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The noble Baroness said that the Government used to include both before housing costs and after housing costs and asked why there was a change. The original child poverty PSA was to quarter child poverty by 2004-05 on both BHC and AHC measures. It is true that after this the Government changed to focus on before housing costs. This was before the extensive Measuring Child Poverty consultation in 2003-04, which arrived at the long-term measure of child poverty. It was decided to focus on before housing costs, only because of the inclusion of the combined low-income and material-

Baroness Thomas of Winchester: Before the noble Lord leaves that point, will he say whom the Government consulted?

Lord McKenzie of Luton: It was an extensive consultation. Somewhere in my pile I have a copy of the government response to it. There was an interim and then a final response. That included those whom we would regard as the usual suspects in all this. More widely it included academics and specialists; I am getting a nod from the Box. I should be happy to share that information more extensively with the noble Baroness.

It was because of the low-income and material deprivation measure that we decided to move and focus on before housing costs. Later we will perhaps delve more deeply into material deprivation measures, so I shall not speak more extensively on that at the moment. The noble Baroness explained what they are meant to capture.

The noble Baroness asked why housing benefit is included as income in the before-housing-costs measure of poverty. We believe that it is right that housing benefit is included in the before-housing-costs income calculation. Households in receipt of housing benefit pay their housing costs using their total income, including housing benefits. Households that do not receive housing benefit will need to pay their housing costs through their total income. Including housing benefit enables like-for-like comparisons between the incomes with which households pay housing costs and meet their other needs. To deduct housing benefit from those that receive it would underestimate the total income with which they could meet their housing costs and other needs.

The noble Lord, Lord Freud, and the noble Earl, Lord Listowel, talked about the lack of affordable housing. For decades, there has been a mismatch between supply and demand for new homes, with housing supply failing to keep up with our aspiring

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and ageing population. This has led to significant problems of affordability, particularly for those seeking to buy their first home. Addressing affordability and tackling poor housing are a key priority of the Government. We have made substantial progress over the past years, but, as I said, there is more to do. Over the years 2009-11, we will invest around £7.5 billion in affordable housing. With this investment, we are expecting to deliver 112,000 affordable homes. The Government's ambition is to deliver 240,000 additional homes per year by 2012. In 2007-08 the number of housing completions was at its highest level for about 30 years, although, obviously, current market conditions have made that somewhat difficult to repeat immediately.

As for the additional costs potentially associated with after housing costs targets, in the impact assessment to the Bill the Institute for Fiscal Studies estimated that eradicating child poverty could cost up to £19 billion in 2020 on a before housing costs basis, if this were achieved solely through increased tax credits and benefits. Obviously, this is not the approach supported by the Bill. The Bill is specifically designed to ensure that the Government use a wide range of interventions via public services, with financial support being only one of those interventions. This will be a more cost-effective, sustainable and efficient approach. However, there is uncertainty in quantifying these costs. Because there is a significantly greater number of children-more than 1 million would need to be lifted out of poverty on an after housing cost basis-we can be confident that, if achieved solely through tax credits and benefits, the costs would be significantly greater than £19 billion.

Currently, the level of relative poverty after housing costs is 31 per cent, or 4 million children. Meeting the target would require a reduction to less than 1.3 million. As was noted at Second Reading by several noble Lords, the existing targets in the Bill are already extremely ambitious. The Pre-Budget Report sets out the five principles of our child poverty strategy: that work is the most sustainable route out of poverty; that families and family life should be supported; that early intervention is necessary to break the cycle-

5.15 pm

Lord Freud: I thank the Minister for giving way. My question concerns his assumption, when he compared costs before and after including housing, that they would have to use the same parameters in each case-60 per cent of the median, reduction to 10 per cent, and so on. As I understand the amendment tabled by the noble Baroness, it considers costs both before and after housing. Clearly, if the Government were to use exactly the same parameters, they would be superseding the easier target with a more difficult one. However, that may not be the intention. It may be that both should be measured but against different financial criteria. I invite the Minister to respond on whether every target has to be measured against exactly the same financial criteria.

Lord McKenzie of Luton: If the financial criteria question is about the percentage of children and the percentage of mean household income, those are not common across the four measures in the Bill. Two of the measures have a 5 per cent threshold; one of them

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does not have a threshold at all at the moment, because it depends on the longitudinal study that is being developed about persistent poverty; and the other has a threshold of 10 per cent. They are not consistent, so here I am responding to the amendment, which adopts the same 10 per cent criterion and 60 per cent of median income, which applies to the before housing costs target. Obviously, if the amendment were different, we would have to consider that, but the fundamental issue is how we best cater for and represent issues of housing cost in the data and targets that we consider. Our point is that by considering a low-income figure and a material deprivation figure-looking at income and, effectively, costs through material deprivation-we have the best route to get the best measure.

Lord Freud: I thank the Minister for giving way. It is possible to view the amendment as rather cynical, just replacing an easier target with a tougher target-the 2.9 million with the 4 million-but it is also possible to look at it in a more qualitative way. It is an attempt to consider another dimension: housing deprivation. If I am straying slightly from the specific words of the amendment, I hope that noble Lords will forgive me. My point is that, if housing deprivation is desperately important, which it is, and this is of value as a measure, it would be possible to devise such a measure with a different threshold or median percentage, so that we are looking not at an inconsistent target-the £19 billion would not necessarily change-but at ensuring that the children whom we are capturing are the more appropriate ones, so that we are capturing something valuable. Whether or not that point is within the letter of the amendment, I would be interested in the Minister's thoughts and response.

Lord McKenzie of Luton: My Lords, it is perfectly feasible to advance an amendment that has a different figure from 10 per cent of the number of children in relevant households and a percentage of median income other than 60. I am not sure whether that addresses the concerns. Let me make it clear that we do not see this as a cynical amendment. The case is genuinely and strongly felt and was argued extensively in the other place. We are continuing with that debate here. As the noble Baroness, Lady Thomas, stressed, the amendment sets an additional target rather than replacing one.

I am about to conclude my response. I have not strayed into the argument raised by the noble Baroness when she introduced her amendment about making international comparisons on the basis of before housing costs. For the record, I will say that we do.

Finally, as noble Lords are aware, the HBAI series contains child poverty figures both before and after housing costs. We are committed to ensuring that both figures will continue to be published, to ensure that it will always be possible to monitor child poverty trends on an after housing costs basis, as well as to keep under review the impact of housing costs on families' living standards. I understand the point made by the noble Lord, Lord Kirkwood, that after housing costs figures could drift if they do not have equal status for these targets, but I do not see that that follows. There are plenty of people, including the noble Baroness and the noble Lord, who will make sure that the Government

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remain focused on that statistic. I apologise that I have been speaking for a while and ask the noble Baroness not to press her amendment.

The Earl of Listowel: My Lords, I apologise for detaining the Committee and the Minister further. Looking back at the answers that he has given, could he say a little more-or perhaps write to me-about social housing and the steps that have been taken since 1997 to invest in it? What he said about decent homes probably covers that to a large degree. Is the fund for social housing being replenished? It causes a lot of dissatisfaction and unrest in some areas when outsiders are perceived as coming in and taking social housing that is in short supply. In some areas it gives rise to a lot of tension. It would be comforting to know what the Government are doing about that.

Lord McKenzie of Luton: My Lords, I am happy to write to the noble Earl with much more detail than I can bring to mind on my feet. There has been a significant amount of investment in low-cost housing to enable people to buy as well as to rent. Particularly in recent times, there has been the opportunity for local authorities, after some while, to build new council homes for rent. I might be wrong on this statistic, but something like 70,000 affordable homes will be built this year and next. I will write to the noble Earl with much more detail. This is not only to deal with the decent homes standard and to make sure that existing housing is brought up to a decent standard. There is an extensive new-build programme, with particular focus on affordable housing both for purchase and for rent. In the current economic climate, it has been particularly difficult to move forward on that, which is why the Government have promoted shared equity schemes as well as another scheme whose name escapes me. I will write to the noble Earl on that.

Baroness Thomas of Winchester: My Lords, I am most grateful to all noble Lords who have spoken in this debate. The noble and right reverend Lord, Lord Eames, who is not in his place at the moment, said that he thought that the discussion was ethereal. I think that this debate has been slightly surreal in some ways. I thought that this would be a rather dry subject, because it involved just the figures to be captured, but it has turned out to be a much wider debate about housing. The noble Lord, Lord Martin, made a very good Grand Committee maiden speech. He told us all about housing in Glasgow and about the men who went to the pub to get away from the overcrowding and stopped drinking so much when they got a house of their own. That was a very interesting aspect of life in Glasgow.

I wish that we had been able to talk more about housing in general, but we had better stick to the topic of the amendment or we will be here all night. Surely leaving housing to the material deprivation score is rather a convoluted way of arriving at a family's disposable income. I would have thought that collecting the after housing costs was much simpler. Even if HBAI is still going to collect them, I am still not quite sure why the Government do not give in and say,

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"Okay, we will collect both, and then we will be happy and you will be happy". I was interested to hear the Minister say that the consultation showed that people wanted the before housing costs, because all the groups and the academic researchers seemed to prefer the after housing costs. That is why we tabled the amendment, because the method that it proposes seemed to be the one that everyone used, as it is much simpler. I wonder whether HBAI will continue to collect after housing costs after the Bill has been enacted. I hope that it does, because it tells us something.

I must also talk about transport. I certainly do not disagree with the point about transport, particularly in London. Everyone knows that if you have a low-paid job, on the whole you live out of London and come in because the transport is relatively good, but in some rural areas it may be more expensive to live near a transport hub. This is why we need both figures. London is a particular example, but there are many other areas of the country that we should not ignore.

I will not speak any further about this, although I am afraid that the Minister has not told me anything that I did not know already. I am tempted to table this amendment again on Report and call for a Division, but I will leave that to another day. In the mean time, I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

Baroness Crawley: My Lords, this may be a convenient moment for the Committee to break during pleasure for 15 minutes.

5.30 pm

Sitting suspended.

5.45 pm

Amendment 3

Moved by Lord Freud

3: Clause 1, page 1, line 10, at end insert ", and

( ) the persistent material deprivation target in section (Persistent material deprivation target)"

Lord Freud: My Lords, I referred to this general area when the Minister asked me whether our view on financial targeting would change. This amendment effectively introduces an additional financial target. Its aim is to set out as reliable a figure as possible, given the state of the data, for the kind of really persistent poverty which concerns the electorate. It is designed to be a rock-bottom measure of long-term poverty combined with long-term deprivation.

One central issue of concern with the financial targets set out in the Bill is the lack of reliability of the data. The income data on which we rely come in the main from the Government's Family Resources Survey. Each year it questions around 25,000 households. There is of course an issue about the reliability of the responses. That is a point we shall pick up on in another amendment. By definition, a survey only records an individual's income at a certain point. For instance,

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if I am in between jobs, I can record nil income and be counted as poor. Not surprisingly, people move rapidly in and out of these deciles. Peter Saunders at Policy Exchange, in his fascinating paper Poverty of Ambition, points out that more than half of the poorest 10 per cent of households move out of the bottom income decile within 12 months. He informs us that of the 18 per cent of households with incomes below the poverty line in 1991, only 2 per cent were persistently poor in every one of the subsequent 10 years. Temporary drops into income poverty are not what the general public understand to be poverty.

Long-term or persistent poverty is covered in Clause 1(1)(d). The trouble is that the measure of income alone seems pretty dubious if you read the IFS report, written for the DWP by a team led by Mike Brewer, entitled The Living Standards of Families with Children Reporting Low Incomes. We have already looked at another report from the IFS today. This report finds a particular problem with self-employed families that have higher living standards than employed families on similar incomes. Additionally, households with children on the lowest incomes do not have the lowest average living standards. The IFS closely examined the number of children in hardship, in particular long-term hardship, using the Families and Children Study and the British Household Panel Survey, known respectively as the FACS and the BHPS in common shorthand. It found that the proportion of children in long-term hardship-that is, three consecutive years-was greater than the proportion in long-term poverty; that is, three years of income poverty. Interestingly, however, the document stated that about one-third of children in poverty for three years never experienced daily living deprivation according to the Families and Children Study; almost one-third never experienced consumer durables deprivation; and much higher proportions were never in hardship according to the other measures. Therefore, a combination of the two measures over a persistent period would allow us to capture that group of children who are at the heart of disadvantage in this country. Once they are clearly targeted, we can focus on how best to help them. I beg to move.

Lord Kirkwood of Kirkhope: My Lords, I commend the noble Lord, Lord Freud, for bringing this amendment forward. Persistent material deprivation has always exercised me more than anything else. As I said earlier, I share his view that looking at statistical metrical data is not sufficient to deal with the problem. However, I wonder how easy it would be to collect the data in the way that he suggested. I genuinely do not know whether it would be easy to do so. It is obviously easier for statisticians. We all accept these surveys a little too casually. For the reasons that he has given, it is not safe to rely on them exclusively, because they are subject to statistical problems and contain lacunae. I agree with him that in the area of self-employment, the figures are notoriously difficult to rely on. He has highlighted something that we need to look at. People who have lived in poverty for three out of four years are a key group who should be targeted and given special assistance. If he can devise other methods that are fair across the board and easily administered, I would be very willing to look at them and would encourage the department to study the suggestions.

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The one note that worried me in the excellent introduction to the amendment given by the noble Lord, Lord Freud, was the fact that he seemed to suggest that people are not as poor as they are made out to be. That is not my experience. If I was left entirely to my own devices, I would use minimum income standards when dealing with material and persistent deprivation, as other European nations do. Material deprivation gets worse as it goes on, and if people are stuck in the trough of material deprivation for three out of four years, they should be entitled to take advantage of the unique gift to the nation suggested by the noble Lord, Lord Freud; namely, the changing of the DEL/AME rules. If I was the head of a family and I could demonstrate that I had been in material deprivation persistently for three out of four years, I should be able to go to Jobcentre Plus and say, "I want to do something to get me out of this". It might take £5,000, £10,000 or £15,000 to get me qualified as a healthcare assistant or a plumber. It would make absolute sense if you could demonstrate that the conditions applied; namely, material deprivation for three out of four years. People should get a hand-I mean a serious hand-in the form of the bursary or grant that they need, with the childcare to match. If people act in good faith, they deserve special treatment of that kind. That is a bit of a fantasy, because it is a very difficult thing to organise. However, it would motivate people and would not have any of the perverse disincentives to work involved in simply giving people extra money.

We as a society have to do something to deal with family households in material and persistent deprivation. My experience is that it is not just that they trade themselves out, as the Policy Exchange work that I have studied suggests. The worst thing that happens to them is that they fall into and out of work. For children, that is even worse, because they do not know where they are at any given moment. Being locked into a cycle for three or four years in which you are in low-paid work, then receive benefits and then go back into low-paid work destroys any ability to give a real advantage to young children. It is very difficult for families to deal with the key formative moments of their children's lives.

The amendment goes a long way towards meeting my concerns in principle. I do not know about its operational effectiveness or feasibility, and if I rightly detected that the noble Lord, Lord Freud, thinks that there are not as many people at this level of poverty as I think there are, I distance myself from him to that extent. Otherwise, it is a perfectly good idea in principle, and I look forward to hearing what the department has to say about it, because it is worth thinking about.

The Earl of Listowel: Perhaps the Minister can help me to understand this better. I, too, am grateful to the noble Lord, Lord Freud, for his amendment. On the one hand I see that, if we want to make a difference, it is important to target the neediest, because they will often be missed, and it is they who need the most dedicated help to improve their lives. On the other hand, I think about the experience on the continent with children in care: more children are taken into care, but there is also more outreach to families, more support and more early intervention.

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My thought in responding to the amendment is that it may be a good approach to detect families before they fall into persistent poverty, but that supporting families when they are in this state of persistent poverty is also very important. I am torn. I suppose that one wants to try to do both: to intervene early to prevent them from entering into persistent poverty, and then to make damned sure that families in persistent poverty get the intervention that they need to get out of it before all the terrible consequences have an impact on their children.

6 pm

Lord McKenzie of Luton: My Lords, I thank the noble Lord, Lord Freud, for his amendment, which deals with an interesting and relevant issue.

I agree with the noble Earl, Lord Listowel, that early intervention and support for children in care and for families is important. I am sure that we will discuss this at greater length in due course in Committee, particularly as our Green Paper is due out soon. I think that the noble Lord's party also produced a possibly equivalent publication yesterday. That approach is a key part of building the strategies and is not inconsistent with needing to address the issue of people who are persistently in poverty. The two must both be addressed.

The amendment proposes that a second persistent poverty target is included in the Bill, and would introduce a corresponding duty on the Secretary of State to meet it. It would also require the progress against the new measure to be reported in the annual progress report. The proposed target measures the persistence of combined material deprivation and low income. The existing target measures the persistence of low income and is set out in Clause 5.

We recognise the importance of including in the Bill a measure of persistent poverty. The length of time that a child is in poverty can have a significant detrimental impact on their experiences and life chances, so it is necessary to ensure that moves out of poverty are sustained and that children do not experience the negative consequences of persistent low income.

We also believe that it is crucial for the targets to capture material deprivation, and the combined low income and material deprivation target will ensure a focus on those families that are experiencing the material effects of living in poverty. It recognises that some families face unusually high unavoidable costs, which mean that their living standards are poor even though their income does not fall under the relative low income poverty threshold. The material deprivation measure in Clause 3 complements the persistent poverty measure in Clause 5 because material deprivation is more likely to affect households which have been poor for a number of years than those households experiencing temporary low income, the point that the noble Lord, Lord Freud, effectively made.

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