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Child poverty is not only a moral issue but also a key component of economic and social prosperity in the UK. It is right that we refresh and strengthen our commitment to deliver on the 2020 goal through the Child Poverty Bill. It will give us a renewed impetus to deliver on our goals, to ensure that the right strategies are in place and to stimulate actions which make a difference. It will build on and sustain the momentum towards eradicating child poverty, create a clear definition of success, put in place a framework for accountability, and improve partnership working and collaboration to tackle child poverty at the local level. We believe this legislation is part of creating a fairer Britain, one where no child suffers from deprivation and every child has the opportunity to aspire and to flourish. I commend the Bill to the House.

3.56 pm

Lord Freud: My Lords, why did child poverty in the UK stop declining in 2004? It simply should not have happened. Everything was set up to see the measure continuing to improve. We were talking then about the fourth largest economy in the world; that economy was enjoying a major boom, and we had a Government who had focused on the reduction of child poverty as a major policy goal. Whatever criticisms I may have of the Government in this area, I do not doubt for a moment their sincerity in wishing to reduce the levels of child poverty. So why did those improvements go into abrupt reverse in 2004? It is the sociological whodunit of our era.

Let me provide the figures to your Lordships. When this Government came into office in 1997, 4.2 million children were in households below the poverty line, defined as below 60 per cent of median income and using the figure after housing costs. In 2004-05, the best year, the figure had fallen to 3.6 million, but by 2007-08 it had risen again to 4 million. I do not use these figures to make a cheap political point. I do not accuse the Government of callous disregard. The truth is that the Government have been pouring money into the fight against child poverty.

In the first year, 1997-98, transfers in the shape of credits and benefits to households with children stood at £15.5 billion. By our turning point year of 2004-05,

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they had nearly doubled to almost £29 billion, from which level they have continued to grow. So it is not a lack of government spending that lies behind this disturbing trend. Indeed, the OECD found that by 2003 we were spending more on our children than most other OECD countries.

Let me try to explain these counterintuitive developments. Clearly, there has been an effect from the slowdown in earnings growth since early in the decade. That slowdown has been magnified by the sharp redistribution of income in favour of the richest in the country. It means that the conventional measure of income inequality, the Gini coefficient, rose to its highest level since records began in 1961. I must confess that until I studied these recent numbers closely, I had not realised that new Labour was quite so much the party of the rich. Nevertheless, these factors alone are not enough to explain the disturbing trend in child poverty that we have seen. The clue has been lying under our noses all the time. Perhaps it is not the case that child poverty has risen despite money being transferred to the poorest sections of the community, but maybe the financial transfers themselves have masked poverty and created poverty traps. At this point, let me make it quite clear that, despite Government alarmism, we will retain tax credits. They have been a financial benefit to families but we do not assume, as the Government have in the past, that they are the only answer to child poverty.

There were warnings about the operation of the poverty trap in the 1970s but, as we contemplate what is forecast to be a substantial shortfall from the interim 2010 child poverty target, perhaps we should turn to examine what has more recently been dubbed the iron triangle of benefit reform. For the first time we can begin to assess its impact as a result of the analytical work of the Centre for Social Justice and Oliver Wyman in their recent publication, Dynamic Benefits-a formidable achievement by a working group chaired by Dr Stephen Brien.

The triangle is the closest thing to scientific law in the social sciences and establishes a mathematical relationship between three factors: the level of benefit; the earnings break-even point; and the rate at which benefits are withdrawn. The analysis in Dynamic Benefits offers up the grim warning that,

As it stands, the Bill is two-headed. It contains within it the drive towards income transfers, which has been the hallmark of Treasury strategy in this area, as Sir Nicholas Macpherson, the Permanent Secretary, explained to the Treasury Select Committee in 2007. He said that,

This is the kind of intervention that our experience since 2004 suggests has broken down-failed. However, the Bill also encourages a wide range of interventions via public services of the kind that is embodied in the Welfare Reform Act that we have just passed. It is this

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latter aspect of the Bill that we wish to reinforce. Our strategy will concentrate on tackling the causes rather than the symptoms of poverty.

Child poverty is not a concept commonly used in European social policy. This is not surprising as children normally do not have income or wealth themselves. It sounds great; it is a compelling soundbite; and in March 1999, when Tony Blair first announced a goal to end child poverty in a generation, it captured the imagination of the country. However, there are two ideas at war with each other within the soundbite: the first concerns general poverty and minimum standards of living for citizens; the second is about child well-being. It is dangerous to put the two together in the unthinking way that new Labour has done, not least because we risk undermining the strategies that matter most for child well-being. We urgently need to get those strategies sorted out. According to UNICEF we are ranked bottom of 21 rich countries in child well-being despite spending more and being richer than most of them. Not half way; the very worst.

The Child Poverty Action Group recommends a holistic approach to tackling the problem of poverty and pursues the approach now being developed in welfare to work. It states that in the same way it is already recognised that a,

so a similar approach needs to be applied to poverty. This mirrors our strategy-perhaps not surprisingly, given our involvement in developing this policy approach in welfare.

First, let me emphasise the Conservative belief in the importance of tackling poverty. This goes to the roots of one nation conservatism. Secondly, let me confirm that we believe that poverty is indeed a relative phenomenon-in other words, that we should seek to ensure that the poor are not excluded from the mainstream of society. That means a series of strategies to tackle problem areas which have been increasingly well documented in recent years. I particularly want to emphasise the importance of stable families, which has been a central Conservative policy for many years. The number of lone parent households-those most likely to be in poverty-has increased by 40,000 a year for the last quarter century. Yet the Child Poverty Action Group found that,

Let me summarise the four problem areas we will target. On family breakdown, our commitment to ending the couple penalty in the tax credits system is just one of a series of measures to tackle this critical issue. The second is addiction to drugs and alcohol. We will put rehabilitation at the forefront of efforts to tackle this problem. The third is education and skills. We will introduce a pupil premium to ensure that extra funds follow the poorest children to the school that educates them. The fourth is work strategy. We will push ahead aggressively to establish outcome-based financing to support those who are economically inactive and able to work back into the workforce.

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How would we amend the Bill? Our key concern is that the targets set out in the Bill are poor proxies for achieving the eradication of child poverty. We will aim to widen the agenda and build up targets, which are more likely to address the underlying causes of poverty. Let me spell out our concern about the statutory financial targets. While financial measures can be a useful guide to action, when they become targets we need to look at them with much more rigour. If they are taken seriously, they will inevitably become subject to serious manipulation and may encourage counterproductive activity by the state. There are already disturbing signs of this. According to Save the Children and the IFS, the number of children in severe poverty had been growing even before the 2004 turning-point year, as policy concentrated on pushing those just under the 60 per cent line to just over it. That is exactly opposite to the effect that most voters, appalled by child poverty, actually want to see.

The targets selected for this Bill do not measure the problem accurately enough. A substantial number of families, according to the IFS, manage to remain out of hardship even during prolonged periods of poverty. We see here the distortions created by a set of targets relying in the main on surveys with all the confusion for respondents on what to report. This distortion is undoubtedly compounded by the anxiety that people operating in the black economy must feel in providing accurate information.

Central to the Government's targeting is the OECD reference point of 60 per cent of median income, with a standard equivalence scale. This makes it possible to compare our performance with that of other countries. But we are, I believe, the first country to aim to adopt this figure and scale as a statutory target, and a statutory target carries with it a far higher requirement for precision. First, how genuinely comparable is the figure across countries? It does not include benefits in kind; it does not adjust for the benefits of free healthcare, for instance. There are a lot of apples and pears in the basket.

Does the equivalence scale, which adjusts for different sizes of household, work? Ominously, the IFS found that the modified OECD income equivalence scale may be inappropriate. As Policy Exchange has pointed out, different equivalence scales will generate quite different poverty estimates. These discrepancies really start to matter if we have statutory targets. We will be driven to devote resources to the wrong people. The purely financial nature of the measurement is a real danger. As the OECD publication Doing Better for Children recommended:

"Interventions in early childhood need to be both in cash and in kind.... The higher the risk in the family situation, the more effective ... services in kind will be".

Yet such effective interventions will be discouraged under this legislation. It could also spell the death knell for passported benefits delivered in kind and not included in the measured target.

What is it with round numbers? As a comparison base, using the figure of 60 per cent is not a matter of great moment. As a statutory target, however, it takes on an altogether different significance. The laws of the iron triangle are inexorable. If we wish to reduce the

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numbers in poverty, we need to set strategies that work within the constraints of the three sides of the triangle, not set one side at a predetermined level that will inevitably not optimise outcomes.

Such considerations will drive the amendments that we will seek. We will want the flexibility to establish financial targets that will work in the real world. We will want targets that capture the real outcomes that we have identified. We will also want a commission that will help us in this strategy. At the moment the membership is locked in. That reeks of a political subterfuge designed to trap a successor Government rather than a measure to help the poor.

My noble friend Lord De Mauley will deal with the role of local authorities and the duties of the proposed new commission in his winding-up speech. We look forward to the maiden speech of the right reverend Prelate the Bishop of Hereford.

I shall summarise the points that I have made. We have the lowest child well-being in a comparison of 21 rich countries. The Government's child poverty targeting regime has failed, broken on the iron triangle. This double failure suggests that the next Government must urgently search out and establish an alternative approach. For that reason, our policy in this area will concentrate on the causes of poverty and inadequate child welfare, with particular focus on the four main drivers: family breakdown, addiction, inadequate education and skills, and work. We will seek to incentivise outcomes in these areas, and we will wish to use poverty targets as a guide and spur to performance but not as a driver towards financial manipulation. The difference between our Benches and the Government on child poverty is that we will apply policies to deal with the causes, while all they have to offer are stale and historic soundbites.

4.13 pm

Baroness Thomas of Winchester: My Lords, we on these Benches support the Bill. I thank the Minister for his typical thoughtfulness in making sure that we all had the Peers Information Pack before Christmas, which I found invaluable, although it was not the most exciting holiday reading.

It is difficult to know whether to be pleased with a Bill that has a purpose with which we can all agree wholeheartedly or whether to despair of the structure that the Bill puts in place, which could crush all its good intentions by overloading it with bureaucracy. There are a dizzying number of buzzwords strung together like beads on a chain, such as "targets", "strategies", "partnerships", "building blocks", "visions", "assessments", "principles", "aspirations", "outcomes" and so on. Fine words in themselves butter no parsnips. Will the elaborate pathways set out by the Bill lead to real action to eradicate child poverty?

On the plus side, the Bill puts child poverty explicitly further up the political agenda than it has ever been, and the statutory nature of targets in the Bill should ensure that it stays there. It has also given a platform for some interesting and important oral evidence to be heard in the other place, with expert witnesses in key lobby groups-such as the Child Poverty Action Group

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and Gingerbread, senior local government councillors and officials, researchers from think tanks and academics-all bringing a different perspective on the Bill. There was plenty of discussion not only about what constitutes child poverty but about the definition of a child, which we may well repeat during the passage of the Bill through this House, and what should be done about child poverty, although the Bill itself sadly does not go into what one witness called "solutions mode".

Several myths were exploded during the evidence sessions, especially where lone parents and poverty are concerned. The first myth is that most lone parents are teenagers, whereas only about 2 per cent are-the average age of lone parents is in fact 36. Another myth is that single parenthood automatically leads to child poverty. In countries with a similar rate of single parenthood, child poverty is much lower than it is in this country. However, it is true that children in single-parent families face twice the risk of poverty facing those in two-parent families. A major cause of that is spelt out in Gingerbread's written evidence: the fact that median gross weekly earnings for male lone parents is £346 whereas the median for lone mothers, who are the majority of lone parents, is £194.

The Long Title of the Bill states that it sets,

Many people have questioned the novel use of the word "eradication", which seems to allow for 10 per cent of children to remain in poverty when eradication has been achieved. Perhaps it is a smoke screen to hide the fact that, in 2007, 23 per cent of UK children were in poverty-shamefully, as we have heard, among the worst figures in Europe. The Government's target, announced by the Prime Minister in 1999, of halving child poverty in 10 years will now certainly not be met. Have the Government introduced the Bill to atone for their failure to deal adequately with child poverty over the past 10 years? Steve Webb, my colleague in another place and an expert in this field, said:

"Tackling child poverty is a bit like running up a down escalator. If we do not do very much, we end up going backwards".-[Official Report, Commons, Child Poverty Bill Committee, 27/10/09; col. 191.]

Beside that figure of 23 per cent, a 10 per cent target by 2020 looks quite good, if unambitious, and appears to be a sustainable figure compared to equivalent countries in Europe, although it still means that two-thirds of 1 million children will be left in poverty. On top of this figure must be those children not included in the household surveys, such as the 60,000 looked-after children. We recognise that it is very difficult to measure the level of poverty of children who do not live in households, but Richard Kemp, the deputy chair of the Local Government Association, put his finger on an important point when he said:

"If we do not help them early, we know we will be dealing with them for the rest of their lives".

My noble friend Lady Walmsley will say more about that problem later.

To a layman, the four targets in Clause 1 seem at first glance to be mind-numbing in their subtle complexity and seeming similarity, but with the help of the Peers Information Pack one discovers the differences. We believe

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that the one target that could be dropped is the absolute low income target. The figures for households below average income-HBAI in the jargon, which we shall come across a lot in the Bill-provide statistics for the preceding 10 years, so, nine years later, poverty is virtually certain to have been improved in that time. In other words, the Government are bound to meet that target without even trying. This is a classic example of picking the low-hanging fruit. Our suggestion is either to drop that target, attractive though it would be to any Government, and substitute it with a different target that measures income after the deduction of housing costs, or to add this as a fifth target. This would not involve more work, because the information is published regularly in the HBAI statistics.

As we all know, housing is a large part of most people's budget and thus of their living standards. The cost of housing is particularly important in low-income areas, where rents are no lower as a result of the recession but income probably is. It is also important in London and other urban areas, where housing takes a high proportion of people's income. If it is argued that even poor people can choose whether to live in a more expensive or a cheaper house, evidence shows that this is not the case. People often have no choice about what sort of house they live in, because of constraints over jobs, schools, transport and other factors. Another reason is the curious fact that the measure of income before housing costs includes housing benefit. Unless this figure is discounted, it will look as though a large family receiving housing benefit has a pretty high income, which makes a nonsense of the figures. It also masks the situation in poor rural areas where housing takes up a disproportionate amount of a person's income.

The Minister may say that housing is included in the questions under the material deprivation measure; so it is, but the questions are only about keeping a house adequately decorated and having enough bedrooms. Housing costs are not stripped out as they would be with an after housing cost target. Kate Bell of Gingerbread said that the sector view has always been that the after housing costs measure of poverty is the better one; Neera Sharma of Save the Children agreed. This is echoed in the summary of consultation responses, under the heading "Targets and measurement" in the impact assessment for the Bill, on page 122 of the Peers Information Pack. The second bullet point reads:

"Measuring income after housing costs was considered by stakeholders to be the best way to determine accurate levels of poverty".

If the Government themselves continue to collect the after housing costs, this proves that they think that they are worth having, so why not add them as a target for relative low income?

Perhaps the real reason why the Government want to stick with the before housing cost target is that this is the figure used in most of Europe. The Minister in another place said that the ability to make comparisons was vital, as it would allow Governments to benchmark their performance. Is being able to make comparisons with other European countries really the most vital thing, particularly given the problem of apples and pears, about which the noble Lord, Lord Freud, talked? Surely the most important issue is what gives the

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truest picture of child poverty in this country. We shall introduce an amendment along these lines at the appropriate stage.

I turn to the problems relating to households with either a disabled parent or a disabled child, on which the Bill appears to be silent but which are very important, given the high costs associated with disability. Clause 6 is about various matters to be set out in regulations. We believe that the costs associated with disability should be included at this point. In a nutshell, either disability living allowance should be taken out of the figures to find out what a household's disposable income is or account should be taken of the higher cost of living for somebody with a disability, which might include increased heating, particularly in this weather, a particular diet, transport, specialised childcare or all of these. If DLA is included in the household's disposable income, it will surely distort the figures, giving that household a relatively high income with no account being taken of outgoings.

The figures associated with disability are truly shocking. Families with disabled children are more than 50 per cent more likely to be in debt, while only 16 per cent of mothers with disabled children work, in comparison with 62 per cent of mothers with non-disabled children. That is a staggering difference. Barnardo's says that one in six families with disabled children go without essentials, such as food and heating, due to lack of money. It is often very difficult, if not impossible, for families to find the right childcare for a disabled child, particularly an older child. Any Bill on child poverty-a major part of which is to collect the most relevant and carefully calibrated statistics on household incomes-surely ought to capture the number of households in this category.

I turn briefly to perhaps the most challenging part of the Bill, and that which involves local government in the strategy. Many local authorities, but not all, already have child poverty as a priority in their sustainable communities strategy. There is evident concern that the Government are, with this Bill, passing even more of the buck to local authorities to deliver their policy. We hope that the guidance that the Child Poverty Unit is working on will do more than try to micromanage local authorities, and that the Government will offer more practical help, such as training and support for partnership working. Steve Webb made a telling point when he said that,

The link between national targets and local delivery is unclear. Perhaps the Minister can address that problem in winding up.

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