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'(b) the percentage of children living in qualifying households in the United Kingdom in the target year who were living in households that fell within the relevant income group for the purposes of section [The relative low income after housing costs target] (Relative low income after housing costs target);'.
'(b) the percentage of children living in qualifying households in the United Kingdom in the renewed target year who were living in households that fell within the relevant income group for the purposes of section [The relative low income after housing costs target] (Relative low income after housing costs target);'.
Steve Webb: A wry smile crosses our faces when it is announced that this Bill is the main business of the day, but in fact it is, in the sense that child poverty is a crucial issue. That view is certainly shared by all those who served on the Committee that considered the Bill.
New clause 1 arises from the discussions that we had in Committee about the most appropriate method of measuring poverty. Hon. Members will know that there are in the Bill four measures or targets relating to poverty, which combine various facets of income, material deprivation, persistence of poverty, and relative and absolute poverty. Clearly, it is welcome that the Bill does not settle on a single definition but recognises that poverty is multi-faceted and that one statistic does not do justice to the whole problem.
In Committee, we discussed the most appropriate treatment of housing costs. My hon. Friend the Member for Edinburgh, West (John Barrett) and I proposed that, for the purpose of income measures, we should measure income after the deduction of housing costs. One of the arguments that the Treasury Minister who responded to our proposal made against it was that replacing the before-housing-costs measure would cause a problem, because we would not have comparable statistics for use in international comparisons. In other words, if we got rid of the before-housing-costs measure and imposed an after-housing-costs measure, our statistics would not line up with those from other EU countries and the OECD.
The point of debates in Committee is to reflect on such issues and then to come back on Report with revised amendments, and that is what we have done in this case. Rather than suggest that we replace the before-housing-costs measure with an after-housing-costs measure, we now suggest in new clause 1 that we do not replace the four existing targets but add a fifth-income after housing costs. That definition will be familiar to the House. It relates to information that is published regularly in the "Households Below Average Income" statistics, so it requires no additional statistical work. The figures are already there, but they would be given the same force as the other four targets in the Bill.
I should say in passing that amendments 1 to 20 are consequential to the inclusion of new clause 1, so wherever the Bill lists the four targets, there would be a list of five. The wording of new clause 1 exactly mirrors the target relating to the before-housing-costs measure and would simply insert "after housing costs". Another, slightly more involved, consequential change is that where the Bill says that certain things cannot be deducted, one of which is housing costs, it would have to state that that does not apply to the provisions of the new clause, under which housing costs would be deducted.
I have been reflecting on the arguments that the Government might use against making the change proposed in new clause 1. First, however, it is worth making the case for an after-housing-costs measure. We believe that there is added value in looking at people's living standards after they have had to meet their housing costs, first and foremost because housing is a very large part of most people's budget and a very big determinant of their living standards. To look at people's standard of living without taking any account of whether they have high, low or next to no housing costs is to miss a very
important part of the picture. Because it is such an important determinant of living standards, the absence from the Bill of an income measure that takes account of housing costs is a significant omission.
Lembit Öpik (Montgomeryshire) (LD): I strongly support the new clause and my hon. Friend's arguments for it. Does he agree that the proposal is particularly salient in low-income areas such as my constituency, because many of my constituents cannot afford the basics after they have paid rent, for the simple reason that rents have not come down with the recession, whereas in many cases incomes have declined?
Steve Webb: I am grateful to my hon. Friend for making that very important point. The Bill measures income, including housing benefits and so forth, but takes no account of the impact of housing costs coming out of that income. Many households are in poverty, and if one compares the statistics on income before housing costs and after housing costs, the poverty rate is much higher on the after-housing-costs measure. It is interesting that he should raise that question, because the general assumption is that taking account of housing costs is an urban issue that relates to big cities with high housing costs, but it is clearly relevant in areas such as his, where housing costs can also take a big part of people's incomes.
Housing costs are a big part of household budgets, and people often have quite limited choices in that regard. It could be argued, "Well, if you have big housing costs it's because you live in a big house. You have chosen a higher living standard, so why should we deduct your housing costs? That would be like deducting your caviar expenditure. You've chosen to spend more and you're better off as a result, so we shouldn't deduct it." However, the reality, particularly for many people in rural areas or others with low means, is that housing is not one of those things that they shop around for, like wondering what tin of beans to buy this week. People in poverty often have very constrained choices about housing, so the level of housing expenditure is not discretionary in the way that spending on a luxury item would be. It really is a necessity, and people have very constrained choices and have to live with the consequences of making them. Assessing income after housing costs have been met would give us another facet. I am not suggesting that it is the only way of looking at things, but it is an additional way.
The second reason why this is important is that the regional impact of housing costs varies considerably, and if we look only at income before housing costs, we do not capture that. Obviously, on average, housing costs will be substantially higher in London and certain other housing hotspot areas. One of the perverse aspects of the measure of income before housing costs is that it includes housing benefit. If that is the only measure we have, we end up with the strange situation where somebody with a huge rent that is being met wholly or largely by housing benefit seems to be relatively well off because all that housing benefit is included in their income, but no account is taken of the fact that it has an equal and opposite cost on the other side of the equation. That bit would never get measured under the Bill as it stands.
Let us take as an example two pensioner households living next door to each other, both with identical pension income. One person has paid off their mortgage
and owns their house outright, and the other is on housing benefit and getting their rent paid in full. On the before-housing-costs measure, the person with the housing benefit is much better off than their neighbour because they have housing benefit, but after housing costs they are both in the same position because they just have their pension once they have met their housing costs. Clearly, the measure we propose provides a fairer assessment of relative living standards than saying that the person on housing benefit is better off. Indeed, one could argue that the person who owns their house outright is better off, because they have an asset, from which one might impute an income. The before-housing-costs measure puts people the wrong way round in that sense, so it is not an ideal definition.
I mentioned in response to the intervention by my hon. Friend the Member for Montgomeryshire (Lembit Öpik) that poverty is greater after housing costs than before them. That is not a reason to put it in the figures, but it demonstrates that, once income including housing benefit is measured, housing costs are seen to take up a bigger proportion of the incomes of the poor than of the rich, which is an important facet of measuring people's poverty.
We want reliable measures over time. My hon. Friend mentioned the problem of rent inflation. It has been the policy of successive Governments to deregulate social rents, so they have risen far faster than inflation for many years. If we only use the before-housing-costs measure, that makes people appear better off, because their housing benefit shoots up every time their rent does. That seems perverse in the extreme. If we measure income after housing costs, we will strip out the effect of rental inflation, which, as he said, has been very significant. There are strong reasons for having the additional target-it would give us a new lens through which to view child poverty without taking away from any of the existing measures, and it would catch an important facet of poverty.
As I said, I have thought about the responses that Ministers might give. One might be, "Well, we can't add another target to the Bill. We've got four targets, we can't have five." If they were to say, "We've got four targets, we can't have 99," I would probably accept that, but we wish to add one additional target. Why do the Government have four, and not three or two? Each target needs to stand on its own feet as an important indicator of poverty and give us new insights that we would not get without it. That should be the test of each target in Bill. As I said in Committee, I believe that the absolute low income target could go. If we could have only four, I would take that one out, but there seems no substantive reason why five good targets that provide a more comprehensive measure of poverty are worse than four. It is a difference not of kind but of degree, and given the added value of the after-housing-costs measures, the additional target is justified.
When we discussed the matter in Committee, Ministers said, "Ah, yes, but housing is in the Bill. You don't need to worry, it is already covered." I apologise if I am running through the Minister's bullet points for her. The Bill does contain provisions on housing, such as the material deprivation measure, which contains a few questions about housing, but nothing that will capture the cost of housing as a measure of income after housing costs would. The difference between the poverty
figures before and after housing costs is, as it says on the tin, all to do with housing costs. They should not be buried as a sub-factor in part of a measure. That is the problem. Although the material deprivation measure has a few housing-related matters in it, there are also a lot of non-housing matters. It would be incredibly difficult to strip out details of housing costs and be clear about whether they, rather than some other facet of material deprivation, were driving the figures. It will be as plain as a pikestaff that housing costs are causing the problem if we use figures for income after rather than before them.
The Minister might say that housing costs are about housing quality. I hope that I addressed that point earlier. The two are not wholly uncorrelated, but they are not very well correlated. Higher housing costs are often the product of necessity and of the part of the country in which people live. Often, as many people who live in private rented accommodation would say, they are not a good proxy for the quality of housing. Deducting housing costs and having both before and after-housing-costs measures, so that one can assess their impact on the figures, therefore seems to us an entirely sensible approach.
Drawing those threads together, the reason why there is not just one target in the Bill is that child poverty is multi-faced. The Government have alighted on four targets, but they could have alighted on three or five. Once one has accepted that there should be more than one, having five rather than four does not seem to make a substantive difference, and there is huge added value in the after-housing-costs approach.
I shall briefly address other amendments and new clauses in this group. I am sure that the hon. Member for South-West Bedfordshire (Andrew Selous) will speak to new clause 2, which suggests that there should be
"reductions in the causes of poverty targets."
I had to read that several times to work out where the pause came-I think it means reductions in the causes of poverty rather than in the targets. Clearly we should examine the causes of poverty, not just the outcomes. We discussed the matter in Committee, in the light of which the hon. Gentleman has obviously refined the new clause. I look forward to hearing him make the case for it. New clause 3 argues for an assessment of progress on the 2010 target. We supported the idea in Committee and anticipate doing so again.
Amendments 33 and 34 were prompted by the discussions of the Joint Committee on Human Rights, and I believe that my hon. Friend the Member for Oxford, West and Abingdon (Dr. Harris) may be planning to speak to them. They raise some important points about who counts as a child in a qualifying household and whether there are two tiers of children in the Bill. There are children who appear in the household surveys on which all the statistical data are based, and there are other children who come under the Bill's more general wording about deprivation but who are not covered by the statistical targets.
I do not mean to be in any way critical of the Joint Committee, but in a sense it is easier to point out the problem than to work out what one should do about it. The Committee referred to Gypsy and Traveller children, some of whom are in the statistics because they live in households picked up in the surveys-for example, if they are on local authority or private Traveller sites.
However, the most transient might not get picked up in the figures. It is incredibly difficult to think how one might meld them into the statistics, so although it is important that they are not treated as second-class children, I am not entirely sure how we can add them to a measure based on household equivalent income.
Likewise, we discussed in Committee children who are in care. Their well-being is clearly crucial, but trying to measure the living standard of a child living in an institution, for example, is very difficult. A child being cared for in a private household, perhaps having been fostered, will be picked up in the normal statistical surveys, but it is difficult to identify the living standards of a child living in an institution whose meals are provided, but for whom there is no parental or household income that one can measure. It is difficult to know whether their income is 50 or 70 per cent. of the median, or how they could be melded into a living standard measure based on households. I am sure that my hon. Friend would accept that. The real question is whether there should be another statistical target or whether we should give greater weight to the parts of the Bill that refer more broadly to socio-economic disadvantage. I look forward to hearing his suggestions.
New clause 1 need not divide us along party lines, and I welcome the support that the hon. Member for Regent's Park and Kensington, North (Ms Buck) has given it. She was a member of the Public Bill Committee and is much respected on these issues, and she rightly believes that housing is a crucial aspect of living standards. I can understand why she would take that view as a London MP. I hope that all parties will support the new clause. I hope for a conciliatory response from the Minister, because I know that my noble Friends in another place attach great importance to housing costs and they will want to return to the matter if we cannot get a better measure into the Bill-one that would improve it and help the Bill to achieve the goal that we all share of ensuring that child poverty is abolished.
Mr. Frank Field (Birkenhead) (Lab): In speaking to this group of amendments, I hope to achieve two objectives. The first is to praise the Government for their determination in setting the objective in the Bill. It is an audacious thing to do, and I do not want the debate to pass without that being said. However, I also wish to raise some questions about the balance of the Government's approach, not in the Bill but up to this point in their campaign to abolish child poverty. I shall question whether they have been far too mechanical in seeing the solution as coming largely from benefits rather than through trying to balance people's immediate need for more money with an examination of the long-term causes of poverty. I take new clause 2 to be about that matter.
First, on a point of congratulation, no Government in the post-war period, or indeed ever, have set the objective of abolishing poverty in the way that this Government have. At the time they set that objective, I was Minister with responsibility for welfare reform, but I learned about it from a television broadcast. That suggested something about the relationship between the two powers in Downing street and the rest of the Administration, but I was pleased to read more recently that No. 11 was not even consulted before the objective was set in the famous Toynbee Hall speech by the then Prime Minister.
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