Examination of Witnesses (Questions 380
- 399)
TUESDAY 6 MARCH 2007
MS SUE
MIDDLETON AND
MR GUY
PALMER
Q380 Mr McGovern:
I thought you said earlier that Scotland was ahead of the game
if you took London out of the equation?
Mr Palmer: What I said was that
Great Britain as a whole missed the 2005 target, but if you look
at Great Britain excluding London, broadly it achieved the 2005
target, and Scotland broadly achieved the 2005 target. In other
words, London is doing something different from the rest of the
country, rather than Scotland doing something different from the
rest of the country.
Q381 Mr McGovern:
I see. Again, from your submission, it seems to suggest that there
is much to be positive about in Scotland—and maybe we have
covered this—but not so much in the rest of the UK. I do
not know if that is specific to London or if it is the UK excluding
Scotland, but is that a fairly accurate assessment?
Mr Palmer: I would argue the issues
are reasonably similar. One of the concerns that we talk a lot
about in Scotland is trends for working-age people without children,
which have been getting worse. If you like, the trends have been
pretty good for pensioners and for children and much more adverse
for those of working age without children. That raises a whole
bunch of interesting issues, because, quite largely, that is to
do with the way the benefits system works and the fact that benefits
have been frozen for those of working age without children for
quite some time now.
Q382 Mr Wallace:
Just going back to the single parent issue, as you said, the single
parents predominantly were closer to the poverty line and that
the system favoured them when they were in work, the Working Tax
Credit, helped lift them out of it. How much of that could be
put down to the overall trend of improving the poverty statistics
that you have talked about, of hitting the target? How much of
the number of people lifted out of poverty belongs to that single
parent group, do you see what I mean, and how much does that contribute?
Mr Palmer: Can I answer a slightly
different question and then try to answer that question. The main
reason there has been a reduction in child poverty in Scotland
is because the risks for both working and workless households
have fallen, rather than because households have moved from workless
to working. Therefore, the tax credits have had a direct effect;
the proportion of working households in poverty has fallen. From
memory, certainly that is true for lone parents; in principle,
working lone parents should not be in poverty if they are claiming
the tax credits to which they are entitled, and that was not the
situation 10 years ago.
Ms Middleton: I can give you those
figures. For lone parent families, 8% of children in low-income
households live in lone parent families with work, 33% of children
in low-income households live in couple families with work, 42%
of children in low-income households live in lone parent families
without work, and 17% of low-income children live in couple families
without work. If you add that together, you will find that actually
something like 41% of children in low-income households in Scotland
are in families where there is work, but most of that is amongst
couple families. As I said, only 8% of low-income children are
in lone parent households with work.
Q383 Mr Davidson:
I thought Mr Palmer was saying there that families in work who
were claiming tax credits should be lifted out of poverty.
Mr Palmer: Lone parent families.
The impact of the tax credit system is very different between
lone parents and couples.
Q384 Chairman:
What you are saying is that couple families are disadvantaged
as against single parent families?
Mr Palmer: I would put it the
other way round. The tax credit system helps lone parents more.
For example, if you are a lone parent working at the minimum wage
16 hours a week, the tax credit system will more than double your
take-home pay.
Q385 Chairman:
What incentive do you think the Government should take to help
the couple families to lift the children out of poverty?
Mr Palmer: Clearly, one possibility
is to make the tax credit system more generous for couples. Another
possibility, which I think is a more strategic way forward, is
to do something about the prevalence of low pay. The third possibility
is to help the second person get into work; the reason the issue
arises for couples is because one adult is working and the other
adult is not working, so clearly one policy response would be
to find ways of helping/encouraging the second adult to work as
well.
Q386 Mr Wallace:
First of all, the middle option, the prevalence of low pay, would
help both, it would be slightly different and it would help them
all?
Mr Palmer: Yes.
Q387 Mr Wallace:
The third option; we know that some of the contribution to social
disorder is lack of parenting roles, I am not getting into married
or not married, but someone being there to supervise the children
in their growing up. I would suspect, when you live in a high-risk
area and your children are left alone, that is not going to do
well for their future in the same way. Really, do we want an option
which encourages both parents to go out if you live in a high-risk
area, as opposed to doing the first option, which is finding a
way to adapt or be more generous, to make that a choice and maybe
encourage someone to be there?
Ms Middleton: I think that is
a very, very important point, but I think it should extend to
lone parents as well. Then you are back to benefits what I said
in my opening remarks about the levels of support for people who
are not in work, because, by definition, if you are a lone parent
either you are in work or you are not, and there is only one of
you. I think that choice has to remain for lone parents, as we
would wish it to remain for a couple, that one of them could stay
at home. The next inevitable shout from economists is always what
about work incentives, that you cannot increase levels of "out
of work" benefits because it will encourage people just to
sit around and not go into work. I have to say that I have never
seen any evidence which has convinced me that work disincentives
actually exist on a macro level important enough to make national
policy which leaves large proportions of children living in families
in the sorts of levels of severe poverty that we find as a result
of our current Income Support and Jobseeker's Allowance rates.
Yes, anyone can give examples of someone they know in their constituency
or round the corner who does not work and has got no intention
of working, and all the rest of it, but the statistics are quite
clear. As Guy said, as we said at the outset, 50% of people out
of work in Scotland are disabled. Another large proportion—the
number escapes me—are lone parents who, although also they
want to work, it is they want to work one day. Many lone parents,
the research evidence is quite clear, feel strongly that, as one
lone parent put it to me once, their child has already been deprived
of one parent, "I'm not going to deprive them of two by going
out to work." That issue of "out of work" benefits
has got to be addressed.
Q388 Mr Wallace:
The line of my questioning was not about the bashing of the single
parent or the individual, we all perhaps have instances or perhaps
do not; it was actually the remarkable difference, that the tax
credit system seems to be benefiting and helping the single parent
family as opposed to a couple, and I do not care whether the tax
system encourages the single parent to stay at home and look after
children either. I am saying that clearly there is something which
needs to be rectified. To put a further question to you, about
the London contribution to the changes in the figures, if, in
London, there are significant areas of poverty with immigration,
where some people come to this country as families, that could
be a significant contribution. If you are an immigrant family
living in parts of London, that contributes to the disproportionate
slowness in the change of figures. I do not have many immigrant
families in poverty in my constituency because I do not have many
immigrants.
Mr Palmer: We can talk about London
if you want. I think there is a bunch of unique issues in London.
There are high levels of lone parenthood in certain communities
and low levels of work in other communities. Then, particularly
in the Bangladeshi community, very few of the women work, so you
have got quite a lot of the families are these couples where one
works and one does not, which leads to poverty problems. It seems
to me, the strategic problem we have is low pay, that, in some
sense, tax credits are a response, that low pay and the National
Minimum Wage are both responses to the fact that low pay is prevalent
in this country. One of the interesting things about low pay is
that the areas where it is prevalent are not areas which have
anything to do with global competition; you will not find low
pay in manufacturing. Low pay is prevalent in the retail sector,
which on the whole is nothing to do with global competition, hotels,
and, because it is the biggest sector, the public sector. In that
sense, we could do something about low pay. In the public sector,
we could say we will raise the pay levels for certain groups of
part-time women, and so on and so forth, and actually it would
not cost anywhere near as much as one would imagine, because you
would get a whole raft back through reduced tax credits. We have
produced reports in the past which have argued that the public
sector potentially could set an example on low pay, a good example,
whereas, in some sense, at the moment, it is setting a bad example,
by saying it is okay to pay at certain rates.
Q389 Mr Wallace:
The question I asked the Low Pay Unit about the low pay was the
alternative of raising the threshold, when people start paying
tax, bottom up. Do you favour lifting the low pay because the
threshold would be a tax cut for everyone, as opposed to targeted?
If you lift low pay, that is not going to help the rich, in a
sense, but if you lift a threshold everyone will get a bit more
to take home. Is that why you would choose a higher rate of pay
than that?
Ms Middleton: Certainly it is,
for me.
Mr Palmer: Yes; talking broadly.
Ms Middleton: Yes; because one
of the roots of the difficulties that we face, which I know you
have had discussions about in your deliberations, is the incredible
inequality that we have in our income distribution in the UK.
We know, from the research evidence, that across the world high
levels of income inequality go with high levels of child poverty,
and what I think has been less prevalent, in the evidence we have
received so far, is very low levels of social mobility. Yes, I
think I would go for the raising of low pay, rather than the raising
of the threshold.
Q390 Mr Wallace:
You have raised the perfect link, which I wanted to ask about
next. Obviously, poverty is relative, the relative poverty, if
the target is to exclude it in 20 years, but at the same time
we know that the gap between rich and poor has got bigger, statistically,
that almost contradicts itself, does it not? If relative is about
median but we know the gap between rich and poor is getting bigger,
your median point is rising as you are trying to capture it?
Ms Middleton: That is the problem
with a relative income measure of poverty, and it is something
we have not raised, that one of the problems the Government will
face is that, to a certain extent, they are at the mercy, in terms
of the child poverty targets, of what happens to relative incomes
over the forthcoming years. It is one of the strange things about
this measure of income poverty that, for example, the two contrasting
examples I have always given are that, if you look at Ireland
in the 1990s, the tiger economy, affluence everywhere, their child
poverty rate went whoompf, because incomes at the bottom were
not increasing as fast as at the average. In Russia, after the
collapse of Communism, when the economy collapsed their child
poverty rate plummeted, because, again, their incomes were not
falling as fast as those further up the scale. It is a moving
target, the relative income measure, and that is always going
to be an issue.
Mr Palmer: I am a very strong
believer in having a relative poverty line.
Ms Middleton: As am I.
Mr Palmer: As are most people
working in this area. I think one of the great strengths of the
poverty debate in Britain over the last decade has been that everyone
has been in support of a relative poverty line. I think it would
be a disaster if that consensus was diluted in efforts to achieve
unachievable goals, and that is one of my worries about the formulation.
Q391 Mr Wallace:
Having a zero?
Mr Palmer: Having a zero, as opposed
to the best of Europe. The second point I want to make is that
the way poverty is defined is not the poor compared with the rich,
it is the poor compared with the average, and the poor compared
with the average has not been growing in the last decade, it has
been shrinking. What has been happening with the overall income
distribution is that, on the whole, it has been shrinking, except
that the bottom few per cent have been falling behind, because
"out of work" benefits for people without children have
been frozen, and the top few per cent have been shooting up, because
pay at the very top, I am talking about with 1 or 2%, has increased
dramatically in the last decade. If you compared, say, the 97th
percentile with the 3rd percentile actually, if anything, that
has shrunk.
Q392 Mr Wallace:
Within the public sector, interestingly enough, which you say
is a major job centre for low income, in the higher reaches of
the public sector, even medium to higher reaches, that has grown
significantly above. If you are a middle manager, or even a junior
manager, in planning in your local authority, your pay scale has
gone up a lot quicker than the cleaner in my local authority.
While they might have 2 or 3% going up there, any one of my deputy
planners will be on pay significantly higher than mine, and they
have not gone up at 1%, 2%?
Mr Palmer: It has varied over
time, has it not; and one of the issues that the unions always
have to deal with when they are doing their pay negotiations is,
in effect, they have different groups and whether they should
try to argue for the architects getting more or the cleaners getting
more.
Q393 Mr Wallace:
Is not that another solution though? Government, as you say, can
deal with the public sector, not on a one-off but it could start
doing that in a much more uniform way, which will significantly
help that moving target to be steadier and allow it to lift people
in a more equal way. I notice that the middle management, I think,
in the County Council will be a 3 or 4 or 5% cent rise this year.
I do not think the cleaners in the County Council will be getting
that.
Mr Palmer: There is a whole bunch
of issues here; can I name two issues and then say what my overall
conclusion is. One problem is the way logistics work. Let us say,
local authorities paid their part-time cleaners a lot more money;
it would cost the local authorities X pounds. The Treasury actually
would gain Y pounds through reduced tax credits; there is no vehicle
for the Treasury then giving those Y pounds back to the local
authority. If you could set up a system where the local authority
only had to bear the net cost to the public purse, rather than
the Treasury making a profit, it would be a much more practical
proposition. At the moment, the way the logistics work actually
creates a big disincentive to the local authorities to do anything
about low pay; ditto the Health Service. The second point I wanted
to make is that outside of the public sector the vast majority
of low-paid people are not unionised, and no-one is batting on
their behalf; quite often, they are unseen, they are unheard,
mainly they are women, mainly they are part-time, and no-one is
fighting their corner. It seems to me, in both of those cases,
if we recognised there were problems it would be a major step
forward. Currently, the rhetoric is "This is supply and demand;
this is the way the labour market works, there is nothing we can
do about it." I think that is a very defeatist attitude.
If we recognise that we have a low pay problem, which affects
particular groups of people, then we might be able to develop
some more effective policy responses to supplement the National
Minimum Wage, which is the only policy response we have in place
really.
Q394 Ms Clark:
What is your reaction to the recent UNICEF report which, as I
am sure you are aware, has put Britain at the bottom of the league
of 21 industrialised countries, so far as children are concerned?
Ms Middleton: I have had longer
to reflect on this than most people, because I actually heard
the findings of that piece of research last September, when the
author was kind enough to give a lecture at a conference that
we held, and it did not come as any surprise to me. I think the
reaction has been sad. I think the Government's reaction, that
the data were out of date, was actually rather sad, because we
have no evidence to suggest that, on most of the indicators we
used, we could have expected things to have got any better in
recent years. I think it was a wake-up call. We seem to be raising
generations of children who are deeply unhappy and I think it
was one of the saddest things, the evidence in that report about
the feeling of children that they are not listened to, in contrast
to children in other areas of the world. Again, you see, it is
interesting, is it not, that the countries which came out at the
top in that report are the Nordic countries, where they do have
a different attitude to the state and to the role of the state
and to the solidarity and to income inequality, amongst other
things. That would be my comment.
Mr Palmer: I would make two comments.
One is, it was the perfect report, in the sense that it allowed
any politician to argue anything they wanted, it justified every
politician's prejudice whatever that politician's prejudice was.
The second is that, although a lot of it did ring true to me,
I am actually quite suspicious of cross-country comparisons. I
think you have to be very careful; cultural issues can change
how people answer questions, and I will give you just one, simple
example of that. According to the Census in this country, levels
of disability have risen sharply for any age group, but the received
wisdom of people who have studied that is that people have become
more ready to admit they have got a disability. You can see that
maybe country cultural issues affect some of that stuff.
Q395 Ms Clark:
This afternoon, you have been talking about the fact that there
have been advances made in terms of reducing child poverty. To
what extent is the UNICEF report linked to poverty or linked to
other factors, you have mentioned cultural factors, or attitudes
towards children?
Ms Middleton: The UNICEF report;
income poverty was just one of a whole range of indicators which
was used, so it formed a relatively small part, and, yes, we may
have improved on that one, but we do not know enough about the
links between income poverty and a lot of the other indicators
in that report. I suppose the answer is, who knows?
Mr Palmer: It does remind us that
poverty is not just about income. One of the problems we have
in society is being excluded from the mainstream, either because
of our income or, in some sense, despite our income. I mentioned
one of the issues which are specific in Scotland is ill health.
If you look at suicides amongst young men in Scotland, they are
miles higher than amongst young men in England, or in Europe:
why is that?
Q396 Mr Wallace:
Finland, I think they are the highest in the world. That is another
story.
Mr Palmer: Where is Scotland in
that list?
Q397 Mr Wallace:
I think Scotland is at about eighth in Europe, from memory. I
think it is interesting you say that. Again, I suppose to reiterate
the point about income, in Austria, the welfare state income is
higher, in many areas, than the UK but it features, in this list,
at 18, and the size of the state is smallest in Sweden, Netherland
and Denmark. It is a higher-taxing country, but the size of the
role of the state is smaller than the top communities in Britain.
Ms Middleton: In what way?
Mr Wallace: It has got a private health
service and the education system is grant-maintained and not run
by the local authority, or indeed the public sector. The public
sector is smaller, higher taxed, better funded, rightly so, in
the trusting of the people, the community feel is much better,
so I think that underlines your view that the factors cross-country
make interesting figures. Finland, I am afraid, on suicide, as
well.
Q398 Mr Davidson:
It has been suggested that we should visit various places, to
make international comparisons. In terms of dealing with the various
varieties of poverty that we encounter in Scotland, is there anywhere
that you would suggest, in particular, ought to be examined for
policy solutions?
Ms Middleton: Sweden, I would
say. Sweden is the obvious place. Norway is interesting, because
in some ways Norway is a bit like us. Traditionally it is seen
as one of these social democratic welfare regimes but it is slightly
different from some of the others; but Sweden, I think, is worth
looking at.
Mr Palmer: The other country I
would mention would be Germany. The reason for mentioning that
is that historically they have been at the opposite end of the
spectrum from us on their welfare system, and they are moving
towards our system and I think we ought to move a bit towards
their system.
Q399 Mr Davidson:
Sorry; in what way do you mean the other end of the spectrum?
Mr Palmer: They have a system
whereby if you lose your job you get very generous "out of
work" benefits for quite a period of time. They have a system
where virtually no pensioners are in poverty because, in one way
or another, they have got pension provision such that they are
not. They do not have a minimum wage, I think, because they do
not need one.
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