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Earl Russell: My Lords, I thought that the Minister would raise that point. The same piece of research to which he refers shows that only 25 per cent of those

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people kept their jobs for six months, and only five per cent found them through their New Deal personal adviser.

Lord McIntosh of Haringey: Yes, my Lords, as far as was known about the first jobs that they achieved through the New Deal. My point is that people who go through the New Deal, as through previous programmes such as the Youth Opportunities Programme, do not necessarily stay in the same job but go on to other jobs.

However, much more important than that is the problem to which the noble Baroness, Lady Andrews, who is expert in the field, referred, which is the work that we must do to improve work incentives to deal with the unemployment trap, in which the difference in family income in and out of work is too small to provide an incentive to take a job, and the poverty trap, in which those already in work are discouraged from working longer hours or taking a better job because their marginal tax rate or loss of benefit rate is too high. We need more than one policy to tackle this difficult and complex problem. We need the minimum wage, which is benefiting a large number of people, 70 per cent of whom are women—that is an important point to make.

We must take into account the fact that we have halved the marginal rate of tax for almost 2 million people through the introduction of the 10p starting rate of tax in April 1999 and the widening of the band last year. We must also take into account the fact that in April 2000 we cut the basic rate of tax to 22 per cent—the lowest rate for 70 years—and we have aligned the national insurance contribution threshold, which means that about 1 million low-paid workers no longer have to pay national insurance contributions.

On top of that, we must take into account the working families' tax credit and the disabled person's tax credit, which target support on those who need it most. Nearly 1.3 million families receive working families' tax credit and, on average, they are £35 a week better off than they would have been under the old family credit. The childcare tax credit component is worth 70 per cent of eligible costs up to £135 a week for a family with one child and £200 a week for a family with two or more children.

That combination must be acknowledged—as it has been in this debate, for which I am grateful—as an outstanding success. We can now guarantee a minimum level of income for people with children moving into work. Combined with the national minimum wage, the working families' tax credit guarantees a family with one earner working 35 hours a week a minimum of £225 a week. We have reduced to a third the proportion of families who face marginal benefit reduction rates of more than 70 per cent—that is the poverty trap—compared with 1997.

Reference has been made to housing benefit. Housing benefit is what happens when we stop rent control—that is basically the truth of the matter. Unless everyone is able to afford decent housing, that is what we get. Therefore, the most important thing we

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can do with respect to housing benefit is to take people off it. The working families' tax credit starts to do that. We have already taken 70,000 people off housing benefit and we must continue that process. At the same time, we must make the benefit simpler and its collection more efficient. We have a target for 2010—I am looking at the noble Baroness, Lady Byford, as I say this—of a decent standard for all social housing, with an intermediate target of improving a third of social housing by March 2004.

Let me turn to the wider agenda of public services. The important point is not the total amount spent on public services—well, of course it is, but that is not the subject of this debate—but the targeting of those areas, and therefore those people, most in need. We have established public service agreement "floor targets" covering the key public services to ensure that as average outcomes of public services improve, the worst-off groups living in the worst neighbourhoods also benefit from improvements—a point raised by the noble Baroness, Lady Sharp of Guildford. That is why we are providing £900 million over three years for the Neighbourhood Renewal Fund and targeted programmes such as Sure Start, Excellence in Cities and the New Deal for Communities. That is also why we are also seeking business involvement in the most difficult and disadvantaged areas.

Perhaps the headline issue here is child poverty. We inherited a situation in which one in three children lived in households with an income below 60 per cent of the national median—which is the definition—and that was getting worse. The number of children in low-income households had doubled during the previous 20 years. In trying to turn round this problem, we are not just turning round a tanker that was stationary but one that was steaming at high speed—as far as tankers are capable of that—in the wrong direction. As the noble Lord, Lord Lea of Crondall, and others have reminded us, we had the highest rate of relative child poverty in the European Union and the highest proportion of children in households where no one worked.

I shall not concentrate on the statistics of child poverty, other than to respond to two specific points made by the noble Lord, Lord Higgins. First, yes, of course a relative poverty target is difficult to achieve because it is a moving target. But the absolute is also difficult to achieve—the Irish Government are trying to do so with great difficulty. Also, the relative target is real—it is real to people. If people are worse off than those around them, they feel poor. We cannot get away from that. Similarly, in answer to the noble Lord, Lord Lea, I shall not describe policies designed to encourage social mobility, but poverty is the most profound barrier to social mobility and the most serious damage that can be done to a child's future chances of having a decent job and leading a decent life in a decent society.

In December, following the pre-Budget report, the Treasury published a paper entitled, Tackling child poverty: giving every child the best possible start in life. I wish that, in congressional terms, I could have that document read into the record, because it contains the answers to many of the questions asked today.

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My second response to the noble Lord, Lord Higgins, concerns the question of there being 1.2 million fewer children in relative poverty than there would otherwise have been. The noble Lord called that a myth. What we mean by "would otherwise have been" is, if previous policies or trends had continued. That is exactly my point about the tanker moving heavily in the wrong direction.

Lord Higgins: My Lords, it has absolutely nothing to do with a tanker moving in the wrong direction. Does the Minister deny that it is untrue to say that a million children who were in poverty, under the usual definition, at the time when the Government came into office, are now out of it?

Lord McIntosh of Haringey: My Lords, they are five years older, for a start. It is a different cohort of people. I am saying that it is different from what it would otherwise have been. That is the description.

Earl Russell: My Lords—

Lord McIntosh of Haringey: My Lords, this is a timed debate—

Earl Russell: My Lords, I am most grateful to the Minister. Would he also concede that not all improvements in the global economy since 1997 are to the credit of the Chancellor of the Exchequer?

Lord McIntosh of Haringey: My Lords, they are a credit to the British people, their resourcefulness and their industry.

The tests of changes in child poverty are that, as a result of all our policies combined, families with children are, on average, £1,000 a year better off in real terms. Families with children in the poorest fifth of the population are, on average, £1,700 a year better off in real terms. For example, a family with two young children on half average earnings—£12,700—is £3,000 a year better off in real terms. That is because of increased child benefit, the children's tax credit, the working families' tax credit and the raising of the children's allowance in income support.

The noble Earl, Lord Listowel, among others, referred to the New Deal for Lone Parents. We must take into account the nature of the New Deal for Lone Parents, which is voluntary and in the first instance requires only those with children aged five and over to attend a work-focused interview. The effect of it—there are 350,000 participants, with 130,000 placed into work—is that any lone parent working 16 hours or more has a minimum income guarantee of £166 a week or £225 a week for full-time work. For those working fewer hours, there is an increase in the income support disregard as support for those who cannot work.

We must consider the direction in which the tanker was going. The noble Baroness, Lady Thomas of Walliswood, made the point that, between the 1970s

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and the mid-1990s, the number of lone parent households doubled, and the number on benefit trebled. That is the tendency that must be turned around. I thought that the noble Baroness, Lady Andrews, was percipient on that point. Again, I say to the noble Earl, Lord Listowel, that what we are doing in respect of maternity and paternity pay and the duration thereof is surely important, particularly for very young children.

The noble Lord, Lord Lea of Crondall, referred to the issue of wallet-to-purse in the child tax credit, which we will introduce from 2003. Of course, one of the features of that is that it will be a secure stream of income for families with children, paid direct to the main carer. It will unify all the income-related child payments, and it will provide greater flexibility and a common framework for assessment, so that everybody is part of the same inclusive system. It will target help on those who need it most, when they need it most. It is an important new development, in the direction in which, I think, noble Lords wish to move. Decisions on the rates and thresholds will, of course, be set out in the Budget this year.

I have so little time to speak about our childcare provisions, although I acknowledge the concern that was expressed. The number of new places that have been created is sufficient evidence of how serious such matters are. Again, I have so little time to speak on pensioner poverty, which ought, of course, to be an important part of the debate. As the noble Lord, Lord Layard, said in his opening speech, it is no longer the case that pensioners are more likely to be poor than anybody else. Therefore, targeted help for pensioners is the only conceivable solution that will achieve results. We have given above-inflation increases in the retirement pension for this year and next year; we have introduced the minimum income guarantee for the poorest pensioners, which benefits over 2 million pensioners, and that has been linked to earnings for the rest of this Parliament; and, of course, there are the free TV licences and the winter fuel payments.

More attention was rightly paid to the next step, which is the pension credit. The noble Lord, Lord Paul, set out the basic facts about it. I must respond to the point made by the noble Lord, Lord Higgins, about complexity. The pension credit will abolish the weekly means test and will apply for a much longer period. We have already successfully reduced the complexity of the application process, and we are moving in the direction of combining targeting with effective delivery.

I am grateful to the noble Lord, Lord Layard, and to all who have taken part in the debate.

5.36 p.m.

Lord Layard: My Lords, I thank the Minister for his helpful reply. I also thank everybody else who has participated in the debate, which has been a good one. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

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