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Earl Russell: My Lords, I am grateful to the Minister for giving way. She has quoted me accurately. If she is able to explain why this increase in poverty and social exclusion was caused, in her opinion, by the passivity of the benefits system, I would understand something which at present I do not.

Baroness Hollis of Heigham: My Lords, I am not sure that I shall be able to satisfy the noble Earl by responding tonight. However, perhaps I may put it another way. I did some "ready reckoner" sums. We could increase all benefits by £10 per week. That would be useful and might pay for an extra couple of pints of milk and a yoghurt each day, or two cinema tickets at the end of the week. However, people would still be poor. Only a small proportion would go over and above half-average incomes. Passively to increase benefits and do little else would cost perhaps an estimated £20 billion-- indeed, as much as we spend on schools and as much as we spend on hospitals--and people would still be poor. That is my response to the noble Earl. That pattern has not, and will not, work.

We must address not just what I would call the "presenting" problems of poverty--for example, low income, about which we do not disagree--but also the reasons for it. We must do so by improving employment prospects, by reforming public services and by helping people to save for their retirement. That cannot be done quickly. In order to improve employment opportunities for those of working age we must not only help this generation of working age people but also ensure that all children leave school with the skills that they need to survive in the modern labour market. To improve pensioners' incomes in the future we need to ensure that all working age people save for their retirement now.

Our key public services are suffering from decades of neglect and cannot be turned around overnight. It is a long-term strategy. Low incomes, poor education, poor health and criminality, all of which have been mentioned tonight, affect the same people and the same places. I have in mind the poorest communities that have been drifting further and further away from the rest of Britain.

The right reverend Prelate was absolutely right to say that geography matters. For example, the poorest 284 wards in England and Wales, with a population of 2.5 million, have nearly half--45 per cent--of the working population inactive and unemployed, compared to half that figure for England and Wales as a whole. They also experience double the rate of deprivation, and yet--this is where the problem begins to present itself to government--half of our fellow citizens who are poor do not live in poor areas. Therefore, we need targeted help and we need to work in partnership with local authorities; indeed, the sort

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of work and help that my noble friend Lady Pitkeathley is doing in chairing the New Opportunities Board. We need targeted help but we also need national help.

In quoting the article from the Daily Telegraph on regional strategy, the noble Lord, Lord Astor, said that that targeted help was in chaos. That is absurd. With a dozen or so pilot zones, budgets, agencies and initiatives, the Government have recognised that the time now is right to strengthen the co-ordinating structures between those initiatives. I hope that I am not misquoting him, but I believe the chief executive of Sandwell council said that he had "one of everything". However, most of the time we receive complaints from city councils that they do not have one of everything and, indeed, that they have "not enough" of most things.

The need to balance the targeting on some of our rural and poorest communities, especially those belonging to the old mining, shipyard and steel communities, with national strategies informs government action. Key groups--such as lone teenage mothers--suffer from multiple problems of low incomes, lack of work, few skills, poor health and poor prospects--so the Social Exclusion Unit is both looking at "communities of exclusion", if I may use that phrase, as well as at the geographies of exclusion in trying to bring them back into the mainstream of our society.

Poverty and social exclusion are also about the lack of prospects, opportunities, self-worth and self-esteem. I remember a social worker friend of mine telling me some 30 years ago that the biggest problem for poor people is the low self-esteem that they have. Life happens to them; they do not control it. We need only compare a student studying for a university degree with an unskilled lone parent who has been out of work for many years: they have identical incomes but totally unidentical prospects. As I said, being poor is when your life is something that happens to you. You do not own your opportunities. You do not own your future.

Who are the poor? They are not primarily pensioners--I will return to the remarks of the noble Baroness, Lady Barker, later--because well over 70 per cent of pensioners now have over half the average income. The number of pensioners in the bottom fifth between 1979 and 1996-97 has halved from 47 per cent to 24 per cent, which is actually lower than the proportion applying to the population as a whole. So the poor are not pensioners, although there are some poor pensioners.

The poor are not primarily adults of working age because 80 per cent of those are on incomes of above half average earnings. However, some adults of working age, especially women and lone parents, are very poor. They are not primarily disabled people. Again, nearly 80 per cent of disabled people have earnings or incomes of above half the average income. If they are not pensioners, adults of working age or disabled people, who are the poor? As my noble friend

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Lady Gale said, the poor in this country are children. Indeed, one-third of all children are poor. The face of poverty in this country is the face of a child.

By 1996-97, one in three children lived in households with below average incomes--three times the rate of 1979. By the mid-1990s the UK had one of the highest proportions of children in relative poverty. I know that we are also talking about inequality, but, nonetheless, that represents one of the highest proportions in the European Union. By the end of that period, families with children were more likely to be living in low-income households than any other group. What an inheritance for those children, as well as for an incoming government!

As the Prime Minister said:

    "Our historic aim will be for ours to be the first generation to end child poverty ... it is a 20-year mission".

The Chancellor of the Exchequer went even further, when he said:

    "It is not enough to tackle absolute poverty and simply prevent destitution. We should do more. It is not fair that children should be disadvantaged from the start of their lives because of who their parents are, what school they go to [and] where they live".

Therefore, we have introduced a wide range of measures to improve the incomes of low-income families. I hope that that will engage with that "travesty"--if I may call it that--of our record so far, as presented by the noble Lord from the Opposition Benches. I think that he was teasing us. But just in case he was not, I shall try to address his points more seriously.

The combined impact of the financial measures introduced in the Budgets of 1998 and 1999 will raise the incomes of the poorest fifth of families with children by £1,000 a year. On average, households gained from the three Labour Budgets by about 5 per cent, but those in the bottom fifth gained by nearly double that figure. Those families with children in the bottom fifth gained by three times or 15 per cent. That is a significant achievement in just a couple of years by any judgment: £4 billion extra pounds has gone to families with children and about two-fifths of that sum has gone to those in the greatest poverty.

I could give noble Lords a dozen examples, but I shall give just one. For children under the age of 11 in workless families the value of the income support allowance has risen in two years from £16.90 to £24.90; in other words, it has risen by 50 per cent in that time. I hope that no one will accuse us of neglecting properly to address the issue of child poverty within our resources.

Our strategy is not just to improve the incomes of low-income families with children but also to tackle the causes of that low income. We know that those children who are poor suffer from a double disadvantage. First, they live in fractured families; and, secondly, they live in workless families. The noble Lords, Lord Lucas and Lord Northbourne, rightly drew our attention to the problems of children in fractured families. They reminded us that children need the support of both parents, even if they do not remain married. We know from all the research that

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we have on the outcomes for children of lone parents that the daughter of a lone parent is likely to flourish if her mother is in work and, similarly, that the son of a lone parent is likely to flourish if he is in contact with his natural father. Those are our best predictors of breaking the cycle of deprivation which those children would otherwise inherit.

We also seek to overcome the problems of poverty among children and to overcome the problems of persistent poverty. For example, in 1998 over 800,000 children lived in families that had spent at least five years on means-tested benefits. Moreover, 2.2 million children--almost a fifth--live in families without work. Again, we have the worst record in this respect of any country in the EU. Children are spending large parts of their childhood living in households where no adult goes to work and where, all too often, there is only one adult in the family. As I said, they suffer a double deprivation which if we do not intervene will scar them for life.

All the research shows--and there has been no dissent on this tonight--that work is the best and most secure route out of poverty for families. Finding work helps to lift people out of poverty, while long periods out of work decrease the chances that parents will return to work. Therefore, when we seek to help lone parents and disabled people back into work, we know that we need to tackle the issues of childcare, the fear of the risk of losing benefit, poor health, low human capital, low motivation, poor skills, poor financial incentives and lack of knowledge about available jobs. We are trying to work across the whole of that waterfront.

Our New Deal for lone parents seeks to help lone mothers, particularly lone mothers who wish to return to work. As the noble Lord, Lord Lucas, has suggested--and as the right reverend Prelate the Bishop of Hereford has asked--we seek to adapt the benefit system in order to sustain that movement into work. Lone parents are understandably reluctant to take jobs that do not pay. The new working families' tax credit, with its generous childcare tax allowance, will improve the incentives to work. As a result, the financial benefit for a family entering work, taking a typical entry wage job, has increased from a net gain of £30 a week to nearer £42 a week. Together with reforms to income tax and to NICs, the WFTC could increase employment by 47,000 over one year and by as much as nearly 300,000 over the long term.

Apart from the problem of low income, we need also to tackle the wider problems of housing and health because they exacerbate each other, as many of your Lordships have said tonight. Just to take one example, we know that nearly half of all lone parents smoke. That is twice the national average for young people. They are poor because they smoke; they smoke because they are poor. A quarter of lone parents have limiting illnesses mainly associated with smoking, and so do their children. Some 75 per cent of the illnesses of the children of lone parents are respiratory related and correlated with their parents' smoking. As Alan Marsh has said, and as the noble Lords, Lord Patel and Lord Rea, have said tonight, we need not just a

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welfare-to-work programme but a welfare-to-health programme, and, as the noble Lord, Lord Ezra, said--I agree with him--a welfare-to-heat programme. We are engaged in providing that.

We have made the tackling of child poverty a priority, because unless we tackle that we shall build up problems for the future because we know that poverty, like wealth, is largely inherited, largely unmerited and unearned. We know that poverty is a cause of poverty. For example, people raised in a family experiencing unemployment are, when they grow up, about twice as likely to have prolonged periods of unemployment themselves. Although children of poor families may move up one or two deciles of income as compared with their parents, for most people the movement is short range, short term, and down the snake they come.

Poverty should not be a birthright. Our strategy is to break that cycle and to halt the transmission of low expectations, low aspirations and low outcomes from parent to child. That means we need to invest our children with the best possible start in life as the dowry our society owes them. As the noble Lord, Lord Patel, absolutely rightly said, the periods before and immediately after birth are crucial to a child's development. At 22 months children whose parents are in social classes 1 and 2 are already 14 percentage points further up the educational development scale than children whose parents are in social classes 4 or 5. When they start school, they begin to fall even further behind. As the noble Baroness, Lady Sharp, said, by the time they are in their teens they are already beginning, almost literally, to vote with their feet. That is why we have introduced a new short start programme, modelled to some extent on the American headstart programme, to promote the well-being of children. We are spending £500 million on building 250 local programmes, as well as investing a further £19 billion in education across the board.

As the noble Baroness, Lady Sharp, movingly said, there are other groups of vulnerable young people who find it difficult to make the transition to adult life. I refer to teenage mothers, children living in the care of local authorities and 16 to 18 year-olds dropping out of education and training. The long-term life chances of these children are often significantly worse than those of other children. We have cross-government programmes which help to discourage teenage conceptions on the ground that children should not have children, as the Prime Minister said. As your Lordships will know, a Bill currently going through this House steered by my noble friend Lord Hunt seeks to encourage local authorities to continue the care of children who are leaving care. I believe that that Bill has been warmly welcomed by your Lordships. Therefore we have a comprehensive programme of action to tackle child poverty, to tackle the causes of child poverty and to help the most vulnerable children as they make the transition to adult life.

We have also to address the problems of people of working age, because they enter poverty for two reasons: half of them enter poverty because they have no job or they lose it and the rest through family

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breakdown or the birth of an extra child. People of working age are poor if they are not in work. The proportion of working age households with no one in work has doubled since 1979. There is only one escape route for people of working age and that is into earnings. Two-thirds of those who move out of low incomes do so when someone in their family gets a job or increases their earnings. If he gets a job and she gets a part-time job, they then become work rich rather than work poor. To achieve that aim we have to establish the right macro-economic framework, which we are doing. Unemployment is now at its lowest level for 20 years. Over 700,000 more people are now in work. The number of unemployed young people has fallen by more than half. The number of long-term unemployed has also halved. Our record so far is good, though we still have more to do.

Yet there are still substantial numbers of people who are out of work, inactive and depend on social security to survive. The number of economically inactive men outnumbers the number of registered unemployed by more than two to one. Around one in seven of the working age population are out of work claiming income replacement benefits and nearly 3 million of those have been out of work for more than five years. Many of these people want to work. They are the hidden jobless. Around 1 million disabled people without a job want to work, especially if we can help them tackle the barriers that block their way. That applies also to lone parents.

Work is available. There are more than a million vacancies across Britain, spread pretty evenly across the regions. Our New Deals are springing people back into work. But we also need to make work pay. My noble friend Lord Davies of Coity talked powerfully about the effects of both the working families' tax credit and, above all, the national minimum wage, which has helped more than 1.5 million people--two-thirds of them women--to spring the poverty trap.

My noble friend Lady Howells thoughtfully described the situation of people in ethnic minorities. She is right to say that seven in 10 households with a Pakistani or Bangladeshi head of family were in the poorest fifth of incomes either because they had high unemployment among the men or low employment among the women or large families or low pay. But the good news is that with the New Deal some 57 per cent of ethnic minority young people and 59 per cent of whites--that is a virtually identical figure--have left the New Deal to enter work. The future is more promising. We know, however, that work is not appropriate for all. That is why from 2001 we shall provide the 175,000 poorest disabled people who cannot work with a new income guarantee--for single adults, children and couples--thus establishing their incomes.

I wish to say a few words about pensioners. We want to ensure that all pensioners have a life to look forward to. The noble Baroness, Lady Barker, said that pensioners were being left behind. That is simply not true. Over the past 20 years or so pensioners' incomes have on average increased much faster than

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the incomes of the rest of us--by 60 per cent in real terms. However, there are still some who struggle to make do, even though income support has kept pace with the rise in real earnings rather than just prices. That is why our strategy is twofold. We seek to help those who are poorest now, mainly elderly widows who need help with taking up the guaranteed minimum income, and we seek to reform our pensions strategy by adding to the basic state pension access either to a state second pension or a stakeholder pension where a good occupational pension is not in place. I have explained what we are doing for pensioners, for people of working age and for children.

We welcome the Rowntree report Monitoring poverty and social exclusion. However, I add a note of caution. The report showed the position mainly in 1997-98 when the key statistics for WFTC and the national minimum wage had not yet come through. Many noble Lords have spoken about research tonight, and we shall be monitoring this in our annual reports, Opportunity for all, in which we shall be measuring our progress in eradicating poverty against our agreed poverty indicators.

We accept the reality of poverty; we accept its many facets; we accept the damage it causes. Beveridge understood those connections more than 50 years ago--so do we. That is why, together with our New Deals, the minimum wage, WFTC, our work for children and our work for pensioners, I believe that we have made more progress, although we need to make even more, in the past two to three years than we have seen over the past 15 years. We have a lot to do, but we are getting there.

8 p.m.

Earl Russell: My Lords, this has been a debate in which it has been a privilege to take part. The House collectively has been absolutely at its best. It is not often that one is allowed to take part in a debate where there are 26 speakers--all of them relevant, all of them good, all of them drawing on different and diverse bodies of experience--and where every speaker on the list beyond number 20 has a major new point to contribute. That really is a pleasure.

I thank the Minister very warmly for replying to the debate in the spirit in which it was conducted. It was a debate in which there were some fairly deep divisions of principle and some fairly deep divisions about likely solutions. But there was also a large amount of common ground.

I agree with Mrs Malaprop that comparisons are odorous. I am not making a comparison but emphasising the need for diversity in paying special tribute to the contributions of the right reverend Prelates. The Church has been for centuries practically the only institution represented in every parish of the country. Its knowledge and its concern for community life owe a great deal to that fact. Were the Church's parochial structure to fall victim to mammon, I believe that not only Christians would be the losers.

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It is not a figure of speech to say that I should like to thank all noble Lords who have spoken--I should like to thank them very warmly indeed. Having done so, I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.

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