Appendix 1
Letter to the Chairman of the Committee from the
Minister of State, Scotland Office
I enclose the Government's response to the Scottish
Affairs Committee's two reports on their inquiry into poverty
in Scotland—Poverty in Scotland and Child Poverty
in Scotland.
I am grateful for the Committee's inquiry and I welcome
the Committee's ongoing interest in this important matter.
David Cairns
Minister of State, Scotland Office
31 March 2008
Memorandum submitted by the Scotland Office
Introduction
1. The Government welcomes the Second and Third
Reports of the Scottish Affairs Select Committee session 2007-08
on Poverty in Scotland and Child Poverty in Scotland. The Committee
has identified a number of issues which it believes need to be
addressed; the Government is equally concerned to ensure that
bodies within and outside Government work together to build on
the progress already made in tackling poverty in Scotland.
2. Compared to 1997, across the UK, there are
now 3 million more people in employment and 600,000 fewer children
living in poverty. Over 1.85 million jobs have been found through
the New Deal programmes. The lone parent employment rate has risen
dramatically by over 12 percentage points and the number of people
claiming incapacity benefits has now started to fall after rising
through the 1980s and 90s. The Department for Work and Pensions
(DWP) will also be spending over £11 billion more
on pensioners in 2007/08 than it would have if 1997 policies had
continued. Around half this extra spending —just over £5
billion—is going to the poorest third of pensioners.
3. During this period Scotland has seen greater
progress than the rest of the UK. From having a lower employment
rate, Scotland now has an employment rate 2.0 percentage points
higher than the UK average. The number of lone parents on benefit
across the UK has fallen by 19 per cent but in Scotland the number
has fallen by 27.7 per cent. Between 1998/99 and 2005/06, the
proportion of children in relative low income[3]
in Scotland fell from 28 per cent to 21 per cent, a fall of 90,000,
and is now lower than the UK average.[4]
Over the same period the proportion of pensioners in relative
low income[5] in Scotland
fell from 27 per cent to 16 per cent, a fall of 80,000 and also
lower than the UK average.
4. The UK Government has a good working relationship
with the Scottish Executive and this continuing good relationship
is vital to make progress on our shared goal—to eradicate
poverty in Scotland.
5. Budget 2008 set out the next steps, including
measures that will make significant further progress towards the
target of halving child poverty by 2010. The measures announced
in Budget 2008 will lift up to a further 250,000 children out
of poverty. Including the reforms announced in Budget 2007 and
the 2007 Pre-Budget Report and Comprehensive Spending Review,
measures announced in the last year will lift a total of over
500,000 children out of poverty.
6. Ending child poverty: everybody's business,[6]
which was published alongside the Budget, sets out the further
steps that the Government will take to tackle poverty during the
next decade including new pilots and further areas of work that
will help develop the strategy for 2020.
7. In December 2007 DWP published measures for
the next stage of welfare reform, Ready for Work: full employment
in our generation,[7]
helping even more people to move into
work and out of poverty. DWP will work with the Scottish Executive
as it brings forward reforms.
Poverty in Scotland — Conclusions and Recommendations
1. We recommend that the Government should review
its preferred measure of poverty (currently set at those with
household incomes below 60% of the median). The poverty line should
represent a minimum adequate income. If necessary, further independent
research should be commissioned to determine a realistic minimum
income standard. (Paragraph 15)
8. The three indicators the Government uses to
measure child poverty (absolute low income, relative low income,
and material deprivation and low income combined) were developed
following extensive consultation including work with academics,
stakeholders and with parents and children about their views on
what poverty meant to them. The headline indicator, which measures
the number of children in households with less than 60 per cent
of median income Before Housing Costs (BHC), is an established
measure used across Europe and internationally.
9. As the Government has already conducted a
consultation on the preferred measure of poverty and the current
measure is the internationally accepted standard, the Government
does not feel that it would be appropriate to change this measure
again at this time. However it is the subject of regular review.
2. Our evidence suggests, and we agree, that
in many cases, measures of poverty taken after housing costs present
a much more accurate picture of disposable income and hence of
a household's living conditions. We therefore recommend that the
Government should continue to publish both BHC and AHC measures
of poverty, but that it should prioritise AHC measures in most
cases. (Paragraph 18)
10. The Government agrees that it is important
to look at both before and after housing costs measures of poverty
and will continue to publish both measures in Households Below
Average Income and as Opportunity for all indicators,
and monitor progress on both measures.
11. The Government's preferred measure for children
is BHC. The headline indicator, which measures the number of children
in households with less than 60 per cent of median income, is
an established measure which is used across Europe and internationally.
12. For pensioners, the Government's preferred
measure is After Housing Costs (AHC). The Government has adopted
an indicator based on low income thresholds AHC for the 'Later
Life' Public Service Agreement (PSA) as this better reflects pensioners'
living standards. The majority of pensioners own their homes outright
and so receive value from housing whilst not having to pay for
it out of their current income. This is different to the current
working age population and to the situation for pensioners in
the past. Considering pensioners' incomes compared to others after
deducting housing costs allows for more meaningful comparisons
of income and welfare between working age people and pensioners,
and between pensioners over time.
3. Although the SIMD only influences a small
amount of funding, there is a perception within some rural areas
of Scotland that reliance on the SIMD does not properly capture
the extent of poverty in rural areas. There is a clear need for
improved measures of poverty in rural areas of Scotland in order
accurately to assess the extent of poverty in these areas. (Paragraph
21)
13. The Scottish Index of Multiple Deprivation,
and any associated funding streams, is the responsibility of the
Scottish Executive. We have highlighted this recommendation to
the Scottish Executive.
4. We recognise that progress has been made in
reducing poverty, particularly amongst groups such as children
and pensioners, which have been the subject of high profile Government
targets. This is to be welcomed. We are concerned, however, that
the benefits of Government measures should be felt by all those
living below the poverty line, including adults of working age.
The evidence we have received suggesting that many working age
adults alternate between poverty and low incomes is particularly
worrying in this regard, and suggests that sustainable routes
out of poverty have not been made available to all. (Paragraph
27)
14. The Government welcomes the Committee's acknowledgement
of progress. Full employment is at the heart of the strategy to
achieve an inclusive, cohesive and prosperous society with fairness
and social justice for all at its core.
15. The Government is aiming for an employment
rate of 80 per cent. This will help to combat poverty and enable
Britain to take the opportunities that the global economy presents.
Significant progress has already been made with the introduction
of a series of radical welfare reforms to improve opportunities
for people to work.
16. However the Government acknowledges that
more remains to be done and agrees that support is required for
retention and advancement in work. It is not just jobs that are
required but jobs that pay and offer opportunities for progression.
In emphasising sustainability and progression in work the Government
has to ensure that all those who need help to develop skills have
access to support. As education is a devolved matter, DWP has
been working with the Scottish Executive to help facilitate the
right skills support to meet the needs and particular circumstances
of individuals in Scotland.
5. Co-ordination with the Scottish Executive
is needed to ensure that national policies are delivered effectively
and 'join up' with devolved programmes. The Scotland Office has
a key role in this process. Conversely, the Scottish Executive
needs to ensure that its own programmes dovetail with national
provision. (Paragraph 28)
17. Good working relationships between UK Government
departments and the Scottish Executive are vital to the public
interest and the effectiveness of government in Scotland and the
UK. The Scotland Office works hard to ensure that reserved policies
which help tackle poverty reflect the Scottish context, during
both their formulation and implementation. The Scotland Office
also liaises with the Scottish Executive on relevant work, and
is actively involved in liaison between UK Government Departments
and the Scottish Executive where deemed appropriate.
18. A Concordat is in place between DWP and the
Scottish Executive for consultation, exchange of information,
finance, access to services, resolution of disputes, and review
of relations.
19. The UK's National Action Plan (NAP) on social
inclusion[8] sets out a
strategy which reflects the wide range of government and non-government
organisations which contribute to tackling poverty and social
exclusion. Devolved administrations and local authorities have
a key role to play in developing the NAP and the Scottish Executive
has played a leading role in this development.
20. DWP and the Scottish Executive alert each
other as soon as practicable, to proposals for new policy initiatives
and changes to existing policies where there is a direct or indirect
impact on the other's areas of responsibility. They also work
together in key UK forums including the British-Irish Council:
the social inclusion strand of this group is led by the Scottish
and Welsh administrations.
6. We recommend that the Government should consider
whether greater flexibility could be given to local government
in the provision of services aimed at reducing poverty. Whilst
there are serious issues in providing different services to UK
citizens living in adjacent areas, local authorities that have
achieved good results in this area should be rewarded. We are
particularly concerned by perceptions that the relationship between
Scottish local government, the UK Government and Members of the
UK Parliament has weakened since devolution. We urge all sides
to work together to renew links. (Paragraph 38)
21. The Government agrees with the Committee
that there is a need for local flexibility. Targeting areas of
high worklessness by devolving and empowering communities is one
of the DWP's five principles of welfare reform. DWP is committed
to working closely with local government and its partners in Scotland
to increase employment rates, particularly in disadvantaged groups
and areas, reduce poverty and encourage social inclusion.
22. In spring 2005 DWP, the Scottish Executive,
and the Convention of Scottish Local Authorities (CoSLA) signed
a Partnership Accord which set out the basis for building on and
improving the collaborative working in Scotland to help the hardest
to reach into work. It was also aimed at helping to achieve the
Scottish Executive Closing the Opportunity Gap objective of 'increasing
the chances of sustained employment for vulnerable and disadvantaged
groups—in order to lift them permanently out of poverty.'
23. DWP also hosts a twice yearly Strategic Forum
which gives the opportunity for the Department and Local Government
Associations in Scotland, England and Wales to discuss the big
issues of the day and for local government to influence policy
development.
24. In the January 2006 Green Paper, A new
deal for welfare: Empowering people to work,[9]
DWP announced its City Strategy. 15 Pathfinder Consortia—including
those in Glasgow, Edinburgh and Dundee—were given the chance
to demonstrate that they could contribute to a significant improvement
in the working age employment rate in their localities through
close partnership working, pooling or aligning funding, and more
flexible working. Each Consortium includes representation from
local government, and has been given a share of DWP's Deprived
Area Fund to manage and the opportunity to benefit from a small
reward fund. Pathfinders have been granted a number of flexibilities
to help improve the delivery of their employment outcomes and
participate in a DWP funded Learning Network.
25. DWP is currently working closely with the
Scottish Executive to establish the feasibility of the Deprived
Area Fund being paid through Community Planning Partnerships in
return for improved employment outcomes in some of Scotland's
most deprived areas. This could involve a discussion about ways
of rewarding good performance.
7. It is essential that the UK Government should
produce a national poverty strategy to co-ordinate the cross-cutting
issues inherent in issues of multiple deprivation. (Paragraph
40)
26. The Child Poverty Review in July 2004 set
out the Government's strategy for eradicating child poverty. This
was agreed after consultation across government, and with the
voluntary and academic sectors.
27. The Government believes that to eradicate
child poverty by 2020 requires a renewed drive on child poverty
for the next decade: this needs to draw on new ideas and approaches
to ensure sustainable progress is made, improving children's life
chances for the longer term. Ending child poverty: everybody's
business, which was published alongside Budget 2008, set out
the new approach the Government will pilot and further areas of
work that will help develop the strategy for 2020. The Government
believes that it cannot achieve these objectives alone and that
ending child poverty requires a sustained national, regional and
local effort involving devolved administrations, across all agencies,
service providers and professionals and including communities
and business. Ending child poverty: everybody's business
sets out the beginnings of a contract: a pledge that all parts
of society will do their bit to tackle this blight on children,
communities and future prosperity.
28. DWP and the Department for Children, Schools
and Families (DCSF) have announced the creation of the Joint Child
Poverty Unit. This Unit brings together the child poverty policy
officials and analysts in the two departments, along with a secondee
from Barnardos, to provide a coordinated and focused approach
to meeting the Government's ambitions to eradicate child poverty.
29. The Unit will be meeting regularly with their
counterparts in the Devolved Administrations through the Four
Countries Policy Forum. The aim of the meetings is to share understanding,
data and good practice, and to drive forward a UK child policy
strategy. The Forum had its first meeting on 22 January 2008.
30. The UK's NAP, as mentioned in paragraph 19
above, forms part of the European strategy for making a decisive
impact on poverty and focuses on engaging across government and
with people outside government to develop a coherent position
across the UK. Central to this approach is the participation of
people experiencing poverty, but the engagement of local and devolved
levels of government is also vital.
8. We commend the Get Heard project and urge the
Government to ensure that all policy on poverty is informed by
the views of those living on low incomes. (Paragraph 41)
31. The Get Heard project helped the Government
to gather the views of people in poverty before putting together
the 2006 National Action Plan on Social Inclusion (NAP). Overall,
146 workshops were held across the UK (45 in Scotland) giving
hundreds of people living in poverty the chance to give their
views on which anti-poverty policies work, which do not work,
and what policy changes they would like to see the government
make.
32. The next edition of the NAP will be produced
this year: publication is expected in the autumn. A key milestone
was a seminar to initiate the consultation process in the spring
(involving various Government departments and stakeholders). This
was held on 17 March. The DWP now intends to follow the previous
development processes and engage across Government through a project
board that will oversee the process of drafting the report.
9. We welcome the increase in employment levels
over the past ten years, which has greatly contributed to a reduction
in poverty. However, unless barriers such as disability, employer
attitudes to disability and unaffordable childcare are tackled,
employment levels cannot continue to rise at the same rate. Even
then, work will never be a realistic prospect for some people,
for example, those with full-time carer responsibilities. These
people must be lifted out of poverty through the benefits system.
(Paragraph 48)
33. The Government continues to target the provision
of extra resources on people who are at the greatest risk of poverty,
including disabled people and their carers as well as pensioners
and children.
34. However, in providing extra money the Government
must be careful not to reduce incentives to work. Many of the
most disadvantaged people are able to work if given appropriate
support, and work remains the best and most sustainable route
out of poverty.
35. The Government has a range of programmes
and services to support disabled people into employment which
operate across the UK. These include Pathways to Work, the New
Deal for Disabled People, WORKSTEP, Work Preparation and Access
to Work.
36. From October 2008, Employment and Support
Allowance (ESA) replaces Incapacity Benefit for new customers.
ESA builds on the success of Pathways to Work, bringing rights,
responsibilities and opportunities to people who need them most
by asking them to engage with us and work towards their ambitions.
However, recognising that for some people moving into work will
be particularly difficult, the Government has committed to an
additional payment within the benefit to be paid to those with
the most severe barriers to work.
37. Policy for childcare is a devolved matter;
the Scottish Executive has the responsibility to ensure that appropriate
provision and support is available to help parents move into work.
10. The tax and benefits system must, at a minimum,
ensure that no-one in full time work is living in poverty. (Paragraph
55)
38. Work remains the surest route out of poverty
and, for many families, a move into full-time work will be sufficient
to lift the household out of poverty, and will have wider benefits
beyond just increased income. The tax and benefit system provides
financial and material support to assist families while maintaining
incentives to work. From October 2008, the minimum wage (adult
rate) will provide, with Working Tax Credits and other benefits,
a guaranteed income of at least £292 per week for families
with one child and one full time worker.
39. From autumn 2008, the Government will be
piloting the new Better Off In Work Credit to ensure that everyone
who has been claiming benefits for at least 6 months sees a gain
from working of at least £25 per week.
11. The Government needs to make enforcement of
the minimum wage a priority and institute stronger penalties for
non-compliance. (Paragraph 56)
40. The Government is committed to simple, effective
National Minimum Wage (NMW) enforcement which supports workers
and businesses by deterring non-compliant employers from underpaying
their workers and removing the unfair competitive advantage that
underpayment can bring.
41. In 2006/07 the Government helped to restore
£3 million in arrears to over 14,000, workers and has also
increased the enforcement budget for the NMW by £2.9 million.
In addition, the Employment Bill, introduced into Parliament in
December 2007, contains provisions to strengthen the enforcement
regime of the NMW. The Bill introduces a fairer method of calculating
arrears of the NMW, that takes into account the length of time
that arrears have been outstanding, and an automatic penalty of
up to £5,000 for employers who do not comply with the NMW.
It also increases the sanctions that are available for the most
serious cases where criminal offences have been committed under
NMW legislation.
12. We urge the Government to investigate the
problem of low wages amongst public sector employers and to consider
a means by which an incentive could be created for these employers
to raise wages. (Paragraph 59)
42. For most public sector workforces, pay levels
in Scotland are a matter for the Scottish Executive. We have therefore
highlighted this recommendation to the devolved administration.
43. In terms of the UK-wide Civil Service, there
are different labour markets for different staff across the Civil
Service, depending on factors such as location, responsibility
level and occupation. Pay remits will be judged on the extent
to which levels of pay for particular groups of staff reflect,
and are responsive to, the relevant local labour markets in which
they operate. In this context, pay levels need to be compared
after allowing for the fact that pay is one individual element
of an overall remuneration and reward package.
44. A national minimum wage is in place to provide
employees with decent minimum standards of remuneration. From
1 October 2008 the national minimum rates will increase as follows:
the adult rate (for those aged 22 and over) will go up from £5.52
to £5.73 per hour; the development rate (for those aged 18-21)
will go up from £4.60 to £4.77 per hour; and the 16-17
year old rate will go up from £3.40 to £3.53 per hour.
13. We are led to conclude that despite the introduction
of the minimum wage and tax credits, work is not an automatic
route out of poverty. Where work is of poor quality, low paid,
short-term or seasonal, in-work poverty is a real prospect. (Paragraph
60)
45. The Government believes that helping parents
into work is the most sustainable way to tackle child poverty.
46. Support is required for retention and advancement
in work and it has to be ensured that all those who need help
to develop skills have access to support. DWP works with the Scottish
Executive to provide people in Scotland with the right skills
support to move into and progress in work.
14. Low paying, poor quality jobs are part of
a bigger problem which will require effort not only on the part
of the Government, but also of the public sector more generally
as well as private employers. In order to ensure that sustainable
routes out of poverty are provided, the focus on employability
needs to include support for retention and advancement. (Paragraph
61)
47. Of all those in employment in the UK, 81
per cent are in permanent employee jobs and 94 per cent are either
permanent employees or self-employed. The equivalent figures for
Scotland are 84 per cent and 95 per cent. So in both Scotland
and the UK as a whole, total employment is dominated by people
who are either in permanent employee jobs or are self-employed.
48. The Government agrees that support is required
for retention and advancement in work, and that it is not just
jobs that are required but jobs that pay and offer opportunities
for progression.
49. Policy on skills development is devolved
to the Scottish Executive, which has its own strategy in this
area.
15. We recommend that the discrimination against
young workers inherent in the current structure of the minimum
wage should end. We are particularly concerned that young adults
on work-based training courses should be able to support themselves
at a decent level. We agree with the Minister that "Apprenticeships
are not meant to be just a source of cheap labour for people"
and we urge the Government to ensure that the guidelines surrounding
pay and conditions for trainees are properly enforced. (Paragraph
63)
50. The Government takes advice on the National
Minimum Wage and the level of pay rates from the Low Pay Commission
(LPC). The LPC takes into account a whole range of factors to
ensure that the minimum wage is set at a level that guarantees
a decent minimum for people at work, does not impact adversely
on employment or deter young people with continuing education
or training.
51. The LPC found that in countries where all
workers, regardless of age, are entitled to the same minimum rate,
youth unemployment tends to be higher. This is because employers
tend to recruit older, fully trained or more experienced workers
if there is no lower rate for younger people. Without the flexibility
afforded by the lower rate for younger people, the LPC concluded
that youth employment rates could suffer.
52. It is the LPC's and the Government's view
that the minimum wage should be sufficiently flexible to encourage
employers to offer good quality training opportunities. We have
been particularly concerned that the minimum wage should not disadvantage
young people entering the labour market who may need to develop
skills and experience in order to become fully productive members
of the workforce. The lower minimum wage offers some recognition
to employers of the training costs incurred and helps to ensure
that there is not a barrier to training in the workplace.
53. It is important to be clear about the purpose
of the 16-17 rate—while it is set to protect young workers
against the worst cases of exploitation, we need to be very careful
not to encourage young people to take up low-paid employment,
rather than continuing with their education or pursuing an apprenticeship—both
of which are in their long-term interest.
54. The national minimum wage is the legal minimum
that employers are under a duty to observe. Many employers recognise
the skills that younger people bring to the workplace and pay
wages in excess of the minimum wage.
55. The Government is committed to ensuring all
workers receive the minimum wage to which they are entitled. The
national minimum wage is enforced by 16 dedicated teams of HM
Revenue and Customs compliance officers. Over £27 million
in unpaid wages has been recovered for around 80,000 workers since
1999. However the best way to support workers is to ensure they
are not underpaid in the first place. Through the Employment Bill
we are introducing a range of tough new measures to crack down
on rogue bosses who refuse to pay the national minimum wage, including
an automatic fine for every employer who underpays, potentially
unlimited penalties for the most serious offenders, and stronger
powers for inspectors to investigate evidence of wrong-doing.
16. We welcome efforts to integrate different
benefits streams into a 'one-stop-shop'. However, the Government
must provide enough resources to ensure that any new system is
properly administered. (Paragraph 74)
56. Jobcentre Plus works in partnership with
Local Authorities on Housing and Council Tax benefits, and with
HM Revenue and Customs on tax credits. Together they are trialling
greater integration in their "In and Out of Work" pilots,
which will test new ways to integrate services on behalf of their
customers. The removal of duplication is also expected to reduce
overall resource requirements.
57. From 1 April 2008, The Pension Service (TPS)
and the Disability and Carers Service (DCS), will join together
to form a single new Agency, to be known as the Pension, Disability
and Carers Service. Each Agency will initially retain its current
identity and name, and will continue to deliver frontline services
with the same aims.
58. The new Agency will be funded from the combined
resources of the existing agencies, but will provide greater scope
for efficiency and rationalisation of support functions.
17. The simplification of the benefits system
is a vital area of work if take-up of entitlements is to be increased.
We refer the Government to the recent excellent contribution of
the Work and Pensions Committee in this area. Given the current
complexity of the benefits system, the Government has a responsibility
to invest in welfare rights advisers and campaigns to promote
the take-up of benefits generally. (Paragraph 75)
59. The Government is committed to simplifying
the benefits system and making its services more accessible so
that customers do not have to go from one place to another to
get the help that they need. For example one phone call to The
Pension Service can now give access to five benefits: State Pension,
Pension Credit, Housing and Council Tax Benefit, and underlying
entitlement to Carer's Allowance. Claims for State Pension and
Pension Credit can now be made together on the telephone, without
having to fill in a lengthy claim form.
60. The new Agency highlighted at paragraph at
57 above will, in the long term, ensure that customers are 'right
first time' whenever they contact any of its outlets to ask for
help. Over 50 percent of DCS customers are over pension age and
predictions are that this figure will increase over time. Joining
TPS and DCS will therefore create a more cohesive service for
all customers, including children and those of working age.
61. Jobcentre Plus works closely with voluntary
organisations and has put in place arrangements at local and national
level to ensure they have access to accurate and up to date information
on its benefit payment claims and payment services. It has recently
signed an agreement with Citizens Advice committing both organisations
to work together to provide the best possible service to customers
making enquiries about their benefits, or other Jobcentre Plus
related issues, at Citizens Advice Bureaux.
62. The Department for Business Enterprise and
Regulatory Reform (BERR) provides Citizens Advice Scotland (CAS)
with an annual grant-in-aid. CAS is the national umbrella organisation
for the Citizens Advice Service in Scotland, and part of its role
is to provide expert help and training for the advisers working
in Citizens Advice Bureaux. The grant provided by BERR for 2007/08
was £2.91 million, and funding for 2008/09 is likely to be
at a similar level.
18. In addition to plans for an online system,
frontline employees in a range of services should be equipped
with a basic knowledge of the tax credits and benefits system
so that they can assess whether a household is claiming its full
entitlement and give advice on where to go for further information.
Where convenient, greater use could be made of co-location so
that benefits checks are part of a local 'one stop shop'. (Paragraph
76)
63. We have highlighted the role of the In and
Out of Work pilots at paragraph 56 above. The new processes are
being piloted in six local authority areas, including West Lothian,
from 12 September 2007. The pilots are running to March 2008 to
allow for full testing of the processes. A detailed evaluation
will take place in order that a decision can be made on the way
forward.
64. Take up of tax credits for families with
children is higher than any previous system of income-related
financial support for in-work families. Many agencies, particularly
the voluntary sector, provide valuable advice on tax credits but
assessment of entitlement is a matter for HMRC and other agencies
should refer claimants there. The tax credits helpline is open
seven days a week from 8am to 8pm.
19. In the areas of welfare advice and co-location
of services there is clear benefit to be gained by working with
local authorities. (Paragraph 77)
65. A Partnership Accord sets out the basis for
building on and improving the collaborative working in Scotland
between DWP, the Scottish Executive, and CoSLA, building on the
existing good practice.
66. Jobcentre Plus/Local Authority joint boards
provide a forum for nominated Jobcentre Plus and Local Authority
officials to discuss various issues, explore best practices, and
implement a programme of activities that supports improvements
in administration.
67. TPS development of Joint Working Partnerships
with Local Authorities and voluntary sector organisations has
proven to be the most effective way of reaching customers who
are entitled to benefits that are not being taken-up. TPS is currently
working with all 203 primary tier Local Authorities across England,
Scotland and Wales and other partners.
68. TPS Local Service is also working with Local
Authorities and voluntary organisations to improve customer service
delivery within local communities, through the creation of designated
Alternative Offices that allow Local Authorities and voluntary
organisations to accept benefit claims.
20. We urge the Government to consider establishing
a transitional benefit aimed at alleviating the costs of entering
employment. (Paragraph 81)
69. The Government currently provides a Job Grant,
worth £100 or £250 depending on circumstances, to long-term
benefit claimants taking up full time work of at least 16 hours
per week.
70. In November 2007, the Prime Minister announced
that the Government will be introducing a better off in work credit.
This credit will ensure that people who have been claiming out-of-work
benefits[10] for 26 weeks
or more will receive an in-work income (including in-work benefits)
of at least £25 a week more than they received from their
out-of work benefits. Payment of the credit would be made for
up to 26 weeks.
21. The Government now needs to ensure that everyone
living in poverty really would be financially better off in work.
Without this approach, the reduction in poverty over the last
ten years will not be sustained in the next decade. (Paragraph
82)
71. Under the current tax and benefit system
there are very few circumstances in which an individual receives
less money from earnings and in-work financial support than they
would receive in out-of-work benefits, and most of the Government's
priority groups receive significantly more in work. This situation
is helped by the substantial in-work support the Government has
already provided for these groups such as Working Tax Credit,
the payment of the In-Work Credit to lone parents and of the Return
to Work Credit to disabled people.
72. We have highlighted the introduction of our
better off in work credit at paragraph 70 above. DWP plans to
begin a pilot of the credit by October 2008 and, if successful,
will look to extend it nationally in 2009.
22. We urge the UK Government, the Scottish Executive
and local authorities to consider ways in which the high costs
of transport in rural areas can be alleviated. (Paragraph 87)
73. The issue of public transport service provision
in rural areas is a matter for the Scottish Executive, and we
have drawn their attention to this recommendation.
23. In this Report, we have highlighted the importance
of co-ordinating initiatives in different administrations and
policy areas in order to reduce unnecessary duplication and to
ensure that policies are 'poverty proofed' across the board. This
is doubly important for rural communities, where accessibility
is key and a range of welfare advice must be made available from
a single point of contact. (Paragraph 94)
74. We offer information in the response to recommendation
24 below on our work to improve the accessibility of services.
24. We conclude that rural poverty presents its
own challenges, which will not be solved by an approach tailored
to the small pockets of deprivation characteristic of urban poverty.
It is vital that the Government's anti-poverty policies are subject
to 'rural proofing'. Witnesses have suggested that the establishment
of a Commission for Rural Scotland might be a way to give rural
communities a stronger, unified voice and we hope that the Government
and the Scottish Executive will consider this proposal. Greater
investment in outreach is needed to ensure that geographically
dispersed communities have equal access to services. (Paragraph
96)
75. The
Government agrees that co-ordination of initiatives to reduce
duplication and ensure poverty proofing is important. An important
element in this is ensuring that everyone has access to the services
appropriate to them.
76. TPS Local Service is working with Local Authorities
and voluntary organisations, to improve customer service delivery
within local communities, through the creation of designated Alternative
Offices that allow Local Authorities and voluntary organisations
to accept benefit claims.
77. TPS Local Service
also visits people in their own home or provides appointments
at one of its 787 Information Point locations across England,
Scotland and Wales; approximately 50 percent of the Information
Points are in rural areas. Jobcentre Plus has also made arrangements
with some local bus companies where Jobcentre Plus can issue a
bus warrant to enable people to travel to interviews in its offices.
78. DWP's City Strategy aims to deliver a significant
improvement in the working age employment rate for disadvantaged
groups through devolving decisions and resources to local Consortia. It
is recognised that communities of all kinds have pockets of labour
market disadvantage. The importance of cities has been emphasised
because this is where the major concentrations of low employment
exist, but in fact the pathfinder areas cover a range of geographies,
including small towns and rural communities.
25. The Government should review its eligibility
criteria for benefits aimed at alleviating fuel poverty. In particular,
both Winter Fuel Payments and Cold Weather Payments could be extended
to those in receipt of disability-related benefits. As part of
this review, consideration should be given to establishing a form
of regional weighting that would recognise the increased burden
in fuel costs to colder parts of the UK. (Paragraph 105)
79. Cold Weather Payments (currently £8.50)
are paid automatically to people awarded Pension Credit and those
awarded Income Support or income-based Jobseeker's Allowance,
who are receiving a pensioner or disability premium, or have a
child who is disabled or under the age of five, when the temperature
at a specified weather station, linked to the eligible person's
postcode, has been recorded as, or is forecast to be, 0°C
or below over seven consecutive days.
80. The Winter Fuel Payment is a national scheme
available to most people aged 60 or over and the amounts paid
from it are the same throughout Great Britain. It would add complexity
and expense to take account of regional differences in temperatures,
given variations between areas of the UK are not extreme.
81. For disabled people, help is already available
through disability benefits and the disability premium in income-related
benefits in recognition of the extra costs, including heating,
which disabled people may have. Around 60 per cent of those who
receive Disability Living Allowance (DLA) and/or Attendance Allowance
are aged 60 or over and automatically receive a Winter Fuel Payment.
26. We cannot understand why the take-up of Fuel
Direct should have fallen at the same time that fuel debt is rising.
We urge the Government to look into the cause of this fall as
a priority. (Paragraph 112)
82. DWP does not discourage the use of Fuel Direct.
Regular liaison between DWP and the fuel companies takes place
and is intended to ensure that suppliers know how to identify
the right candidates for the scheme. The number of people using
Fuel Direct has fallen significantly, although this downward trend
bottomed out in 2006 and the latest figures for 2007 show a marginal
increase.
83. The main reason for this long-term decline
is that the eligible benefit population—chiefly recipients
of the working-age benefits Income Support and Jobseeker's Allowance
—has declined. In other words, Fuel Direct volumes have
gone down as employment has gone up. For example, the number of
Fuel Direct customers on Jobseeker's Allowance fell from over
30,000 in February 1997 to around only 2,200 in May 2006, reflecting
a steep reduction in the JSA population over the same period.
Also in this timeframe, around 200,000 lone parents receiving
income support found work.
27. The reduction of fuel poverty is an area in
which greater co-operation and coordination between the UK Government,
the Scottish Executive, energy companies and Ofgem is required.
(Paragraph 119)
84. We have found that energy efficiency measures
are often best delivered at a local level, which is why the
Chancellor announced in his Pre-Budget Report 2006 that £7.5m
would be made available across the UK in 2007/08 to improve the
effectiveness of fuel poverty programmes and the Energy Efficiency
Commitment that applies to suppliers. Of this £634,000
was allocated to the Scottish Executive as consequentials.
85. However, the Government does recognise that some measures
to alleviate fuel poverty do benefit from greater co-ordination
between suppliers, scheme managers, Ofgem, the Government
and the Devolved Administrations. That is why Ofgem,
the energy suppliers, eaga, the Warm Front Scheme Manager,
and the Department for Work and Pensions are working together
on a mail-out to all those across the UK, in receipt of Pension
Credit, to tell them about the energy efficiency measures that
the energy companies will install, free of charge, as part of
their Energy Efficiency Commitment targets, now known
as Carbon Emissions reduction target. The letter will also direct
customers to a helpline where they will be given information specific
to their locations. This follows a commitment in the Energy
White Paper, that we would work to get maximum use from
the benefit data held by Government to target those most in need
of assistance.
86. We will continue to work in co-operation
with the Scottish Executive, suppliers and Ofgem to alleviate
fuel poverty in Scotland.
28. We are concerned that the UK Government, the
Scottish Executive and local authorities should co-ordinate their
efforts, particularly in the area of illegal money lending. (Paragraph
123)
87. The UK Government works in partnership with
local authorities and the Scottish Executive to tackle the issue
of illegal money lending. In addition, a broad range of stakeholders
in Scotland are cooperating with the Scottish Illegal Money Lending
Team. They include the police, the courts, credit unions and community
development finance initiatives, and other financial inclusion
partners, such as debt advice agencies. The UK Government will
continue to build upon and strengthen these partnerships in order
to track down and prosecute loan sharks, and to provide victims
of loan sharks with the support they need to make a permanent
transition away from illegal lenders.
29. We believe that there is a case for Courts
to be empowered to impose an interest rate cap in order to prevent
severe poverty or destitution. (Paragraph 128)
88. BERR commissioned independent research on
this issue which investigated the effect of interest rate ceilings
in France, Germany and the USA. The research found that:
- Lenders in these countries
do not provide credit for small loans repayable over a short period,
thus excluding some low-income consumers from the market or leading
others to take out larger loans than they need;
- The choice of products is reduced, limiting competition;
- Some low-income consumers will take out credit
on products that have extra charges which are not included in
the interest rate calculation, but which low income consumers
are particularly likely to incur, such as late payment charges;
and
- The percentage of consumers who admitted to having
borrowed from unlicensed or illegal lenders was twice as high
in Germany and France as in the UK.
89. On this basis the Government decided not
to impose an interest rate cap. In particular we were concerned
that to do so would reduce the range of credit products available
and could result in vulnerable consumers using inappropriate alternative
products or even going outside the regulated market to loan sharks.
However, we will look again at this issue if presented with fresh
evidence that overturns these findings.
90. Consumers do have recourse to redress from
the Courts where they are treated unfairly by a lender, which
may include being charged extortionate interest. The Consumer
Credit Act 2006 introduced a new "unfair relationships test".
This enables a borrower to challenge a credit agreement in court
on the grounds that the relationship between the lender and the
borrower is unfair to the borrower. This provision is in addition
to an enhanced ability for consumers to take disputes to the Financial
Ombudsman Service.
91. The unfair relationships provisions replaced
previous provisions relating to extortionate credit bargains,
which were generally held to be inadequate to protect consumers.
The new provisions, which came into effect on 6 April 2007, enable
the Courts to take into account any feature of a credit agreement
or linked agreement, and any aspect of a lender's behaviour throughout
the lifetime of the agreement, in considering whether the relationship
is unfair. This includes linked agreements for ancillary products
such as insurance as well as the behaviour of agents acting on
behalf of the lender, including debt collectors.
30. We endorse the recent recommendation of the
Work and Pensions Select Committee that the Government should
look in more detail at the potential for increasing the eligibility
for the Social Fund. We believe that the Social Fund should be
reformed and expanded through an increase in resources. A more
extended service of affordable credit to those in most need could
offer a real alternative to high cost credit. (Paragraph 136)
92. The Government is exploring ways in which
reform of the Budgeting Loan scheme could contribute to a wider
increase in lending capacity. The Government's Financial Inclusion
Action Plan for 2008 to 2011 announced plans to conduct a feasibility
study to look into whether the private and third sectors could
be brought into partnership with the Government in delivering
a reformed Social Fund Budgeting Loans scheme.
93. The Growth Fund, which is now delivered by
over 120 credit unions and community development finance institutions
across Great Britain, is to be expanded considerably during 2008/11.
Work to expand coverage is already underway and has been discussed
in detail with the Scottish Executive. Up to 31 December 2007,
3,284 affordable loans, totalling almost £1.5 million, had
been made to financially excluded people in Scotland.
31. Our evidence leads us to conclude that more
action on irresponsible lending is necessary. Lenders must be
obliged to offer credit responsibly and above all transparently.
This is not the only solution. Once again, in order to tackle
the problem of debt, a coherent strategy must be implemented across
a range of policy areas, from the regulation of credit agencies
to better education in financial literacy. Co-ordinated action
will be needed on the part of the UK Government, the Scottish
Executive and local authorities to ensure this takes place. (Paragraph
142)
94. Ensuring that lenders do take a responsible
attitude to the provision of credit has been a key priority for
the Government in its recent reform of consumer credit law. The
Consumer Credit Act 2006 introduces a stronger, more effective
consumer credit licensing regime giving the Office of Fair Trading
(OFT) increased powers to take action against unscrupulous lenders
and unacceptable practices.
95. From April 2008 OFT will be able to assess
a company's ability to run its business in a fit manner in the
future, as well as assessing past conduct, and to monitor the
conduct of a licence holder on an ongoing basis. OFT will target
businesses that work in areas where there is high consumer detriment,
such as the home credit market, subjecting these businesses to
more in-depth scrutiny.
96. In terms of a coherent strategy to tackle
the problem of debt, in 2004 the Government produced the "Tackling
Over-indebtedness Action Plan" to which all relevant departments
and devolved administrations contributed, including the Scottish
Executive. The latest update on progress was given in the recent
"Tackling Over-indebtedness - Annual Report 2007". This
provides comprehensive background to the action being taken and
the commitment to dealing with over-indebtedness in the future.
Once again, the Scottish Executive was fully involved in its production
as part of a fully co-ordinated effort by Government and its partners
to tackle the twin aims of stopping people getting into unmanageable
debt and helping those who do.
97. The UK Government has recognised that improving
levels of financial capability—that is the knowledge, skills
and motivation to understand one's own financial circumstances—needs
to start young and that means in schools. Financial education
within the curriculum in Scottish schools is the responsibility
of the Scottish Executive.
98. In January 2007 the Government set out its
long-term approach to financial capability when it set out its
aspirations for the next 10-20 years. Apart from the need for
a planned programme of education in schools the Government commissioned
Otto Thoresen, CEO of Aegon UK, to conduct a feasibility study
into a national approach to Generic Financial Advice (GFA), that
is independent advice, which helps people manage their money better
and make confident financial decisions. Thoresen delivered his
final report on 3 March 2008. The Government has accepted his
central recommendation for a £12 million money guidance 'pathfinder',
to be delivered jointly with the Financial Services Authority.
The Government will set out further details about this and respond
to Thoresen's other recommendations as part of the financial capability
action plan due in late Spring.
32. Our inquiry has confirmed that a welcome reduction
in poverty has taken place over the past ten years, particularly
amongst vulnerable groups such as pensioners and children. This
reduction must continue over the next decade. In order for this
to happen, the Government needs to make a concerted effort to
present a coherent anti-poverty strategy across all policy areas,
joining up across government departments as well as with the work
of the Scottish Executive and of local government in Scotland.
On present evidence, we do not believe that the Government is
doing enough to 'poverty-proof' all of its policies and to exploit
the available opportunities to integrate services. (Paragraph
143)
99. The Child Poverty Review 2004 articulated
the Government's comprehensive strategy for tackling child poverty,
setting out a number of priorities: providing financial support,
increasing employment, tackling material deprivation, and improving
children's life chances. The Child Poverty Review consulted with
the devolved administrations to learn from relevant best practice,
and it is committed to continued collaborative working.
100. The Government has continued to invest in
financial support—taken together, Budget 2007, PBR 2007
and Budget 2008 will help lift over 500,000 more children out
of poverty, and make significant progress against the PSA target.
101. The Child Poverty PSA Delivery Agreement,
published in October 2007, built on the Child Poverty Review,
and reaffirmed the Government's commitment to tackling child poverty.
The Delivery Agreement embeds the child poverty strategy across
HMT, DCSF, DWP, and the relevant Cabinet Committees, and will
drive performance by regularly monitoring progress and holding
departments to account. The PSA also indicates that, where possible,
delivery activity in Scotland will be taken into account and included
in future reporting arrangements. The Government will continue
to work with Local Authorities and partners to ensure that they
have the flexibility and capacity to deliver the best solutions
to meet local needs, drive up standards and improve the services
they provide.
102. Ending child poverty: everybody's business,
which was published alongside Budget 2008, sets out the further
steps the Government will take to tackle child poverty including
the new approach the Government will pilot and further areas of
work that will help develop the strategy for 2020. This includes
£125 million to fund pilots across the UK to prepare for
the next decade including looking at new approaches to increasing
parental employment and raising incomes, to tackling deprivation
in communities and to improving poor children's life chances.
The Government believes that ending child poverty requires a sustained
national, regional and local effort involving the devolved administrations,
across all agencies, service providers and professionals and including
communities and business. Ending child poverty: everybody's
business sets out the Government's vision for a 'contract
out of poverty' in which all parts of society pledge to do their
bit to tackle child poverty.
103. As mentioned in paragraph 19, the UK's NAP
is specifically intended to join up action across the UK (including
devolved administrations and local government). The NAP also allows
mainstream social inclusion across a wide range of policy areas
through the Stakeholder Group. Representatives of a wide range
of Government Departments, of the devolved administrations and
local government meet regularly with NGOs and people experiencing
poverty. Subject-specific seminars (for example on the economic
inclusion of Gypsies and Travellers) allow a more in-depth discussion
as well as making the link between people experiencing poverty
and decision makers across government.
104. Where the levers for tackling poverty are
devolved, the Government is committed to working with the Scottish
Executive.
33. This inquiry has highlighted a number of issues
that are of particular concern. The Government's focus on work
and the national minimum wage as routes out of poverty has been
responsible for a substantial part of the reduction in poverty
that has been achieved so far. The Government cannot rely on economic
growth alone to reduce the inequalities in society. Those that
remain out of work face considerable barriers in the form of inadequate
childcare, geographical isolation, employer attitudes or provision
for disabilities. A considerable amount of work will be needed
to remove these obstacles and we are not confident that the Government
appreciates the scale of the task it faces. (Paragraph 144)
105. The Government agrees that those that remain
out of work do face a number of barriers and it is working to
help people overcome them. DWP is working closely with the Scottish
Executive in those areas of policy that are devolved including
education and childcare.
106. There are a range of programmes and services
to support disabled people into employment. For example, DWP manages
a number of employment schemes aimed at helping disabled people
start and retain work. These include Pathways to Work, the New
Deal for Disabled People, WORKSTEP, Work Preparation and Access
to Work.
107. The recent publication Ready for work:
full employment in our generation also sets out the Government's
next steps in helping even more people, such as lone parents and
the long-term unemployed, to make the move into work.
34. Our evidence also suggests that some of those
who have entered work in recent years have taken on low paid jobs
with few prospects of advancement. Those in seasonal employment
can hover around the poverty line in a 'no pay, low pay' cycle.
Sustainable routes out of poverty can be provided by genuine career
paths which, although they may start on relatively low pay, offer
the chance of progression. The introduction of the minimum wage
has made a significant contribution to reducing poverty. The setting
of an appropriate rate needs further investigation, but in principle,
pay should be fixed at a level so that no-one in full time work
is living in poverty. The relatively poor progress that has been
made on reducing poverty amongst single adults of working age
is evidence of the problems in this area. (Paragraph 145)
108. Information on recent announcements on an
increase to the level of the national minimum wage has been provided
at paragraph 41 above.
109. Lord Leitch set out in his report Prosperity
for all in the global economy in December 2006 the challenges
faced by the government in developing the skills of individuals
and achieving sustained employment, challenges which are common
across all four parts of the UK. DWP has been working with the
Scottish Executive to understand how Lord Leitch's proposals for
an integrated employment and skills service may be implemented
to provide the right skills support to meet the needs and particular
circumstances of individuals in Scotland.
35. Rural poverty, fuel poverty and debt have
been particular focal points for this inquiry. Each of these areas
raises distinctive issues, discussed in detail above. We are concerned
that, despite good intentions, there is a lack of integration
and too much complexity in these areas. The Government could do
more to integrate different policy streams and to work co-operatively
with stakeholders, including local authorities, with whom relationships
appear to have weakened, and the Scottish Executive. (Paragraph
146)
110. The Government takes a joined-up approach
to tackling poverty, which is an integral part of multiple policy
areas and a key Government priority.
111. The Government is committed to tackling
fuel poverty, and has spent £20bn on benefits and programmes
since 2000. A number of existing and enhanced policy measures
of relevance across the UK have been developed, including the
Winter Fuel Payment to pensioners, and the substantially expanded
Priority Group obligation within the Carbon Emissions Reduction
Target. Spending in this area is a devolved matter, and the Scottish
Executive has its own spending programme to provide insulation
and central heating measures as part of its strategy for tackling
fuel poverty.
112. The UK Government continues to have a good
working relationship with the Scottish Executive. Officials maintain
contact with their counterparts within the Scottish Executive
to ensure that key reserved policies on tackling poverty, such
as those in relation to welfare reform, work effectively within
the Scottish context.
36. The fight against poverty has not yet been
won. Recent progress in reducing poverty must continue over the
next decade. More resources and an even greater effort will be
needed to reach those groups that have not yet benefited from
the economic growth enjoyed by the UK as a whole. (Paragraph 147)
113. As the Committee acknowledges, progress
has been made on tackling poverty.
114. The UK Labour Force Survey[11]
indicates that 15.9 per cent of children live in workless households,
a fall of 450,000 (or 2.9 percentage points) since 1997. This
is greater than the rate of improvement seen in the EU15, where
the proportion of children in workless households has fallen by
1.9 percentage points since 1997.
115. Across the UK as a whole previously disadvantaged
groups, such as lone parents, people aged over 50 and those with
disabilities, have seen some of the greatest improvements
in labour market outcomes since 1997. However, the Government
is aware that more needs to be done and has proposed further reform
to build an inclusive, cohesive and prosperous society for all.
Ready for work: full employment in our generation sets
out how the next phase of welfare reform will make this vision
of society a reality.
Child Poverty in Scotland — Conclusions
and Recommendations
1. We are concerned by the recent apparent slowdown
in the reduction of child poverty in the UK but are pleased to
note that Scotland is doing better at reducing child poverty than
the UK as a whole. The Government should analyse the reasons for
this relatively good performance so that successful strategies
can be identified and deployed more widely. (Paragraph 13)
116. Budget 2008 set out the next steps, including
measures to make significant further progress towards the target
of halving child poverty by 2010 including: a further £50
increase to the child element of Child Tax Credit from April 2009,
an increase to the first child rate of Child Benefit to £20
from April 2009, and the introduction of a Child Benefit disregard
for Housing Benefit and Council Tax Benefit purposes. As highlighted
in paragraph 100 above, measures announced in the last year will
lift a total of over 500,000 children out of poverty.
117. The Government believes that the child poverty
target will be met through a combination of building on the support
provided to help parents move into work and delivering targeted
financial support and by providing focused support for parents,
families and communities, and disadvantaged and vulnerable groups.
118. The Government will continue to scrutinise
good practice, including in Scotland, in order to continue developing
and strengthening its policies for the reduction and ultimate
eradication of child poverty.
2. Poverty runs in families. If levels of child
poverty can be reduced, there is an opportunity to break the cycle
of generational poverty. We therefore welcome the Government's
focus on the reduction of child poverty. The success or failure
of policies in this area will affect not only those currently
living in poverty, but generations to come. (Paragraph 17)
119. The Government agrees that it is vital to
tackle inter-generational poverty. Many of the causes of poverty
are ingrained and the Government is committed to a long-term strategy
that works. Reducing the number of workless people is critical
to breaking the cycle of deprivation and key to reducing child
poverty in this and future generations.
3. Action to tackle child poverty necessarily
targets parents, attempting to lift children out of poverty by
raising family incomes. This action would be more effective if
the position of young single adults—the parents of tomorrow—were
also improved. As we noted in our previous Report, very poor progress
has been made in reducing poverty amongst this group. The strategies
we recommended in that Report, namely, the provision of a decent
minimum income level as well as stable career paths enabling progression,
should not be seen in isolation from the problem of child poverty.
The Government also needs to work to increase the take-up of benefits
and tax credits entitlements. Maximising the incomes of young
adults will have a preventative effect on child poverty that is
sustainable for years to come. (Paragraph 23)
120. The Government agrees that young adults
are an important group in tackling child poverty. The Government
has introduced a range of measures to improve outcomes for young
people, including Government-supported apprenticeships, Educational
Maintenance Allowances, and National Minimum Wage coverage from
the age of 16, with the full adult rate starting from the age
of 22.
121. The New Deal for Young People (NDYP)[12]
gives young people the skills, confidence and motivation to help
them find work, and improve their prospects of doing so. In the
UK approximately 764,000 young people have found employment as
a result of NDYP, around 88,000 in Scotland.[13]
122. The Government also agrees that support
is required for retention and advancement in work and that all
those who need help to develop skills should have access to support.
DWP works with the Scottish Executive to provide people in Scotland
with the right skills support to move into and progress in work.
123. We noted the introduction of a better off
in work credit at paragraph 70. DWP plans to begin a pilot of
the credit by October 2008 and, if successful, will look to extend
it nationally in 2009.
124. HMRC is working to improve the take-up of
tax credits. Take-up is higher than any previous system of income-related
financial support for in-work families. In 2005-06 take up of
the Child Tax Credit was 82 per cent with 91 per cent of the money
available being claimed. Take-up amongst those of incomes of less
than £10,000 is now 96 per cent; and take-up amongst lone
parents is now 95 per cent (up from 91 per cent in the first year
of tax credits). Take-up amongst those entitled to WTC only has
been lower, and in Autumn 2006 HMRC ran a campaign targeted at
those entitled to WTC only—that is, single people and couples
with no children. Although finalized take-up statistics will not
be available for some time, current data shows that the number
of people claiming WTC only has substantially increased.
4. We are concerned by the evidence we have received
that those children living in the severest poverty in Scotland
may not have fully benefited from the recent reductions in child
poverty rates. The poorest children are not helped if the Government
meets its targets only by reaching those just below the poverty
line—a strategy that also endangers the Government's longer
term targets for the total eradication of child poverty. (Paragraph
30)
125. The Government agrees that every child living
in poverty needs to be helped and particularly those living in
the severest poverty. The Government believes that work for those
who can remains the most sustainable route out of poverty and
that is why the Government will continue to do all it can to support
parents into work. Extra resources continue to be targeted on
providing support for people who face the greatest disadvantages
in the labour market.
126. It is not just those families close to the
60 per cent threshold that have benefited from Government policy,
but also those lower down the income distribution. Compared to
1997, there are 440,000 fewer children in workless households,
the percentage of children in households with less than 50 per
cent of median income has fallen from 14 per cent to 11 per cent,
and the percentage of children in persistent poverty has fallen
from 17 per cent to13 per cent.[14]
As a result of all measures since 1997, by April 2010 families
in the poorest fifth of the population will be, on average, £4500
better off in real terms.
5. The Government needs to do more to assess what
progress has been made in raising the incomes of the poorest families.
The current child poverty targets are based on a single poverty
line of 60% of median income. This is not sensitive to variations
in standards of living that fall below this line and we therefore
recommend that additional research should be undertaken to assess
the standard of living of the poorest children. (Paragraph 31)
127. As indicated in paragraph 8, the three indicators
the Government uses to measure child poverty were developed following
extensive consultation. The headline indicator, which measures
the number of children in households with less than 60 per cent
of median income before housing costs, is also an established
measure which is used across Europe and internationally.
128. Given the recent consultation the Government
does not feel that it would be appropriate to review this measure
again at this time.
6. A significant proportion of those children
living in poverty come from households where at least one parent
is working. In order to continue to reduce child poverty, the
problems of low pay, job retention and career advancement must
be tackled. We refer the Government to the findings of our previous
Report, Poverty in Scotland, on these issues. As we stated in
that Report, "the tax and benefits system must, at a minimum,
ensure that no-one in full time work is living in poverty".
(Paragraph 37)
129. We have responded to the Committee's conclusions
at paragraph 38 and 39 above.
7. The high transitional costs experienced by
parents entering the workplace, as well as the loss of key benefits,
undermines the Government's efforts to raise incomes through making
work pay. There is a need for the Government to introduce a simplified
benefits system that allows an individual to move from unemployment
to work without losing income. (Paragraph 38)
130. Under the current tax and benefit system
there are very few circumstances in which an individual receives
less money from earnings and in-work financial support than they
would receive in out-of-work benefits, and most of the Government's
priority groups receive significantly more in work. This situation
is helped by the substantial in-work support the Government has
already provided for these groups.
131. The Government is keen to do what it can
to ease the transition from benefits to work. The design of the
benefits, tax credits, and tax system ensures that nearly everyone
receives more income in work than they would do on out-of-work
benefits. As highlighted, the introduction of a better off in
work credit will ensure that people who have been claiming out-of-work
benefits[15] for 26 weeks
or more will receive an in-work income (including in-work benefits
and Working Tax Credit) of at least £25 a week more than
they received from their out-of work benefits. Payment of the
credit would be made for up to 26 weeks. This supports the Government's
wide-ranging strategy to help people get the skills they need
to progress in work.
132. In addition to this, the tax credits system
already allows households to move into work, or to increase their
earnings, without losing any tax credits, through the £25,000
disregard. This allows a household to increase their income by
up to that amount in a single tax year without seeing any reduction
in their tax credit entitlement until the following year.
8. The Scottish Executive should do more to ensure
that resources reach disabled families, who are disproportionately
affected by poverty. (Paragraph 42)
133. This recommendation is aimed at the Scottish
Executive, and the UK Government is therefore unable to offer
a response. We have highlighted this recommendation to the devolved
administration.
9. The Government has succeeded in increasing
the incomes of many working parents through the minimum wage and
tax credits, but it must now recognise that future progress will
depend not only on financial rewards, but also on removing the
current barriers to entering work. In order to continue to reduce
child poverty, the Government's focus on getting people into work
needs to be responsive to the needs of families. Access to affordable
and suitable childcare is key, both for working parents and for
those who wish to undertake training to improve their skills and
employability. Parents of disabled children face a significant
challenge in accessing suitable childcare and support for these
families should be reviewed as a priority. We are aware of successful
local childcare projects, but the Committee believes that more
needs to be done to support these groups. (Paragraph 45)
134. The Government agrees that it is very important
to tackle the barriers to work faced by some, such as the provision
of affordable and suitable childcare. Policy for childcare is
a devolved matter, and the Scottish Executive has the responsibility
to ensure that appropriate provision and support is available
to help parents to move into work.
10. The Government has focused on work as a route
out of poverty. We welcome the recent increases in employment
for those seeking work. However, Ministers must be cautious in
suggesting that all parents are now expected to enter paid work.
The contribution to society made by full-time carers must not
be undervalued. (Paragraph 47)
135. The Government recognises the valuable contribution
made by carers to society and believes that people with caring
responsibilities should be helped to make the most of their opportunities,
including the opportunity to stay in work or to get back into
employment where possible. As part of the National Carers Strategy,
a substantial package of measures has been introduced to extend
and improve the financial support and services available to them.
This package includes a range of improvements to benefits, which
are in particular helping older and poorer carers, as well as
those able to combine some work with their caring responsibilities.
The government has launched a major review of the National Strategy
for Carers, in consultation with the principal organisations representing
carers, and carers themselves. The review of the Strategy is considering
the scope for improvements to the existing system of financial
support for carers. The outcome of the review is expected to be
published later in 2008.
136. Moreover, lone parents who are unable to
work because of caring obligations,[16]
health conditions or disability can continue to claim Income Support
or other appropriate benefits.
11. Our previous Report on Poverty in Scotland
concluded that the best way of tackling poverty was through a
joined up approach, integrating services provided by the UK Government,
the Scottish Executive and local authorities. Although there is
clearly more to be done, we are pleased that co-operation between
these bodies appears to have helped to reduce child poverty in
Scotland. Tackling child poverty requires combined effort and
a genuine political will. We hope that the historically close
collaboration between the UK Government and the Scottish Executive
in this area will continue. (Paragraph 53)
137. The Government is committed to eradicating
child poverty in a generation and agrees that a joined-up approach
with local authorities and the Scottish Executive is very important
in tackling child poverty in Scotland.
138. The Joint Child Poverty Unit will meet regularly
through the Four Country Devolved Policy Forum with their counterparts
in the devolved administrations to share best practice and information.
12. Child Tax Credits have been a key factor in
reducing levels of child poverty, but given the complexity of
the tax credit system, we are concerned that the Government should
do its utmost to ensure that families are aware of their entitlements
and that they can access the full range of support that is available.
Even if the take-up of tax credits improves, significantly more
resources will be needed in order to reach the 2010 target of
lifting half of children out of poverty from the 1997 baseline.
(Paragraph 62)
139. Take up of tax credits for families with
children is higher than any previous system of income-related
financial support for in-work families. Figures published in March
2007 show that in 2004-05 take up of the Child Tax Credit rose
in the UK from 79 per cent to 82 per cent with over 90 per cent
of the money available being claimed. The take up in Scotland
was similarly high at 82 per cent with 94 per cent of the money
claimed. Take-up amongst those of incomes of less than £10,000
in the UK is now 97 per cent.
140. As part of the CSR the Government announced
a new Public Service Agreement reaffirming its commitment to halve
child poverty by 2010-11 and the Government published a Delivery
Agreement outlining how Government will work across departments
to meet this commitment. The PSA indicates, where possible, delivery
activity in Scotland will be taken into account and included in
future reporting arrangements
141. Paragraph 116 above also outlines recent
Budget announcements which, along with other announcement from
the past year, will help to lift 500,000 more children out of
poverty.
13. The Government needs to keep the balance of
its targeted programmes of support under review. It is possible
that, once some groups have been helped out of poverty, others
may be left behind. The tax and benefits system must be flexible
enough to respond to these changing needs. (Paragraph 65)
142. The Government wants no one left behind
in poverty and is committed to building an inclusive, cohesive
and prosperous society with fairness and social justice at its
core.
143. Over the past ten years the biggest improvements
have been amongst the groups that started off in the worst position.
However, the Government recognises that there is more to do.
144. Ready for Work: full employment in our
generation sets out the Government's strategy to move people
from being spectators on the margins—as recipients of benefits—to
becoming participants, actively seeking and preparing for work.
It also outlines the Governments' long term objectives for transforming
the benefits system by making it simpler and less complex.
14. The UK welfare system today is a mixture of
universal and targeted programmes, embodied in the different forms
of support provided by Child Benefit and tax credits. Our inquiry
has found evidence that children in the poorest families may not
be reached by some of the current government policies, which focus
on means-tested benefits and employment. In this context, increases
in Child Benefit, which has a high take-up and is universally
available, seem attractive. It is undeniable, however, that increases
in Child Benefit would also go to rich families. The Government
needs to consider carefully whether there is a way to reach the
poorest families through a targeted benefit, or if universal support
is the only reliable method of raising incomes amongst this group.
(Paragraph 70)
145. It is not just those families close to the
60% threshold that have benefited from Government policy, but
also those lower down the income distribution. Compared to 1997,
there are 440,000 fewer children in workless households, the percentage
of children in households with less than 50% of median income
has fallen from 14% to 11%, and the percentage of children in
persistent poverty has fallen from 17% to 13%. As a result of
all measures since 1997, by April 2010 families in the poorest
fifth of the population will be, on average, £4500 better
off in real terms.
146. The Government's system of financial support
for families is based on the principle of progressive universalism,
delivering help for all families and more help for those who need
it most.
15. Children in larger families are at greater
risk of poverty. Our evidence suggests that equalising the rate
of Child Benefit would help many of the poorest families. We are
attracted to this idea but consider that further research is needed
to establish whether this is the most practical way of reducing
poverty in large families. (Paragraph 74)
147. The Government is committed to the principle
of universal Child Benefit, paid to the main carer, as the foundation
of its support for children.
148. A higher rate of Child Benefit for second
and subsequent children would be one way to reduce child poverty
in large families. However, it would not be the most targeted
form of support for those with the lowest incomes.
149. The Government's current strategy of financial
support for low to moderate income families includes the Child
Tax Credit (CTC). It particularly benefits large families which
have seen the biggest falls in poverty. The child element of CTC
is now £1,845 a year, an increase of £400 since its
introduction in 2003. The child element will rise further to a
projected £2,085 from April 2008. A low-income three-child
family currently receives £8,280 support each year through
Child Benefit and the CTC. Three-child families who earn up to
£50,000 receive at least £2,740 Child Benefit and CTC
a year.
16. We have had representations to consider seriously
the option of establishing a twice yearly seasonal grant for families
in receipt of Income Support, Jobseeker's Allowance or the maximum
Working Tax Credit. Throughout this Report we have emphasised
the importance of simplifying the benefits system. We are concerned
that establishing a new seasonal grant might increase the bureaucracy
involved. We do believe that resources should be devoted to helping
low income families to cope with large items of one-off expenditure
which might otherwise push them into poverty. It might be possible
to achieve this by allocating additional resources to the Social
Fund, as recommended in our previous Report. (Paragraph 76)
150. The Government has an ambitious programme
of welfare reform under way in which simplification plays a crucial
part. It will continue to pursue simplification vigorously where
it supports the strategic aims of promoting full employment, supporting
children and families and delivering security, dignity, social
justice and independence.
151. The Government is exploring ways in which
reform of the Budgeting Loan scheme could contribute to a wider
increase in lending capacity. The Government's Financial Inclusion
Action Plan for 2008 to 2011 announced plans to conduct a feasibility
study to look into whether the private and third sectors could
be brought into partnership with the Government in delivering
a reformed Social Fund Budgeting Loans scheme
152. Many people on low incomes need to borrow
from time to time to help manage their cash flows or deal with
unexpected expenses. Via the Growth Fund, £42 million has
been invested in over 120 credit unions and community development
finance institutions to increase the supply of affordable credit.
The recent allocation of a further £38m for the period 2008-2011
will mean that many tens of thousands more people will have access
to affordable credit.
17. Our evidence indicates that those young people
who stand to gain the most from training courses experience the
greatest difficulties in securing access and financial support.
The generational cycle of poverty will not be broken unless the
Government ensures that young adults are supported to gain the
skills necessary for a life free from poverty. Age-based discrimination
in the tax and benefits system undermines progress in this area
and we therefore recommend that it should end. (Paragraph 80)
153. The Government agrees that young adults
need to be supported to gain the skills they require and New Deal
for Young People (NDYP) provides this support.
154. The DWP is making changes to New Deal from
April 2008 to make sure that 18-year olds previously not in education,
employment or training can, by agreement with their personal adviser,
be fast tracked to the NDYP Gateway on a voluntary basis. From
2009, DWP will take this approach further by making fast tracking
to the flexible New Deal Gateway mandatory for 18-year olds who
have already spent at least six months not in education, employment
or training. Customers participating in the Gateway receive intensive
support to find work. In return, there is a greater requirement
for them to demonstrate that they are looking for work and taking
steps to improve their job chances.
155. In October 2007 the Pre-Budget Report announced
the abolition of the lower Income Support and Jobseeker's Allowance
rate for 16 and 17 year olds. They will instead receive the same
rate as paid to single 18 to 24 year olds, which will significantly
increase help for over 15,000 of the most disadvantaged young
people.
18. We welcome the progress that has been made
in reducing child poverty since 1997, which has been achieved
as a result of unprecedented levels of investment and a strong
political will that now, appears to be shared by all. Poverty
is often passed from generation to generation. The reduction of
child poverty therefore offers the opportunity to break the cycle
of deprivation. Nonetheless, the levels of child poverty in Scotland
are still high by international standards and there is some evidence
to suggest that progress is slowing down. In order to reach the
target of halving child poverty by 2010, the Government will need
to match, if not surpass the level of resources and of commitment
of the past decade. (Paragraph 81)
156. Government policies so far have made a considerable
impact on child poverty, particularly in Scotland, but it is recognised
that there is more to do if the cycle of deprivation is to be
broken. The announcement of a new Public Service Agreement reaffirms
the commitment to halve child poverty by 2010 and a Delivery Agreement
has been published outlining how Government Departments and delivery
partners will work together to meet this commitment. Through building
on the success of policies helping parents into work and delivering
the right financial support, the target can be met.
157. Budget 2008 set out the next steps, including
measures that will make significant further progress towards the
target of halving child poverty by 2010. The measures announced
in Budget 2008 will lift up to a further 250,000 children out
of poverty. Including the reforms announced in Budget 2007 and
the 2007 Pre-Budget Report and Comprehensive Spending Review,
measures announced in the last year will lift a total of over
500,000 children out of poverty.
158. Ending child poverty: everybody's business,[17]
which was published alongside the Budget,
sets out the further steps that the Government will take to tackle
poverty during the next decade including new pilots and further
areas of work that will help develop the strategy for 2020. These
new pilots will look at new approaches to increasing parental
employment and raising incomes, to tackling deprivation in communities
and to improving poor children's life chances. The Government
also announced that it will be bringing forward a radical reform
package to extend and improve opportunities and incentives to
work, make progress towards the target on child poverty, and to
encourage independence, choice and control for disabled people.
159. As a result of the Government's reforms
to the tax and benefit system since 1997, by April 2010 and in
real terms, households with children will be, on average, £2,000
better off; and households with children in the poorest fifth
of the population will be, on average, £4,500 better off.
19. We recommend that the targeted nature of welfare
support should be reviewed to ensure that help is reaching those
most in need. Throughout this Report, we have emphasised the importance
of a simplified tax and benefits system. (Paragraph 82)
160. We have provided information on our work
towards a simplified benefits system in response to recommendation
17 within the volume 1 report, and paragraph 163 below also refers.
20. Child poverty can be tackled through many
of the same strategies as poverty in general. By maximising the
incomes of parents (and parents-to-be), children will no longer
be born into poverty. Our previous Report on Poverty in Scotland
emphasised the need for an integrated strategy, working co-operatively
with the Scottish Executive and local authorities. There is evidence
to suggest that this approach has led to a relatively greater
reduction in child poverty in Scotland, compared to the UK as
a whole. However, inconsistencies and administrative complexities
remain in some areas of the welfare system. These need to be removed
if further progress is to be made. (Paragraph 83)
161. The Government believes that work for those
who can remains the most sustainable route out of poverty and
that is why it will continue to do all it can to support parents
into work.
162. All of the Government's welfare programmes
and policies are kept under regular review to ensure that the
needs of the most disadvantaged, including children living in
poverty, are met.
163. The Government accepts that the benefit
system is too complex. A simpler system with clear outcomes for
our customers and for DWP in delivering its services is a principal
aim. Fundamental change will take many years to implement and
the Government is committed to assessing the best way to do this
whilst balancing the needs of its customers within resources available.
164. In all of this action to continue to tackle
poverty in Scotland co-operative working with the Scottish Executive
and local authorities is vital.
3 Before housing costs. Back
4
DWP will publish poverty estimates for 2006-07 in the next Households
Below Average Income report in spring 2008. This is a National
Statistics publication, and the date of publication will be announced
in line with National Statistics protocols. Back
5
After housing costs Back
6
www.hm-treasury.gov.uk/media/3/F/bud08_childpoverty_1310.pdf Back
7
Department for Work and Pensions, Ready for work: full employment
in our generation, Cm 7290, December 2007 Back
8
See www.dwp.gov.uk/publications/dwp/2006/nap/ Back
9
Department for Work and Pensions, A new deal for welfare: Empowering
people to work, Cm 6730, January 2006 Back
10
Incapacity Benefit (and ESA from its introduction) Income Support
or Jobseeker's Allowance Back
11
2007, quarter 2, published August 2007. Back
12
NDYP is mandatory for all 18-24 year olds who have been claiming
Jobseeker's Allowance (JSA) for 6 months. Back
13
NDYP figures to May 2007. Back
14
Persistent poverty figure is GB only. Back
15
Incapacity Benefit (and Employment Support Allowance on its introduction),
Income Support or Jobseeker's Allowance Back
16
For example if they have children for whom the middle or highest
rate care component of DLA is payable, or they claim Carers Allowance,
or are fostering), Back
17
www.hm-treasury.gov.uk/media/3/F/bud08_childpoverty_1310.pdf Back
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