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The Budget protected many of the loopholes and benefits that the wealthiest people have had entrenched under the Government and did precious little for those on the lowest incomes. I want to refer to four issues: child poverty, which has been mentioned already, fuel poverty, welfare to work and the overall effect that the
Budget has on hard-pressed families on low incomes. Those are the issues that matter most in discussing the Budget today.
Of course, the background to the Budget is, as has been said, that ordinary families on low and middle incomes are under a great deal of financial pressure: rising energy bills, rising food costs, rising council tax and rising housing costs. Of course, that relates very directly to the experience of poverty that the Secretary of State referred to in the one or two brief remarks that he addressed to his proposals.
Let us look at the experience of poverty under this Government. Of course, the Secretary of State is right: the Government inherited a truly appalling situation from the Conservative party, and it would be wrong not to recognise the fact that some progress has been made on reducing poverty.
Greg Clark: Does the hon. Gentleman agree that the number of people in severe poverty has increased compared with 1997?
Danny Alexander: I certainly agree, and I was about to add a few caveats of my own, because although some progress has been made it is worth pointing out that in the last year for which figures are available child poverty went up, both according to figures in which housing costs are taken into account, and according to those in which they are not. We may get some new figures in the next few weeks. Figures for last year show that inequality of wealth is rising. The Gini co-efficient—the recognised measure of inequality—is rising, and is higher than it was in 1997 when the Government came to power. Inequality of income is not narrowing as one might expect it to and, of course, the point about extreme poverty that the hon. Member for Tunbridge Wells (Greg Clark) made is absolutely right, too.
It is absurd that the poorest taxpayers pay a greater share of their income as tax than the richest taxpayers. Even after the changes made to capital gains tax—in fact, especially after those changes—it is still the case that a hedge fund manager paying capital gains tax at 18 per cent. is paying a lower rate of tax than the person who cleans our offices, who may be paying income tax at 20 per cent. That situation could not in any way be characterised as fair, yet fairness is one of the concepts that the Government talk about. That problem will get worse at the beginning of next month, when the 10p rate is abolished—or doubled, as I prefer to put it. It will mean that 5.3 million people on low incomes, generally earning less than £18,500 a year and not in receipt of tax credits, will pay more tax. Those same people are paying more for their energy, their council tax, their food and their fuel. They will now pay more income tax, too.
Let me deal now with the issue of child poverty, because it is critically important. I agree with the Secretary of State that it is not a subject for the sort of synthetic anger that we heard from at least some Conservative Members. The shadow Chancellor said little about what he would like to be done to take us further towards meeting the 2010 and 2020 child poverty targets. It was interesting to hear what the Secretary of State had to
say in answer to the several interventions that he took on child poverty. In a document published alongside the Budget yesterday, entitled “Ending child poverty: everybody’s business”—and of course it is everybody’s business; that title is quite right—there are continual references to the 2020 target. It says that there will be working groups, new policy ideas and some money spent on piloting new proposals, but that is all aimed at allowing us to reach the 2020 target. However, the Secretary of State said strongly that he remains committed to the 2010 target.
Barbara Keeley: There are initiatives going on at the moment. The hon. Gentleman will probably agree that getting lone parents back into work is important, so there are issues such as child care to consider. There are some very important pilots taking place across London. The Department for Work and Pensions study by Lisa Harker pointed out that child care costs are key, particularly in London. It is not at all true to say that work is not going on to meet the 2010 target; it is.
Danny Alexander: The hon. Lady makes an important point about London and lone parents, and I want to come back to that because she is right to say that there are specific issues affecting London that have to be addressed if the target is to be met. I was making a broader point. It is not that no progress has been made; the point is that, if we look at the Budget figures and the amount of extra resources being spent on the issue, we see that the Budget will be remembered as the time when the Government abandoned their target of halving child poverty by 2010.
I wish to make it clear that we Liberal Democrats are committed to the target of abolishing child poverty by 2020, and to halving it by 2010, but according to figures from the Institute for Fiscal Studies, the Government are expected to miss their 2010 target by some 450,000 children. Those are children who would no longer be in poverty if the target were met, but who are still in poverty because of the slow progress that has been made.
Bob Russell (Colchester) (LD): Does my hon. Friend agree that the most fundamental way of dealing with child poverty is for families to have decent housing? Does he share my dismay that the housing crisis in the affordable rented sector is worse than it was 10 years ago? Some 500,000 council houses were built in the first 10 years of Conservative government, but the Labour Government have built only 5,000 in 10 years.
Danny Alexander: I am grateful for that intervention, and I agree with the sentiment that my hon. Friend expresses. I pay tribute to the doughty campaigning that he has done on the issue in his time in Parliament. The point I was trying to make is that this is the Budget in which the Government effectively abandoned their 2010 target of halving child poverty.
It is worth reminding ourselves of a few of the facts about child poverty. In 2005-06, child poverty figures were still half a million higher than the target that had been set for 2004-05: there were 2.8 million children living in child poverty, if housing costs are not taken into consideration, and 3.8 million if they are. [ Interruption.]
That is not a matter for derision or laughter from Members; it is a matter for genuine, serious debate and consideration. I think that anger would be a better response. Between 2004-05 and 2005-06, child poverty actually increased by 100,000, if housing costs are not taken into consideration, and by 200,000 if they are. I hope very much that the figures published in the next few weeks will show that the downward trend has continued, but I am not convinced that they will; we shall see.
As the hon. Member for Worsley (Barbara Keeley) rightly pointed out, the area with the highest concentration of children in poverty, after housing costs have been taken into consideration, is inner London, where 51 per cent. of all children are poor. The Secretary of State could have mentioned, but did not, that the report that he published sets out some London-specific measures that I welcome, by and large, as an attempt to get to grips with specific problems in London.
It is worth pointing out that there are particular problems of poverty among families with large numbers of children. Some 50 per cent. of children in families with four or more children are poor, compared with only 23 per cent. in one-child families. Half the children in poverty are in families where there is work, so the problem is not confined to workless households. That is why it is not enough to get people into work; it has to be work that pays sufficiently well to lift the family out of poverty.
It is scandalous that 1.5 million children in poverty belong to households that pay full council tax, and are not in receipt of any benefits to reduce its cost. Of course, those children would be particular beneficiaries if a local income tax were to be introduced. [Interruption.] They would. The hon. Member for Bradford, North (Mr. Rooney) may laugh, but it is a serious point. If one wants to address the issue of income at the lowest level, it should be recognised that council tax is a particular cost burden on the poorest families. In the latest international child poverty figures from EUROSTAT, which uses the 60 per cent. median and not the lower figure to which the hon. Member for Tunbridge Wells referred, the United Kingdom is ranked 21st in a league table of 30 countries, equal with Romania and Bulgaria on child poverty.
The debate about child poverty must not be about income alone, and the Chancellor did at least hint at that in his Budget speech yesterday. We have to consider future opportunities for children, too. There is much less social mobility in this country than there was in the 1950s and ’60s. The Sutton Trust report shows a difference between the 1958 cohort and the 1970 cohort, but there is no evidence that things got better for later cohorts. The right hon. Member for Darlington (Mr. Milburn) talks eloquently on the subject; he believes that today someone from his background would not end up in the Cabinet. That shows the extent to which poverty has become a matter of inheritance; it is passed on almost automatically from one generation to the next. We must talk not only about income levels, but about how we can break that intergenerational cycle.
It is appalling to note that rich children are catching up with poorer peers in developmental tests between the ages of three and five, and will often have overtaken them by the age of six or seven. In other words, a bright,
poor child will be overtaken by a rich but less bright child at the age of five or six. The impact of poverty can be seen at that very early age. We should ask—the Secretary of State should address the issue—what more can be done to help us to meet the target.
One measure in the Budget that I do welcome is the increase in the child element of the child tax credit. It is a good way to help families with multiple children, because it is a child element and not a first-child element. The Government are relying heavily on the tax credit system as a means of tackling child poverty, but the system has many flaws. There are overpayments, and the financial rollercoaster that far too many families experience when overpayments are made and then taken away; plunges people into a worse financial situation than the one they started in. There are also low take-up levels for some tax credits. The working tax credit, which is paid to people who are in work, is not being uprated. To make a more general point about poverty, take-up among people without children is appalling, at roughly one in five. The take-up of child tax credit is not good enough, either; it is around 80 per cent., at the lowest estimate. Tax credits are paid to people very high up the income scale. The child element of child tax credit is paid to people earning up to £58,000 a year, so it can be argued that it is poorly targeted.
It would surely be better, as we have proposed, to reform the way that tax credits work, to stop paying tax credit money to people with above-median income, and to use that money instead to concentrate the effort, first, on people at the lower end of the income spectrum and, secondly, to increase substantially one of the benefits about which the Government spoke yesterday: child benefit. At least we know that every family gets that money. Its take-up is almost universal—or as near as makes no difference—whereas there are problems of take-up and overpayment associated with tax credits.
I would argue strongly for a much more substantial increase in child benefit. The Chancellor yesterday tried to make the measures on child benefit sound great, but it is worth noting that child benefit was increased by today’s retail prices index of 4.1 per cent. this April and next April. It will be worth £19.61 anyway, so raising it to £20 is not really a huge step forward and is hardly a ground-breaking move. I am sure the extra 39p per week is welcome, but it is not the shift of resources that the Chancellor made it sound like.
Increasing child benefit for the first child by, say, £5, as we have proposed, would lift a further 150,000 children out of poverty and could be paid for by scaling back tax credits paid to the rich. Getting families over the arbitrary income line is not enough. We also need to invest in future opportunities. We have proposed a pupil premium to target additional funding to schools for each disadvantaged child those schools take. I was interested to hear from the shadow Chancellor—I am sure the figures that he gave are correct—that there was a reduction in education spending hidden in the Budget. If that is the case, it is going in entirely the wrong direction if the intention is to provide additional resources for our poorest children.
The most cynical element in yesterday’s Budget was the last point that the Chancellor made about the winter fuel payment. We have argued strongly that much more needs to be done about fuel poverty. But the idea seems to be that a one-off payment to deal
with an issue that has been going on for many years and will continue for many years is the right way to tackle it. That is what happened when a similar one-off measure was tried with council tax, as some hon. Members will remember, when an extra £200 payment was provided on a one-off— [Interruption . ] Yes, during an election year. Of course, there is a school of thought that suggests that an election may be in the offing, so a one-off fuel payment in the winter to come might be a nice bounce into an election. I do not suggest that the Minister would be so cynical, but the Chancellor may well be.
Even with the £50 increase that has been proposed, the winter fuel payment will still pay only 34 per cent. of a pensioner’s winter fuel bill, compared to the 50 per cent. of a pensioner’s winter fuel bill that it paid in 2003 when it was introduced. On fuel poverty, the measures are too little, too late. Four and a half million people, and rising, still live in fuel poverty, and the Government’s 2010 fuel poverty target has effectively been abandoned by Ministers—unless a Minister is about to pop up and tell us that that is another target that the Government stand by. It seems that there is no prospect whatever of that target being met.
I find it incomprehensible that the Government have not had the courage to claw back some of the huge profits that the energy companies have made from the free permits handed out to them in the emissions trading scheme. Limiting the measures in the Budget to pre-payment meters does not go far enough. Even on pre-payment meters, those are voluntary measures. Surely we are far beyond that. The idea that if “by next winter”, to use the phrase in the Budget document, the companies have not taken appropriate steps, the Government will consider statutory action is, again, far too little, far too late. That potentially condemns many very poor customers to paying, in the case of npower and E.ON, for example, more than £300 more than their equivalents who do not have a pre-payment meter. Surely it is time to compel all energy companies to introduce real, fair social tariffs for all vulnerable people, not just those on pre-payment meters.
The Secretary of State did a little more today to explain the Government’s plans, as announced in the Budget, on welfare to work; and the Budget contained key measures relating to lone parents and incapacity benefit. Of course, more help is needed to get lone parents into work. As the hon. Member for Worsley said, that can make a significant contribution to reducing child poverty. However, many lone parents would laugh out loud at the phrase in the child poverty paper,
“with accessible childcare...in place”.
That statement, which assumes that there is now sufficient child care in all parts of the country for all lone parents, and that it is now appropriate to move on and reduce the age of the youngest child at which lone parents can be forced to work, seems complacent in the extreme. Child care is still a huge problem and Government policy is not meeting the challenge in relation to two, three or four-year-olds.
We agree with reducing the age of the youngest child to 12, which effectively equates to the time at which the child would start secondary school. That seems right. I
would like further reductions to be based on evidence about how that measure has worked, rather than being automatically reduced, and there should be much greater certainty in relation to child care; otherwise, lone parents with a child aged 7 for whom there is not appropriate child care will be put in an extremely difficult position and threatened with loss of benefits.
I question the Secretary of State’s remarks about lone parents and the effect on child poverty. I note that in the same child poverty report, the Government estimate that 100,000 more lone parents will be in work as a result of those age-related measures, but only 70,000 children will be taken out of poverty. Even assuming that each lone parent has one child, which is not a reasonable assumption—many of them will have more than one child—of those more than 100,000 children whose parents will be back in work, at least 30,000 and probably 70,000, will still be in poverty, on the Government’s own assumptions and according to the Government’s own projections.
Surely there is something wrong when the Government are saying, “We want you to get back into work to lift your children out of poverty,” yet the Government’s own figures assume that many of the children of the lone parents who have been pushed into work will still be living in poverty.
Mr. Terry Rooney (Bradford, North) (Lab): Does the hon. Gentleman accept that there can be a vast increase in household income through moving into work without necessarily getting above the poverty line?
Danny Alexander: Of course I accept that. I certainly accept that income can be increased by getting into work, but we are discussing the issue in the context of meeting the 2010 and 2020 child poverty targets. The information that I quoted is from the document “Ending child poverty”, yet the Government admit that some of the measures that they intend to take will not end the poverty that some children experience. It is deeply misleading, at the very least, to set the point that the hon. Gentleman made in the context of trying to end child poverty.
I turn now to incapacity benefit. During the passage of the Welfare Reform Bill, my colleagues and I supported the idea of extending the new assessment and support system to existing claimants, once it could be proved that the support network that those people needed was in place. But—and this is a big but—the extension to existing claimants, the 2.6 million people currently on benefit, must be about getting people into work. The emphasis must be on the work, not on the reduction of the benefit rolls. The media focus—the Minister may well be more humane in private—is on toughness, not on support to get people into work.
On pathways to work, good progress has been made for some groups, but concerns remain about people whose main reason for being on benefit is their mental health. They are the largest group among new claimants for incapacity benefit. Progress on getting people with mental health problems back into work is far too slow. In terms of making therapies more widely available, the Government’s steps towards meeting the objectives set down in an excellent report by Lord Layard are way behind. The Department for Work and Pensions and the NHS are nowhere near joined-up enough to implement that work-related agenda.
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