Examination of Witnesses (Questions 500
- 519)
TUESDAY 20 MARCH 2007
MR JOHN
DICKIE AND
DR PAUL
DORNAN
Q500 Mr McGovern:
I think the point he was making was that if we concentrate too
much on making people aware of the benefits rather than trying
to make sure everybody has access to employment—
Mr Dickie: Hopefully in the evidence
we have submitted and what we are saying it is about getting the
balance right between focusing on removing the barriers to work
and ensuring people are able to access jobs that provide genuine
routes out of poverty; that employers take into account the needs
of parents and the flexibility that is required in terms of child
care and that we have the provision there to ensure that where
work is not a real possibility for those people who for whatever
reason—illness, disability, lack of jobs in their area,
temporary unemployment—that they have access to financial
support to stop them and their families falling into poverty and
too often getting caught up in poverty which is harder to get
out of.
Q501 Mr Walker:
I suppose, following your line of argument which is not a bad
line of argument, if the Chancellor decided that there was room
to return some money to the taxpayer instead of doing general
tax cuts, you may well argue that that money would be better spent
on uprating child benefit, for example. If the Chancellor decides
to return some money to taxpayers, he could decide to cut income
taxes or he could decide he wants to return that money in a more
targeted way, in a way that you would probably prefer, and that
money would be better returned in the form of child benefit. Everybody
would be eligible for it but it would be based around children,
that return.
Mr Dickie: We would certainly
look for further money to be invested in families and children.
Q502 Mr Walker:
If he has two billion to give away, rather than just a general
tax cut, it is better to spend that two billion targeted at children,
in your view.
Mr Dickie: Yes, definitely.
Q503 Mr Walker:
I would probably agree.
Dr Dornan: The reason we would
agree with that is that typically tax relief benefits those who
pay more tax. Child benefit would benefit in cash terms equally
all children so in terms of that aspect benefits are bound to
be more effective.
Q504 Mr Walker:
As my colleague, Jim, points out, the millionaire would benefit
from that. If child allowance was increased by £5 a week,
the millionaire would benefit but the marginal benefit to that
millionaire would be far less than the marginal benefit to someone
living in poverty having an additional £5. That would really
mean something to them per child whereas for the millionaire it
would be neither here nor there, but that would not be a reason
not to do it.
Mr Dickie: Absolutely.
Q505 Ms Clark:
There has been a massive debate over many decades about what is
the best way to provide money for those who need it in society.
Particularly on the Left, the debate has been between means testing
and targeting, as it is now called, or universal provision. Is
that something that you have looked at in any detail because we
have heard evidence from quite a number of witnesses around this
area. You seem to be saying that a mix is acceptable. There are
mixed messages coming through. You think, yes, you should have
child benefit and increased levels of child benefit but targeting
is also acceptable. Do you think a mix is what is needed or do
you have a more hard line position on it?
Mr Dickie: A mix is what is needed
and what can work and also what is pragmatically, politically
possible. The balance at the moment needs to be shifted a bit
towards universal and we need to see more investment in universal
child benefit. We would not want to say, given where we are now,
that all additional resources to tackle poverty should go into
child benefit and none through child tax credits targeted at the
poorest. At the moment, we are suggesting that the balance should
be shifted in the direction of more money going into universal
child benefit.
Q506 Ms Clark:
You think that tax credits in general and pensions credit have
been fairly successful?
Dr Dornan: We would not comment
on pension credit because it is slightly outside our area, other
than as a comparator. In terms of child tax credits, I think it
is clearly the case that the amount of resource going through
the tax credit system has been increased significantly. It is
also the case that that has had a significant impact on child
poverty. To that extent, yes they have. In terms of CPAG's position,
we have criticised tax credits in the past where we have seen
them to be failing particular families, particularly in areas
of overpayment. We recognise that poverty measures have been put
in place or are in the process of being put in place and we are
keen to see how those work out in practice. We are slightly holding
fire on that because we see a lot of advantages in the tax credit
system. We need to see it succeed and we are looking at the evidence.
A lot of that evidence is contingent on policy changes that have
been made relatively recently, so it takes a while for information
to filter down. There are outstanding areas of concern that we
have on tax credits, particularly around aspects like appeal rights
within the scheme, but that is possibly a slightly different issue
to the policy one about its impact. On that, we think it has had
a significant role to play in what has been happening.
Mr Dickie: In terms of take-up
we need to get the administration right because anecdotally we
are getting feedback from families who have just given up claiming
tax credits because the problems have been so great. Overall it
has delivered additional resources to families in poverty and
contributed to a reduction in the overall poverty rates. For some
families it has plunged them into deeper poverty because they
have faced overpayments which may have been clawed back without
any right to appeal. That starts building up a sense of, "I
am just not going to claim tax credit any more because it creates
more problems than additional resources." It is vital that
we do get the current changes put in place and monitored in terms
of how successful they are but also to keep a very close eye on
making sure they get the administration of the tax credit system
correct. We also need to make sure we invest enough money into
tax credit that will help us reach the 2010 and 2020 targets and
help us to eradicate child poverty.
Q507 Ms Clark:
In your submission you point to what you think are the three key
principles that undermine child poverty policy. What you say is
that you think the policy at the moment is first of all the belief
that paid work is the key way out of poverty. The second is targeting
and the third is that you say there is an underlying assumption
that eradicating child poverty is possible without significantly
challenging underlying income inequalities. Can we go through
them? Do you think it is fair to say that work should be viewed
as a key route out of poverty? Do you have a problem with that
as an organisation?
Mr Dickie: Not at all. We very
much welcome the work as a central part for most families in ensuring
that they are able to sustain lives free of poverty. We need to
make sure that the quality of that work means that jobs are sustainable
and that people are not in and out of work, getting caught up
in the benefit/work trap which sometimes leaves some of the poorest
children in families that are in and out of work regularly. It
needs to be balanced by investment in benefits for those people
for whom work will not be a short term or, in some cases, a long
term possibility. The bottom line is the current benefit rates
for people who are not able to work leave children and families
way below the poverty line and that does not seem acceptable.
It is not tenable if we really are wanting to reach a situation
where child poverty is eradicated, not just eradicated for children
that are in working families.
Q508 Ms Clark:
You have said already in your evidence that you think targeting
has a role to play, particularly in the current situation but
do you think it is possible to arrive at eradicating child poverty
without significantly challenging underlying income inequalities?
Mr Dickie: In some ways this takes
us back to some of the earlier comparisons with those countries
that have very low levels of child poverty. They have much lower
levels of inequality as well. As far as I am aware, there is no
country that has the same level of inequality as the UK and Scotland
and also has very low rates of child poverty, which would suggest
we need to do something about inequalities. That is a key reason
for looking at inequality. There is another issue in terms of
evidence that inequality itself undermines the wellbeing of children
and families not just below a certain income line, but if you
are living in a society that is so unequal your access to the
kinds of opportunities that society aspires to are so limited
that you undermine the wellbeing and the opportunities for those
children.
Dr Dornan: We see a wide range
of analyses, particularly from Richard Wilkinson, around the impact
that inequality has in terms of people's health and other things.
One thing that I would stress is the impact that inequality may
have on social distance. If you have a situation where you have
some very rich people and very poor people, the consequence of
that is that people lead very different lives. That makes it quite
hard to build a consensus around, well, actually that is somebody
else's position because if you do not see it why should you be
concerned by it. Confronting that social distance does mean looking
at inequality. The practical thing that I would stress also is
that income inequality is a driver in some of these problems.
In relation to tax credits, you have to run to stand still without
looking at some of the underlying issues as to why you have to
do that, why some groups are getting much richer and that does
start to limit what you are able to do. There is a question about
exactly how far you can get without looking at that. To be fair,
we do get quite a bit of discussion about inequality, particularly
in education and health and the impact those have. Understanding
the links with income, particularly with wealth, given that we
have issues about housing, but also issues about the way in which
wealth cascades down generations and the relation between that
and social mobility, in terms of looking at the long term, is
absolutely critical.
Q509 Ms Clark:
I do not know if you have had a chance to look at the evidence
that we have been given by lots of different organisations. Quite
a lot of suggestions have been made to us. Some of them are things
like money advice for parents. We have had proposals for a higher
minimum wage and also an equal minimum wage for young people;
and also seasonal grants. In terms of the various suggestions
that have been made to us, are there any of those that you would
disagree with? Are there any comments you want to make in terms
of some of the suggestions that have been made to us for policies
that might help eradicate child poverty?
Mr Dickie: I do not think there
are any we disagree with. They all represent additional investment
in children and families that will play an important role in supporting
families and lifting children out of poverty. They are all part
of the mix in terms of the range of policies that need to be looked
at and brought into place in order to make the progress and see
it continue in child poverty.
Dr Dornan: I thought we might
get on to talking about the national minimum wage. It is an interesting
set of issues, particularly for an organisation like ours because
we see the national minimum wage as a very good thing in terms
of protecting a basic level of rights. We would like to see the
rate of that increase in real terms. We do not see much evidence
of the employment effects that was previously claimed of it. Particularly
when the economy is in reasonable shape, trying to use that as
a way of narrowing some of the gaps is quite important. However,
in terms of the impact that has on measuring child poverty, because
of the interaction with tax credit and housing benefit, it is
not clear that you would see the gains in terms of a target necessarily
by doing it through that route. I would stress that there are
other reasons for doing it all the same, partly because it goes
with the notion of what most in society want, which is that people
are paid fairly for their work. That is the key aspect of what
would protect families from poverty. Also, it starts to reduce
some of the means testing, but we do see particular problems with
overpayments that have come up and marginal deduction rates and
gains from work are also relevant. There are other reasons why
you would wish to make progress on the national minimum wage.
The other group of reasons that I would stress are those people
who are not parents now but who might become parents. That has
relevance for income support scale rates, particularly for somebody
who, say, might be on income support and become pregnant. That
is a serious issue given the rate of that benefit. Also, because
working tax credit coverage is much lower for those who do not
have children, particularly those who are younger, the national
minimum wage has a significant role to play there. Given that
they may become parents, it is in itself a good reason to be concerned
about the rates.
Q510 Mr Walker:
I have to say it strikes me as madness, as it does most of my
colleagues, that people earning the national minimum wage, which
we all agree is not a great deal of money, start paying income
tax when they have earned half of it. The national minimum wage
is about £5.35 now. As soon as you are earning about £2.60
of that you start paying income tax and national insurance. To
me, that just does seem crazy. It seems particularly crazy because
we then launder these people's money back to them in the form
of tax credits. Perhaps it would just be a lot better if people
on low incomes did not pay income tax at a starting threshold
of £5,000. Perhaps we could have a threshold starting at
£12,500. That would allow people to keep more of what they
earn as a way of alleviating some of the consequences and causes
of poverty. How we pay for that I am sure I would disagree with
my colleagues about but I hope I am right that we do share the
view that it seems morally wrong for people on terribly low incomes
to be paying income tax and national insurance, particularly as
this money is then returned to them in the form of a handout,
a tax credit. They are just getting their own money back again.
Do you think there is room for government of whatever colour and
persuasion to act on that injustice?
Mr Dickie: It is certainly worth
looking at. We have to be careful about where the benefits of
that would reach. The tax credit system targets the money back
at the poorest families. Many of the poorest families are not
paying any income tax at all so raising the threshold would not
help them. Raising income tax thresholds would also benefit earners
all the way up there.
Q511 Mr Walker:
It depends how you fund it. That is where the difference would
be. You could raise, as some of my colleagues on the Labour bench
no doubt would like, the upper threshold on rates of tax to fund
it. That can be discussed between politicians. We have identified
in your evidence and in your submission that people in work are
still in poverty. Surely we should address that situation perhaps
by looking at how much tax people pay on very low earnings.
Mr Dickie: Our approach would
be to raise those earnings. There is no reason why people should
be earning wages leaving them in poverty.
Q512 Chairman:
What my colleague is saying is that, rather than taxing people
first and then giving them handouts back, it is better if the
basic threshold is raised and the money which you believe is going
to be subsidised to the richer people—then you can have
a higher bracket for them if they are earning more than £50,000
or £100,000.
Dr Dornan: The question you seem
to be asking is should we have a negative income tax system where
you are considering the tax credit payment and the tax to be paid
in one bundle so that you are not paying with one hand and taking
back with the other.
Q513 Mr Walker:
Yes. You mentioned the stigma of handouts. It is wrong. We should
not stigmatise people. We should not hand back their own money.
Why should we do that to them? Let them keep more of what they
earn. It is not a party political point. I just think it is so
wrong that we stigmatise people in poverty and make them fill
out these forms for tax credits and so on. It is just soul destroying
for them. We have seen people around Scotland, really good, decent
people, who through no fault of their own are forced onto the
state and they get these handouts that they are meant to be grateful
for. Particularly when they are working, I just think it is so
wrong. That is a very emotional, unstructured, unacademic view
of the whole issue.
Dr Dornan: Could I answer in a
similar vein? I would answer at a level of principle rather than
getting into that detail. The issue about the tradition of tax
allowances as being of more value to people who are paying tax
and benefits being of more value to people who are getting them
is of significant importance. I take your point that there are
ways of designing schemes, but that is an issue that we would
be very interested in discussing in any proposals that were being
discussed around there. Tax is an issue. Proportional income tax
is an issue. I would also say that VAT is an issue if you are
looking at where people spend their incomes. We say that we have
a progressive tax system and we do not. The direct elements of
this are progressive. The proportion of pay rises with your earnings
but VAT does not. If you do not have very much money you have
to spend most or all of it which is taxed through VAT. If you
are looking at those aspects, there are some other progressive
things you might be thinking about looking at other than tax.
I would not say that we would not be interested in this sort of
discussion. We would be. The issues around in work poverty are
significant but it is how you design schemes that we would raise
questions about.
Q514 Ms Clark:
You will be aware of the recent collapse of One Plus and KidCare.
You will be aware that they were arms' length companies providing
services. Do you think it has done any damage, the fact that so
many parents found themselves in a situation where suddenly their
childcare just vanished and they were forced to deal with that?
Do you think there is anything to be learned from what happened?
Mr Dickie: There is a long way
to go before we find a way of investing in child care for those
in the most disadvantaged communities who are most disadvantaged
themselves in a way that is sustainable, successful and funded
in a way that makes it a genuine feasibility. One of the other
things that has come out from child care providers where we are
looking to support parents back into work by providing child care
is this balance. They are increasingly under pressure to create
a more sustainable business model provision and that inevitably
means charging more fees. That inevitably cuts against the anti-poverty
objectives and makes that child care less successful to the very
people we want to reach if we really are to encourage and support
those parents back into education, training and work. There are
real issues raised by the collapse of One Plus and the pressures
on other child care providers to find a model of supporting and
financing that. In terms of where child care is provided, for
very good reasons through the voluntary sector and social economy
models of provision, because they are the organisations that understand
the customers they are trying to reach, that makes a lot of sense.
We need to have that security. These are core services. It should
be accepted that your child care is there, it is safe and it will
not collapse because one particular organisation or funding is
not sustainable. We need to have child care available, accessible
and reliable for families.
Q515 David Mundell:
In your submission you say, "Devolved policy to tackle poverty
by improving school attainment levels of the most disadvantaged,
and so tackle the deficit of opportunity they face, has had little
impact to date."[28]
Why do you feel that?
Mr Dickie: The situation in England
and Wales as well is that whilst overall attainment levels have
increased, for the bottom 20% of pupils, there has not been any
shift. The gap is widening. Why that is we do not have any particular
expertise or knowledge. It is an area that needs additional attention.
We welcome that there has been a move to make sure that schools
in the most disadvantaged areas with high proportions of pupils
from low income backgrounds do get additional finance and support
to start tackling some of the gap in educational opportunity.
I suppose where we have particular concerns is some of the problems
and the additional costs associated with schools. We think of
ourselves as having a free education system and free schooling.
Actually, there is a whole range of additional costs that children
and parents face that serve to undermine children's access to
all the potential opportunities that education offers them and
undermine their potential to attain at school. One particular
area that we have done a lot of work on in Scotland is around
school meals. We have had a real recognition in Scotland that
what children eat at school and their access to healthy food in
school is critical not just to their health and wellbeing but
to their ability to learn and their readiness to learn, their
concentration and their long term ability to attain. We are seeing
particular evidence coming out from Hull interestingly, where
there is an evaluation of a universal free school meal approach
which has seen very real evidence of children's readiness to learn
and concentration increasing when you ensure that all children
have access to a healthy meal in the middle of the day. We are
particularly keen for that model to be adopted in Scotland to
ensure that, while we have seen a real improvement in the quality
of school meals, over half of children are not getting those school
meals and 30% of secondary school kids say one of the key reasons
for that is the cost of school meals. Removing that cost to something
that is so integral and key to children's ability to get the most
out of their education we think would be an important way forward
to tackle some of that gap in attainment.
Q516 David Mundell:
That particular argument has been rejected twice by the Scottish
Parliament, has it not?
Mr Dickie: It has. Interestingly,
it has been accepted by UK ministers and politicians across the
board. In Scotland and England there is a growing agreement across
political parties that it is an approach that needs to be taken
seriously. The point I was making is that we are winning a lot
of the argument which is how important that aspect of a school
day is to pupils' potential attainment. There are other aspects
of education where people are either excluded or families are
hit with additional costs which either mean children cannot participate,
whether it is in school outings, school activities, school trips,
that are part of the overall children's experience of school.
If they find themselves excluded from that, the impact that has
on attainment and longer term feelings about education and school
can be undermined so we are doing a bit of exploratory research
at the moment, looking at how some of those other costs for school
uniform and other school equipment, the cost of school trips,
impact on children from low income families to see if we can start
overcoming some of those barriers.
Q517 David Mundell:
I am sure that issue will be hotly debated over the next five
or six weeks because it is an important issue.
Mr Dickie: We now have most parties
contending for power during the election committed to extending
free school meal entitlement, at least to those children who are
in working families in poverty receiving maximum working tax credit.
That is a major step forward, recognising that that aspect of
the school day is important and that all children should have
access to a healthy school meal during the day. There is some
significant progress. If we hold parties to account during and
after the election, we may see a situation where school meal entitlement
in Scotland is different from the rest of the UK which may be
an interesting example for what progress could be made elsewhere
in the UK as well.
Q518 Chairman:
What do you think are the two most important things that the government
should do to tackle poverty?
Dr Dornan: Financial investment
and political investment. The financial investment point goes
back to earlier questioning around can we make these targets work.
The answer is yes, we can. We have evidence and mechanisms that
we know have yielded results. CPAG is arguing in favour of child
benefit amongst that. There is a suite of policies that the Joseph
Rowntree Foundation have modelled and costed. I think previous
evidence has been brought forward to you from the Rowntree Foundation
about that. The estimated cost was 0.3% of GDP. We know that we
can meet the 2010 target. That is key. Secondly but not secondly
in priority order is the political investment. We are in a very
good place. We have many parties and wide commitment that child
poverty is an issue. CPAG is very pleased with that. We think
that is an extremely important juncture. That also suggests that,
given that there is that level of consensus, there is much more
that can be done in terms of winning that argument about just
exactly what that means; but also what the benefits and gains
are that could be made from that. The positive message is saying:
look, we have a lot of consensus around the problems that are
facing a lot of children within the UK and we have some policies
which have been shown to work. We have a strategy and I think
there is a degree of consensus around in terms of what further
can be done. The negative part of that is some of the political
rhetoric that goes the other way, particularly reflecting on where
some of the debate has been around welfare reform. It is quite
important there that that public messaging from politicians—CPAG
as a campaigning organisation has an interest in building public
consensus—but what we find very difficult to deal with in
terms of building that is when you get messages from politicians
that risk fuelling a lot of the stereotypes we know are in the
media, messages which overemphasise the extent of fraud when we
know that it has been coming down, messages which overemphasise
the number of people who may be on benefits but arguably, for
whatever reason, should not be. Those simplistic messages undermine
that public support. For my two points I have had about six.
Mr Dickie: I would reinforce the
points Paul made. Investment in child tax credit and child benefit
at the level required to meet the 2010 target is the immediate
priority. In terms of long term eradication of child poverty,
we need to keep up the political faith, the commitment and the
belief that this is possible. We need to meet that 2010 target.
We have costed models about how that can be done by investing
in child tax credits and child benefit. Within that, we would
say push money into child benefit to ensure that the balance is
right and that money is put into child benefit to equalise the
rate of child benefit for all children. It has been estimated
at between four and five billion a year. That is the priority.
We need to get that investment.
Q519 Mr Walker:
Four or five billion in what? Family child allowance?
Mr Dickie: Child tax credit and
child benefit, a mix, investing in both.
28 See Ev 163 Back
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