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Westminster Hall

Tuesday 4 July 2006

[Mr. Eric Martlew in the Chair]

Child Poverty

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Heppell.]

9.30 am

Stephen Hesford (Wirral, West) (Lab): I am very honoured and in a way flattered by this opportunity; it is the first time I have participated in a Westminster Hall debate in the lead role—even if it is in Committee Room 10. A small but perfectly formed group of interested colleagues are taking part, and I welcome them to what I think is an important debate.

Why have I chosen this debate for my first time out in this Chamber? In years gone by, before I was elected, I was a regional organiser for the Child Poverty Action Group in the north-west, and the issue is one of long-standing interest to me, and to my party. Eradicating child poverty by 2020 is simply the civilised thing to do. The classic, if not hackneyed, answer to the question of how a society feels about itself is about how it looks after its young and old, and child poverty fits fairly and squarely into that.

The Government have already highlighted the issue, and I shall return to that point. It is topical, because other bodies have renewed their interest in it. For example, there is a coalition of outside interests on the subject, and I am sure that hon. Members will be familiar with many of the things that I am about to set out. The Fabian Commission on life chances and child poverty recently produced its report “Narrowing the Gap”; a similar research report is due to be published this month by the Joseph Rowntree Foundation; and the Institute for Public Policy Research and the Institute for Fiscal Studies have also commented recently on this important topic.

I shall not do a textual analysis of what those bodies have said, but an important point from the Fabian Commission serves as another reason for holding this debate now: among some worrying findings was the public’s general reaction to the idea of poverty eradication and, specifically, child poverty eradication. The commission found, in conjunction with MORI, that the idea was not culturally understood and that there was not automatic acceptance of such issues among the broad public. That is a worry if there is to be a coalition to fight child poverty by 2020. As is almost self-evident, with such a cross-cutting agenda, it is vital to take the public with us; but MORI found that the public did not understand why we are taking the action that we are taking.

As worrying as low awareness was the denial of the existence of income poverty. I suppose that it is easy for people to look at themselves and their families, without realising what happens elsewhere. The report noted comments, such as that income poverty for children was due to bad parenting. There was a general lack of empathy. If we are to make progress towards 2020,
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general awareness must be raised and the public brought to accept that the goal is a good thing in itself. There are good, self-interested reasons for seeing things that way. It is good for the individual, raises educational attainment and keeps people out of trouble and away from drugs. It also gives a future back to what might otherwise be disorganised or dysfunctional families.

What do we mean when we talk about the eradication of child poverty? I shall principally talk about income poverty; there are other forms of deprivation, but that is the key to unlock the conundrum. How we deal with income poverty is the kernel of the debate. What is income poverty? According to the classic definition, it means a child living in a household with income below 60 per cent. of the median household income, either before or after taking housing cost into account. I shall not detain hon. Members with the question of which it should be: if pressed I should probably err on the side of “before”, but whatever definition one takes, the general picture is broadly the same.

Miss Anne McIntosh (Vale of York) (Con): I do not want to pre-empt the hon. Gentleman, but does not the question of whether the definition is arrived at before or after considering housing costs go to the heart of child poverty and the Government’s record? Housing costs should be included in the definition of poverty, which would probably show that more children are living in poverty than were before 1997, because housing costs have increased so dramatically.

Stephen Hesford: I do not accept what the hon. Lady says. If we want to bandy figures, I can do so but I do not think that the figures show what she claims. It would be unhelpful to go down that road, which is a way of avoiding the issue.

The Child Poverty Action Group recently calculated that the poverty line stood at £268 per week—an annual income of just under £14,000 for a couple with two children aged 5 and 11. However, for a lone parent in a similar situation it calculated that poverty-line income would be just under £10,000. Lone parents are, for that very reason, one of the target groups that I expect my hon. Friend the Minister to mention. Their access to income is different from that of a couple.

What is being done? In 1999, the Government, through the Prime Minister, gave a three-fold commitment. The first part was to reduce child poverty by a quarter by 2005, the second to reduce it by half by 2010, and the third to eradicate child poverty by 2020; hence the title of the debate. In some ways the first commitment is historical, because we have passed that point. We are approaching the 2010 target, but if we miss it, 2020 will be very difficult.

Sadly, despite a range of initiatives, the 2005 target was in fact missed by 200,000 children. Those children would not have remained in poverty had that target been hit. Between 2003-04 and 2004-05, about 100,000 children were taken out of relative poverty. If we do some simple maths, we see that, at a rate of 100,000 a year for the remaining years, we will miss the 2020 target. We have to do better than the 100,000 that we achieved between 2003-04 and 2004-05.

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Which measures were relevant to, and current at the time of, the first target in 2005? The working families tax credit was introduced in 2001 and has since become the working tax credit and the child tax credit. One significant reason why the Government did as well as they did is that child benefit for the first child has risen by 25 per cent. in real terms since 1997. That offers major assistance to single parents and, classically, the mother in a couple.

By October 2006, the poorest fifth—in real terms—of families with children will be an average of £3,400 a year better off, and that is significant. As I said, relative poverty is defined as having an income of below 60 per cent. of median income. That poverty line resides within the poorest 20 per cent., so they are the key target for action on child poverty.

The proportion of children living in workless households has come down from nearly 20 per cent. in 1997 to just under 16 per cent. in 2005. Worklessness was, and is, a key to explaining why families live in relative poverty.

Where does that leave us? Mike Brewer of the Institute for Fiscal Studies said that although the Government would be disappointed at missing their targets, they must be congratulated on taking on the issue and on removing about 800,000 children from poverty by the dates that I mentioned. Those sentiments have been echoed by Kate Green, the chief executive of the Child Poverty Action Group, and one can well understand the CPAG’s reaction.

Perhaps I can just give a little plug for the CPAG, an organisation with which I grew up. It was set up under the Harold Wilson Government in 1965, and I understand, although I am slightly too young quite to remember this, that that was quite a shock to them, because poverty eradication was one of their key polices. They were quite shocked that such an organisation would form itself and was thought necessary.

The CPAG was formed because the system was not reaching a group of people in society, and, in some ways, we are still talking about that same group. Sadly, we may now be talking not only about the same group—the poorest 20 cent. and certainly the poorest 10 per cent.—but about the relatives of those then in it, because, unfortunately, the problem can be generational. Poverty of aspiration, poverty of opportunity and poverty of housing can all be passed down, literally, from father to son and from mother to daughter. As well as increasing income, we need to break that cycle of deprivation.

What is the problem that remains? Which is the hardest group to tackle? The target group is made up of four broad subgroups, and I have touched on some of them. One, for the reasons that I have indicated, is lone parents. Commonly, nine out of 10 lone parents will be female.

Another group is large families. Income poverty will hit large families, and, rather paradoxically, one can have in-work poverty. There must therefore be a way of helping not just the first and second children, but the third, fourth and fifth.

Another group is families with a disabled parent, which will also suffer income poverty because of
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unemployment. Unfortunately, not enough of our disabled constituents have the opportunity to work if they want to. The Minister may say more about that in due course; indeed, I believe that things may be said, or may have been said, about that today. That is an important part of the matrix, but it has been missing so far.

London also has its own problems, simply because of the cost of living. Although your constituency and mine, Mr. Martlew, are not a million miles from London, they might as well be culturally. Many people might say that that is a good thing—many of my constituents certainly would—because life pressures are different in London.

Let me just try to unpick those four areas a little further. On paid work, 75 per cent. of children in households with no adult in work are income poor. Some 12 per cent. of children are in households with all adults in employment. A key measure would be to get one parent and, if possible, both parents working.

Ethnicity, which I meant to mention before, is another area of concern. The CPAG has calculated that there are different risks of child poverty for different ethnic groups, and that 57 per cent. of Pakistani and Bangladeshi children, 44 per cent. of Chinese children or children from other ethnic groups, and 43 per cent. of black or black British children are categorised as being in poor families in the way that I have described. I have not resolved this issue in my own mind, but there is a suggestion that the Gini coefficient—the relationship between those at the bottom of the heap and those at the top—might be significant. I do not know whether it is, but others say that it might be. Despite the fact that 800,000 children have been raised out of poverty, the poorest tenth of the population still receives only 1.7 per cent. of the income received by the population as a whole, whilst the richest nearly 30 per cent. receives 17 times as much. CPAG calculates that despite the efforts that have been made, the Gini coefficient of proportional inequality, whether it be absolute or relative inequality, remains unchanged. Some would argue—I am not arguing this point because I have not decided whether it is a factor—that that relativity needs to be adjusted if we are going to crack this particular nut.

I come to the crux of the debate: where things are going. Clearly, child trust funds will bring benefits down the line and will be part of the mix towards 2020, although that policy is not universally adopted or respected across the Floors of the two Houses. That is a matter for debate.

Tax credits have been criticised, but I reject those criticisms, not because it is a party political issue, but because of my constituency experience. Having been a constituency MP for nearly 10 years, I have come to trust the evidence I get from people who come through my surgery door, or who telephone, fax or e-mail me, to show me where things are going. That has worked for many other issues, and I have absolutely no doubt that it is as true, or at least as likely to be true, for this issue as for any other.

Nearly 7,000 families in my constituency benefit from child tax credit and working tax credit. In the time that tax credits have been in operation—is it about two years?

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Mr. David Laws (Yeovil) (LD): Just over three.

Stephen Hesford: I am grateful. In those three years, I have received about 50 complaints. While any complaint is regrettable, and I urge the Government to redouble their efforts to make the system work as we all want it to, that is 50 complaints out of 7,000.

Mr. Laws: Does the hon. Gentleman acknowledge that his experience may not be typical? In my constituency in the past two years, I guess that I have seen somewhere between 300 and 400 people with serious problems with tax credits. If one took the number of overpayments and spread them across constituencies, there would be many thousands in every constituency in the country.

Stephen Hesford: I do not doubt for one second that the hon. Gentleman is absolutely accurate about his constituency. I accept that and respect it, but I trust my own figures and what I have found. I cannot really comment on other people’s experiences. I would find it extraordinary if my constituency were blessed on this issue for some reason. You will know from your postbag, Mr. Martlew, that when you pick up these things, it is very unusual not to pick up what your colleagues are picking up to some extent. Therefore, I am quite prepared to use my constituency work as a basis for assessing where tax credits are going.

When the new Secretary of State came into office, virtually the first thing that he said, which I very much welcomed, was that his No. 1 priority was to tackle child poverty. Given that, technically, the target was missed—that is admitted, and I have tried to deal with it in context—I suppose that he was saying that the effort was valiant, welcome and civilised, but the target was ultimately missed, so how do we get back on track? He said that the Government would redouble and renew their efforts, which I very much encourage. From my perspective, it was absolutely the right thing for the Department for Work and Pensions to focus on. In such a Department, many issues could be focused on and be the subject of debate. I am sure that we all have issues in mind that are dealt with by that Department and that we could debate, but they are not the subject of today’s debate.

The Government have taken things on the chin by acknowledging that we have the worst rate of child poverty in Europe. That is not a pretty thing to say, but they acknowledge it. Over the years, Governments have denied, fudged and not dealt with the idea that income poverty is the issue. I began by saying that, and I maintain that position. The question is how we continue the process and make the system better so that it can deal with income poverty. In some ways, I have two different targets to consider: the shorter-term target of 2010 and that which is the subject of the debate—the 2020 target.

The Government need courage and ability to take this matter forward, and I know that that is their intention. My hon. Friend the Minister recently announced the welcome appointment of a so-called child poverty tsar. No doubt he can tell us more about that and about how the office will work from a cross-cutting position, with the appointee having
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feelers across a range of Departments. I wish it success because this is a cross-cutting issue.

Let us consider income poverty, which moves us from the general and cross-cutting to the specific. The Institute for Public Policy Research calculated that to get back on track to meet the 2010-11 targets the Government would have to inject a further £2 billion into the tax and benefits system, which is a frightening figure if it is at all true. Whether or not the figure is cast iron is perhaps not the issue; the issue is that there is an income gap for the poorest 20 per cent. If that gap is not addressed, no matter what kind of exhortation and other measures are put in place—even though they will be good things in themselves—the likelihood is that the 2010-11 target will not be hit and the eradication of child poverty by 2020 will not be achieved, which cannot be contemplated and should not be countenanced. That is not necessarily agreed on all sides, however, and there may be more to be said on the matter.

On the appointment of Lisa Harker, who has a relevant background in that she was the chair of the Daycare Trust, I wish her well. Will the Minister tell us more about what she might be expected to do and will do? That is important in terms of additionality: what more will we do that we did not do before 2005? What extra is being put into the pot?

I want to pick up on a few things that others have said. The “Narrowing the Gap” report by the Fabian Commission on Life Chances and Child Poverty made a number of recommendations. I shall not go through them all but shall pick up on some. They may be of exhortatory significance in putting a bit of steel into the resolve that I know the Minister has to ensure that these targets and others are met. The report says that the issue must be identified as a key “central national priority”. That returns to my opening comments and the MORI review in respect of the public’s understanding. Eradicating child poverty should be a key national priority, and I hope that there will be cross-party support to make it a central issue, target or whatever one wants to call it.

The report suggests that

should be instituted. So, there we are; I ask the Minister to get on with it.

While much has been done on maternity support, not least with maternity leave and increasing maternity pay, disadvantage is still inflicted on families, particularly the poorest, when pregnancy comes around. We have talked about trying to have two parents earning, and that is key when more children are involved. Rather like illness or unemployment, that kind of interruption can be the difference; it can knock somebody out of the cycle or knock them back down to where they came from. There should be redoubled effort on maternity support.

A key recommendation, which I understand does not fall outside the Government’s direction of travel, is a system of what the report terms “universal high quality childcare”. I know that child care places have been increased by about 100,000 over the past two or three years, but such provision needs to be bedded down everywhere. I do not know but guess that it is not universal. Although it may be good in certain areas,
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there will still be pockets of hard-to-reach families, so universal high-quality child care is key and must be available.

The report suggests that

I have already talked about the 25 per cent. real terms increase in child benefit. That might be part of what the IPPR calls the £2 billion injection gap. Among other things, the Fabians would want the question of whether those increases can be in line with earnings to be considered. The minimum wage also needs to be maintained and supported. Finally, the Fabians suggest setting

That comes back to the idea of the Gini coefficient. As I said, I am undecided on that, although I see the argument behind the report’s suggestion.

The final outside body that I shall cite for today’s purposes is the Child Poverty Action Group. It suggests a 10-point plan, but I shall not go through all of it. I cannot apologise for this and am not trying to make things party political as I am just reading from the list, but at the top it states:

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