult to keep families above the poverty line when the lowest wages are falling further behind the average and benefits are only keeping up with prices. The commitment to maintain child tax credits against earnings is valuable, but this will entail greater public expenditure just to maintain existing achievements, especially if the national minimum wage is not maintained in the same way.

  83.  By contrast, the Government must act "to raise the earnings floor progressively through up-ratings in the minimum wage" (Darton et al, 2003, p 34). This is not an alternative, but a necessary complement to other measures to raise productivity and improve human capital through training and education, if there is going to be a long-term reduction in poverty.

"Over a sustained period, the knowledge by employers that the minimum wage will be increased annually, at least in proportion to average earnings and where possible faster, will create an incentive to think of ways of improving productivity" (ibid).

  Given the evidence cited earlier about the polarisation in training opportunities, this will be an important step forward. Over time such policies could help to reduce the bill for tax credits at the fullest amount.

  84.  Widening and persistent inequality itself hinders the recognition of greater and deeper poverty. Those who have done well or even just maintained their position are less likely to recognize the persistence of poverty, and probably more likely to attribute it to personal reasons. The problem is increased by the way that factors reinforcing inequality are concealed by accounting treatment of the hidden tax welfare state—see section seven below.

  85.  This very short section makes it clear that this is not an area with which I am very familiar: I have drawn heavily on the evidence quoted in Toynbee's context-setting chapter (2003). I do believe, however, that there are important and urgent issues which need closer policy consideration. These are the ways in which a context of persistent higher inequality and declining mobility makes it significantly more difficult to bring an end to child poverty. I would therefore strongly urge the Select Committee to commission a special analysis of this issue.

VI—THE NEED FOR MORE TRANSPARENT AND CONSISTENT JOINED-UP POLICYMAKING

  86.  References have already been made to the need for more and better joined-up policymaking, particularly in relation to ensuring that the paid work which is being promoted as the best form of welfare and the way out of poverty is of decent quality and pay so that people are not trapped into working poverty. Here I want to pick up other issues that need better connection if policies are going to make a proper impact on poverty.

  87.  The UK Government has committed itself to a Public Service Agreement target to:

"reduce the number of children in low-income thresholds by at least a quarter by 2004, as a contribution towards the broader target of halving child poverty by 2010 and eradicating it by 2020" (JCP, 2003, p 7).

  At present this is set out as a joint target for the Treasury and the Department for Work and Pensions, but its importance needs to be enhanced by establishing this as a target for the whole government in the UK and its constituent parts. Effectively the Prime Minister has done this by his commitment in 1999 to eradicate child poverty (Blair, 1999), but more needs to be done to carry this through into the regular, routine work of all government departments.

  88.  This includes the devolved administrations. The Scottish Executive, for example, is quick to point out to poverty groups that this is not a Scottish target though the work of the Executive in social inclusion—and formerly social justice—will play an important part in helping to achieve these targets.

"Tackling Inequalities by Improving Public Services"

  89.  This strategy is an important part of the latest Opportunities for All, published in September 2002, which relates well to the SEU emphasis on bringing basic services up to a minimum standard (SEU, 2001). If the full force of a broader definition of poverty is taken into account, services, public and private, can make a useful contribution to preventing poverty and to keeping people out of it once they have escaped it.

  90.  Given the importance of labour market participation in the Government's anti-poverty strategy, it is very surprising that the whole 25 pages of chapter 5, "Tackling Inequalities by Improving Public Services", one of the five key chapters, has no mention of DWP or Jobcentre Plus—except by implication in the very brief discussion on tackling discrimination of ethnic and age groups in the labour market. It is quite extraordinary that Jobcentre Plus should be overlooked or neglected in this way, especially in a report for which its parent department is responsible—one more indication of the need to develop joined-up policymaking more systematically.

  91.  Similarly, despite clear recognition of the importance of a good start to employment for young people, the current forms of the career service, Connexions and Careers in Scotland, also receive little attention in this or any other part of the latest Opportunities for All. One might have expected a clearer role and even a public service agreement on getting young people into decent work in line with the DWP Objective 1. This may be an example of departmentalism blocking joined-up policymaking.

Raising Poverty-Awareness in Public and Private Services

  92.  Those working in welfare rights inside and outside government and those in anti-poverty groups and organisations are constantly made aware of the ways in which many people in both public and private bodies who are routinely dealing with people in poverty have little awareness of the problems which poverty brings. In consequence their assistance is much less helpful to people in or vulnerable to poverty than it might be.

  93.  Dundee Anti-Poverty Forum has taken the initiative, working with local government, to provide courses raising poverty-awareness. I would encourage the Committee to seek evidence on the value of these from the local authority and other customers. The importance of raising poverty-awareness in a Department publicly committed to tackling world poverty was recognized by the last Secretary of State for International Development who was concerned that all staff in the Department should have a better understanding of poverty. The guidance notes in Poverty: Bridging the Gap (DFID, 2001) provides a thought-provoking example of what might be provided for work within this country.

VII—"REVERSING PERVERSE EFFECTS"

  94.  In Preventing Social Exclusion the importance of reversing perverse effects of other government policies is highlighted (SEU, 2001, chapter 4). The eradication of child poverty will not be achieved if some parts of the Government pursue policies that undermine the attempt to get more resources to poor children and their families.

  95.  The Child Poverty target is listed under Objective VII in the Treasury's list: "promote a fair and efficient tax and benefit system with incentives to work, save and invest". We now have the perverse situation where the Treasury and the Inland Revenue are playing a central part in the Government's strategy against child poverty through tax credits, but others of their policies are undermining the effectiveness of these measures. The continuation of the unequal tax burden can be seen as a continuing cause of poverty. In their examination of what could be done to tackle health inequalities five years ago Sir Donald Acheson and his colleagues gave particular attention to the harmful effect of the regressive shift in the distribution of taxation in recent years which meant that the net income of poorer groups had been disproportionately reduced (Acheson, 1998). In income tax there have been important changes since then with the Working Families and now the new Tax Credits. In addition, the reduction of VAT on domestic fuel has been helpful.

  96.  The unequal, and unfair, tax burden has, however, increased and this can only undermine what is being achieved through the tax credits. The latest official statistics released in May show the poorest fifth of households paying 8% more of their income in taxes than the richest fifth—42% compared with 34% in 2001-02 (Lakin, 2003, Table 3). The average share of income taken in taxes of all kinds fell to 35% in that year, although it has been closer to 37% over the last quarter of a century. In recent years there has been a marked shift in the burden of taxation with those on lower incomes paying a higher proportion, and the gap has widened once again with the latest figures. This is now the widest gap in the current series with the poorest fifth paying one-fifth more of their income than the richest fifth.

Table 1

ALL UK TAXES AS A PERCENTAGE OF INCOME, 2001-02

	Direct %	Indirect %	All Taxes %
All	20.5	14.9	35.3
Top fifth	23.9	10.4	34.2
Bottom fifth	11.6	30.1	41.7

(adjusted for household size, from Lakin, 2003, Table 3)

  97.  One minor but important qualification which needs to be made to this picture is that the re-distributive effect of the Working Families Tax Credit and the Disabled Person's Tax Credit is not picked up in the official analysis of the tax burden because the gains to low-earners from these are treated totally as benefits. Even if there is no payment but only a reduction of the income tax which would otherwise have been paid, this is treated as a benefit and not as a reduction of taxation. Analyses of subsequent years will be changed to take account of the major shift to Child and Working Tax Credits from this April. However, the distribution of all taxes shown for 2001-02 in the table would only be affected to a relatively small extent by including the gains to low income groups from the WFTC and DPTC in the analysis of the tax burden. This is because of the regressive nature of indirect taxes and council tax which is clearly revealed in the detailed calculations (Lakin, 2003, Table 3).

  98.  The fact that the poorest fifth of households are paying one-fifth more of their income in all taxes than the richest fifth deserves far more attention than it has received. Tax policy is undoing what other social policy measures, also using the tax system, are at last starting to tackle. Through indirect and council taxes those in poverty are effectively having to make a bigger contribution to finance the tax credits which are supposed to be lifting them out of poverty. This deserves close attention from the Committee. I would strongly encourage it to seek an analysis of how many of those prevented from falling into poverty or lifted out of it by tax credits have been brought back into poverty by the increased burden of other taxes reducing their disposable income.

  99.  Despite the clear evidence on this inequity in taxation, there is little challenge to the belief of the well-off that they pay the taxes and others receive the benefits. Most discussion is conducted as if the only data are those in the left-hand column of the table above. In consequence, tax changes are considered as if any rise in taxes will fall more heavily on the better-off who have more political muscle. This only encourages further imbalance in the tax burden.

The Hidden and Upside-down Distribution of the Tax Welfare State

  100.  One major cause of the tax burden which works against the Treasury's Objective VII of "a fair and efficient tax and benefit system" lies in the hidden tax welfare state. There are many ways in which the operation of the tax system affects the distribution of resources in society. In evidence to the Social Security Committee in 1998 I indicated the importance of tax relief's for supporting some groups in society, generally the better-off, at the expense of others, generally the poorer (Sinfield, 1998, and with specific reference to non-state pensions, 2002). The introduction of tax credits together with the abolition of mortgage interest relief and the married couple's allowance have brought major reductions in the promotion of inequality, but the working of the tax system still provides an invisible tax welfare state which reinforces inequality. I will give two examples of measures which makes it very much easier for those on higher incomes to avoid poverty than those on low incomes—and at the expense of those on lower incomes who do not have access to these tax benefits.

  101.  Pensions tax relief: Estimates for 2002-03 show that nearly £14 billion of taxpayers' money was used by the Government through tax relief's to occupational and personal pensions to encourage and help people to make better private provision for their old age (Treasury, 2002, Table 7, after deducting income tax received on pensions paid). Private pension contributions are discounted for tax up to a generous limit, lumpsum payments are taxfree up to a high ceiling and the fund profits are still largely exempt from tax. The value of the relief is equal to about one-eighth of the total revenue raised from income tax.

  102.  There are also other substantial subsidies. In addition to the income tax privileges, OECD includes in its discussion of subsidies to private pensions various National Insurance contribution relief's which come to a substantial additional amount. Its estimates showed that as a proportion of GDP the cost of these tax relief's have been higher than in any other country in their international comparisons (Adema, 2000, and correspondence with the author). Over and above these amounts an extra subsidy of £4.9 billion has appeared this year which the Treasury has included in its listing of tax relief's for the first time (Treasury, 2002, Table 7). This is the cost for the year 2002-03 of not charging National Insurance contributions on payments by employers into private pensions. There are also other major items which deserve to be considered, such as the relief on Capital Gains Tax, for which there do not appear to be even rough estimates for use within government (Sinfield, 2000).

  103.  The Government provides no information on the distributional effect of any of these subsidies. The latest, and only, independent research on the tax subsidy on private pensions contributions alone indicated that as much as one quarter of the tax benefit went to the top fortieth of taxpayers, one half to the top tenth (Agulnik and Le Grand, 1998, p 410). Despite governments' emphasis on the need for better targeting of scarce resources to protect those in greatest need, these tax benefits have long provided most support to the most well-off, less to the average, very little to the lower-paid and nothing at all to the poor. They cost the taxpayer about one-third more than all means-tested assistance for the poorest old people (including income support, housing benefit, council tax benefit and the Social Fund).

  104.  The pension tax benefits can be seen as excellent measures preventing poverty—but especially targeted at those who are at least risk of poverty. This "upside-down" targeting runs totally counter to government policies to tackle poverty (Surrey, 1973, p 37). This Select Committee has already recommended that "the current distribution of tax relief should be reviewed" earlier this year (HC 92-1, para 53). The present inquiry into child poverty and the resources available to tackle it provides further justification for returning to this point which was totally ignored in the Government's reply (DWP, 2003b, para 12).

  105.  Tax relief on private payments on the termination of employment: Another major tax benefit is the exemption from income tax of the first £30,000 of any payments to someone on the termination of employment. In lost revenue this cost £850 million in 2002-03 (Treasury, 2002, table 7, see also note 1 below). This is two-thirds more than the contribution-related element of the Jobseeker's Allowance—the survivor of National Insurance Unemployment Benefit which Beveridge intended as the main protection during unemployment.

  106. While the benefit derived from national insurance contributions is limited to the involuntarily unemployed, there is no such restriction on the costly but un-discussed tax benefit. It may simply provide relief for a redundancy payment but it may also help employers to persuade staff and management to leave for other reasons or to take early retirement. The cost of the public benefit has been cut by half with its replacement by the Jobseeker's Allowance and the reduced duration of the insurance benefit from 12 to six months.

  107.  There is no evidence however on how many receive the tax benefit or how it is distributed. The maximum contribution-based JSA benefit for a single person aged 25 or over of £1,420-90 is taxable and any payment beyond six months is subject to means-testing. By contrast, the maximum tax benefit is £6,600 for a standard rate taxpayer and four-fifths more—£12,000—for a higher rate taxpayer with no requirement that the person remains out of work. It should be added that these private payments are only partly redundancy payments under the state scheme where the maximum payout is £7,800, well below the £30,000 limit to the amounts which gain tax relief.

  108.  In these and many other ways the income tax system protects some people from the risk of poverty far more effectively than the social security system does the majority of the population. This is very different from the effect of refundable tax credits and little realized by either the beneficiaries of these upside-down tax benefits or the rest of the population whose own taxes may be correspondingly higher without any of the advantages.

  109.  In effect, tax benefits such as these are government spending programmes run through the tax system promoting greater social and economic security for some better-off people at the expense of the rest (McDaniel and Surrey, 1985, p 6). These tax benefits are not subject to the same Parliamentary and public scrutiny and assessment as welfare state programmes are.

  110.  The lack of joined-up policymaking in this area is amply demonstrated in the current consultation over the simplification of the taxation of pensions. The Treasury and Inland Revenue paper provides no information at all on the present costs or the upside-down distributive effects of these relief's, let alone any indication of potential costs for changes to either aspect for what is described as a "radical simplification" (Treasury and Inland Revenue, 2002). If these reforms are allowed to go through now, the very expensive and inequality-generating tax privileges will not only be preserved but will become reinforced. The proposed change will not reduce this inequality but appears bound to increase it, as I have already noted to the Select Committee (WPC, HC 92-II, p 362).

  111.  To the best of my knowledge Parliament has never debated these tax reliefs, let alone their distribution and fairness. But by letting the proposed simplification pass into operation, it will be tacitly giving its approval to the continuation of a remarkably inequality-generating measure that works against what the Government says it stands for in committing itself to end child poverty. There needs to be an open discussion of the effectiveness and value for money of measures such as these in a democratic society concerned with fairness. The power of the vested interests here cannot be overlooked: the rumour that Nigel Lawson might tax the pension lump sum led to what he described as "the most astonishing lobbying campaign of my entire political career" (Lawson, 1992, p 369).

  112.  Many other examples of the two worlds of tax benefits and public welfare could be given, but the contrast between this discussion and the careful costing of benefits for people in poverty is particularly sharp. If there are only limited resources available to promote welfare across society and the Government has issued a public commitment to ending child poverty, the case for joined-up policymaking across the tax system is powerful.

  113.  One result of this is that the traditional social policy debate over the alternative virtues and vices of universal or selective, targeted policies in reality conceals a third element of indirectly targeted tax benefits. As now in pensions, targeted policies for those who are unable to compete in the market are accompanied by other policies targeted upwards through the availability of tax relief at the marginal rate to help the better-off compete more easily in the market. And, it should be added, there is little evidence that there are problems with take-up for these tax-targeted measures.

  114.  We need a fully Comprehensive Spending Review which will examine how all government policies, including those targeted through tax relief's, affect the prevention and tackling of poverty, to identify both those measures which are helpful and those which are counter-productive. This "poverty-proofing" is being used to apparently good effect by the Irish Government as a central part of their national anti-poverty strategy (Irish Government, 1997).

VIII—THE NEED FOR A CLEAR, LONG-TERM STRATEGY

  115.  Even if my own analyses of the causes of child poverty and the consequent preventive strategies are not accepted, the need to give more attention to strengthening prevention as part of the long-term strategy for ending poverty cannot be ignored.

  116.  The need to take a long view has been powerfully and valuably reinforced in Tackling disadvantage: A 20-year enterprise, the recent Joseph Rowntree Foundation report (Darton, Hirsch and Strelitz, 2003; see also the accompanying volume). They conclude that "the problem can be largely conquered" and that it is "a tough but affordable mission" (ibid, p 15):

"Over most of the past 20 years, incomes grew much faster for richer groups, but more recently there has been steady, moderate growth across the board. With the same overall rate of economic growth over the next 20 years, skewed to the poor, it could bring them above 60% median, while other groups maintain modest rises . . . Less redistribution will be needed if more people move into work, and if people in low-paying jobs become more productive and better paid" (ibid, p 15, figures 9-11).

  117.  An independent Commission is needed to review policies, progress and problems which could be linked to the Offices of the Commissioner for Children in Wales, Northern Ireland and Scotland and the proposed English one with a responsibility for the "economic well-being" of children. The Commission should issue an annual report, commenting on developments. The current government annual reports, Opportunities for All from London and Social Justice from Edinburgh, are valuable developments. However, they present the Government's picture of changes and do not open issues up for discussion, although the inclusion of external comments in the Scottish one is a very welcome step. The Commission would also help to distance the issue of poverty and progress in tackling it from the politicking and spinning in recent decades which have frequently blocked more considered debate and alienated many people—including, I would suspect, many of those in poverty.

Note:

  1.  In the first three years of published data, the cost appeared to have risen by 60% to £1.6 billion (IR, 1995, Table 1.6 and earlier years)—some £300 million more than public spending on what was intended to be the main benefit for people out of work, then National Insurance unemployment benefit. It now appears that earlier years have been revised upwards by 70% to £1.7 billion. One can only guess at the outcry that there would be if a social security programme were found to have been underestimated by 70% in each of two successive years.

References

Acheson, Sir Donald et al. (1998)Independent Inquiry into Inequalities in Health, London, The Stationery Office.

Adema, W. (2000) 'Revisiting real social spending across countries: a brief note',OECD Economic Studies, No. 30, pp. 191-197.

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Adrian Sinfield

17 September 2003

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Prepared 22 January 2004