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8 Feb 2010 : Column GC97

8 Feb 2010 : Column GC97

Grand Committee

Monday, 8 February 2010.

Child Poverty Bill

Bill Main Page
Copy of the Bill
Explanatory Notes
3rd Report Delegated Powers Committee

Committee (5th Day)

3.30 pm

The Deputy Chairman of Committees (Baroness Gibson of Market Rasen): My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Clause 8 : UK strategies

Amendment 37

Moved by Lord Freud

37: Clause 8, page 4, line 25, at end insert-

"( ) When considering taking any measures under subsection (5)(b), the Secretary of State must take account of the likelihood of disproportionate spending by a member of the recipient household on drugs, alcohol or any other addiction."

Lord Freud: My Lords, I have tabled this amendment in order to highlight the futility of seeking to eradicate child poverty solely through the means of financial transfers. Your Lordships have heard me speak on this before, but I felt that the example of addiction within a household below the poverty margin needed to be raised in particular.

During the evidence session in another place, it became apparent that there was a clear philosophical divide between these Benches and the Government on this matter. I entirely agree with what Charlotte Pickles of the Centre for Social Justice said in talking about a parent who is addicted to drugs or alcohol. She said that,


This view was entirely rejected by the Parliamentary Under-Secretary of State for Work and Pensions, who seemed to find it almost personally offensive that one might see better uses for taxpayers' money than pouring it through the hands of an addict straight into the pockets of their supplier or the local off-licence. Surely the Minister would agree with me that raising benefit levels to a family when all disposable income, and much that many of us would probably not consider disposable at all, is already going on the maintenance of an addiction, is not going to benefit the child and might actively harm them by ensuring that their parent can afford more time under the influence.

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The Parliamentary Under-Secretary made the astonishing statement that the services provided by local authorities and the NHS to deal with addictions have no relevance to this Bill. I could not disagree more. It is crucial to the fight against child poverty that "joined-up government" becomes more than just a Labour buzzword. Rightly, the Bill identifies local authorities as critical in the delivery of the UK strategy.

My amendment would ensure that the Secretary of State properly considered that resources might best be diverted to supporting local authorities' and healthcare providers' programmes to tackle addiction. I am thinking in particular of the remarkably successful programme in Ipswich, where the number of young females resorting to prostitution to feed their drug habit has been virtually eradicated-and I use the word "eradicated" in its conventional sense.

Clearly, where a child has one or more parent with an addiction, we must look at providing financial funding and support through a safe pair of hands. Surely the Minister would agree that the UK strategy must tie in with the work of other departments to ensure that, rather than just throwing cash at the problem, we offer suitable support instead. I beg to move.

Baroness Meacher: My Lords, I oppose the amendment. The noble Lord, Lord Freud, would readily acknowledge that it is important for legislation to be compatible with previous legislation and not to have unintended consequences. He knows as well as we all do that the Welfare Reform Act 2009 provides a framework for dealing with claimants who are dependent on drugs by requiring them to attend assessments in order to continue to be entitled to benefits. This was recommended by clinicians as the best approach for people dependent on drugs in order to ensure that they get into treatment at the earliest possible moment, thus also getting people back into employment, reducing the cost to the taxpayer and reducing the cost of crime.

The amendment could be used to provide a completely different method of reducing benefits to those families among whom there is a person dependent on drugs. That would be entirely unacceptable and would cut across the Welfare Reform Act. Any such reductions have profound unintended consequences, such as exacerbating the criminal activities of the individual concerned.

However, the noble Lord, Lord Freud, makes an important point about the person who is to receive the benefits to which the household is entitled. I think that the Committee will agree that children of parents who are dependent on drugs are at risk of being deprived of the money that they need to pay for food and everything else. I am sure that the noble Lord, Lord McKenzie, will be interested in that aspect of the amendment.

In this context, I give credit to the enormous amount of work that the Government have done on dealing with drug addiction. I was at a seminar about drugs this morning. I had not been fully aware of the extraordinary success of the drug addiction policies. I heard about someone who had been committing more than 1,000 crimes a year but wrote to a Minister

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saying, "Your people need to be recognised for the amazing work that they do. I now commit no crimes". That sort of work has gone on under the Government and needs to be recognised, but I think that the business of the allocation of benefits is also very important.

Baroness Walmsley: My Lords, these Benches, too, oppose the amendment. I shall be as brief as possible in the hope that we can finish the Committee stage of the Bill today. I will leave it to the Minister to refute the claim that this Bill is just about income transfer, which I am sure that he will want to do.

I agree that the Government have done a great deal to tackle addiction, but I still have questions about whether the money is being well spent on the right sort of treatment at the right time. I share the concern expressed by the noble Baroness, Lady Meacher, about reducing benefits to a family just because one or other of the parents spends some of their income on drugs. In the end, the children will suffer. An addict will spend the money first on the addiction and the children will not get the money. I accept what the noble Baroness said: you need to look at where the benefits go. If the money goes to the father, perhaps it should go to the mother. If it goes to the mother, perhaps it should go to the father. Unfortunately, in some cases, a bullying husband will get the money out of the mother, but that is another issue.

I am concerned about the idea that the children in a family where one of the parents is an addict should not have the same rights to support from the state as any other child. When an addict is identified, the authorities do not always ask, "Are there children in this household who need protection from neglect or abuse or from being in contact with criminal activity and people?". That does not always happen, but it should. It is the sort of joined-up service that we want to see. I am sure that the Government do, too, but it does not always happen on the ground.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government & Department for Work and Pensions (Lord McKenzie of Luton): My Lords, I thank the noble Lord for his amendment and the noble Baronesses, Lady Walmsley and Lady Meacher, for their contributions. As has been identified, the amendment would, in effect, require the Secretary of State to carry out an analysis of the likelihood of any particular member of the household spending a disproportionate amount of money on an addiction. This would be an onerous and impractical task. It is unclear legally what is meant by "disproportionate" or "likelihood"; furthermore, it is unclear what the overarching intention behind the amendment is.

To be fair to the noble Lord, Lord Freud, the issue of directing benefit to the member of the household who is less likely to divert it to alcohol or drugs is now clearer. However, as drafted, the amendment is unclear and cannot be accepted. All it requires is that the likelihood is assessed; it does not state what happens if a likelihood of disproportionate spending on an addiction is discovered. Both the noble Baronesses, Lady Meacher

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and Lady Walmsley, have indicated that if it resulted in financial provision being withheld from the household, it would increase the risk of poverty for children in that household and, clearly, I cannot support that.

It is right that we should be concerned about households with high expenditure on drugs, alcohol or other addictive substances. At this point, as anticipated, I reiterate that this is not only about income transfers; it is about much more than that. I hope that the noble Lord will acknowledge that. We know that a parent's drug and alcohol use can cause harm to children at all stages of their development. Again I am grateful to the noble Baronesses, Lady Meacher and Lady Walmsley, for acknowledging what the Government have done, with some reservations about what more might be done. This is why the Government are investing almost £80 million in 2009-10 to support families at risk through the Think Family programme. We have given parents with drug problems priority access to treatment and we have supported a network of family self-help groups to develop across the country.

The child poverty family intervention pilots are also testing the effectiveness of the family intervention pilots model with a wider range of families experiencing barriers to training and employment, including drug and alcohol misuse. While it is too early to fully evaluate the effects of these pilots, evidence from the first 699 families to complete the intervention suggests that substance misuse problems have decreased from 32 per cent to 17 per cent and alcohol problems have decreased from 28 per cent to 12 per cent.

I hope that the noble Lord will not press his amendment. It is imprecise and could lead to adverse consequences, which is not what he is seeking. I ask him to acknowledge that a good deal of work has gone on in relation to drugs, alcohol and other addictive substances and that that is part and parcel of tackling child poverty in addition to ensuring that income levels are supported.

The Earl of Listowel: My Lords, the Minister talked about what the Government are doing in terms of interventions for families where substance misuse is an issue. Is he aware of the Family Drug and Alcohol Court at the Inner London Family Proceedings Court developed by District Judge Crichton? Will he consider the funding of that court and perhaps write to me with reassurance that all that can be done is being done to ensure the continued success of that initiative?

Lord McKenzie of Luton: I have no briefing on that but I am happy to take the point away and see whether I can get an answer for the noble Earl.

Lord Freud: I thank the Minister for that response and the noble Baronesses, Lady Meacher and Lady Walmsley, and the noble Earl, Lord Listowel, for their contributions. I am slightly baffled by all the responses because nowhere does the amendment even imply that the Secretary of State would use the power as a carte blanche not to provide funds for children or households. It is precisely placed in the strategy clause of the Bill, which requires the Secretary of State to be concerned about the drug issue when looking at the financial transfers and how they are done.

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I know that no one would imply that this was a cheap way of reducing the income transfers. If anyone has any thought that it is, I can categorically state that that is not the issue here. The issue is that we have roughly 1.5 million children in families where there is drug or alcohol addiction or misuse. Conventional financial support mechanisms will simply not work. That is not a small number of children. We are talking about trying to eliminate from the target number that are in poverty more or less that number from next year over the decade.

We are looking at a group of children who will get potentially no benefit at all from the poverty structures that we are talking about if we do not have a specific concern to tackle this issue. It is not a small, marginal issue; it is very important. That is why I raised it in this context. I accept that the Government have had a concern with this issue. I am grateful for what the Minister said in explaining the family intervention strategies, but it is important to have a clause that reinforces the importance of this issue. Clearly, if what has been drafted is acceptable in spirit, it can be rewritten. I think that noble Lords have missed the point about the importance of this issue.

3.45 pm

Lord Northbourne: I for one am completely unclear as to what the noble Lord is suggesting should be done about a situation where, perhaps, one or both parents are drug addicted.

Lord Freud: I thank the noble Lord for the question. I do not have the answer to this problem. It would be very nice if we did because it is a big problem. The point of the amendment is to require the Secretary of State to worry about and have strategies to deal with the problem as he goes about setting a strategy for the next decade. It would do no more than that and is not intended to.

Lord McKenzie of Luton: I do not want to prolong this; I think that we are probably almost there. There is no disagreement that issues around addiction impact on families and children. We simply argue that ensuring that the Secretary of State focuses on that is encompassed by the building blocks that are already there. It is not necessary to add this issue more specifically.

Lord Freud: We disagree with that conclusion, but for the time being I beg leave to withdraw the amendment.

Amendment 37 withdrawn.

Amendment 38

Moved by Lord Freud

38: Clause 8, page 4, line 25, at end insert-

"( ) In preparing a UK strategy, the Secretary of State must consider the appropriate relationship within the benefits and tax credits system between the levels of benefit, the earnings break-even point and the rate at which benefits are withdrawn."

Lord Freud: My Lords, this amendment deals with the poverty trap, as it used to be called, and the iron triangle of benefit reform, as it has more recently been dubbed. Noble Lords will not be surprised that, as the

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shadow Minister for Welfare Reform, I take a great interest in this topic. If your Lordships will indulge me, I will go back more than 30 years to the centre-page feature in the Financial Times on 19 June 1979, I think, which warned about the looming problem of the poverty trap. I remember the piece not just because I was the journalist who wrote it, but mostly for the help that I got from Frank Field, a new Labour MP who was still then closely associated with the Child Poverty Action Group. I quoted him then:

"It has become impossible for individuals to break back into the mainstream of the country's life".

Little has changed in the past 30 years, except that the problem seems to have become much worse.

Twenty years later, and somewhat bloodied by his experience of trying to reform the system, Frank Field wrote:

"Welfare is a most powerful agent for shaping behaviour-for good or ill-and politicians ignore this elementary fact at enormous cost to society at large".

I am quoting from a piece called "What Then Was Unthinkable". There is no secret about the enmity that the current Prime Minister held towards Field's activities. I would only state, from our Benches, that it is a tragedy for this country that Field's approach has been abandoned by his party and that we have lost a decade of reforming time.

The issue was summed up by Milton Friedman in 1980:

"All radical welfare schemes have three basic parts that are politically sensitive to a high degree. The first is the basic benefit level ... The second is the degree to which the programme affects the incentive of a person on welfare to find work or to earn more. The third is the additional cost to taxpayers ... To become political reality the plan must provide a decent level of support for those on welfare, it must contain strong incentives to work and it must have a reasonable cost. And it must do all three at the same time".

I suspect that not many Lords in this Room are devotees of Milton Friedman. Nevertheless, he captures the point, while this Bill does not. The Bill concentrates on a level of support for people and is decidedly thin on work incentives and costs to the taxpayer. In other words, it does not,

At Second Reading, I pointed out the large sums that had been transferred to the poorest in our community and the disappointing outcomes in terms of poverty reduction, particularly in the 2004-08 period. The question that is naturally raised is whether this Government, in providing extra help for the poor, have done it in a way that has blunted incentives to work. To the extent that this is the case, the Government are like a mouse on a treadmill: they pump in extra money but they disincentivise more people from working and establishing independent incomes than they support directly. When the Government set their rates, they never examine the dynamic effects of such policy but purely look at them on a static basis. This is, of course, why I fear that the £19 billion cost, estimated by the IFS to eradicate child poverty through income transfers alone by 2020, is hopelessly optimistic. It does not take into account the dynamic effects of such transfers.

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Baroness Hollis of Heigham: My Lords, as a point of information, it absolutely does. I have been there, done it and seen the evidence. I cannot let those remarks go unanswered.

Lord Freud: I thank the noble Baroness, Lady Hollis, for making that point. The fact is that, until this year, there was no model that could do the dynamic analysis. The Treasury model has relied on a static analysis. The lead in this area has been taken by a working team chaired by Dr Stephen Brien, supported by the Centre for Social Justice, and Oliver Wyman. As I said, the team has built a dynamic model of how the benefit system works in practice. In particular, its document Dynamic Benefits points out that there is a mathematical relationship between three factors: the level of benefit, the earnings break-even point and the rate at which benefits are withdrawn.

The iron triangle imposes mathematical limits on what we can do. The example offered by Dynamic Benefits is this:

"If break-even earnings are £16,000 per annum and out-of-work benefits are £12,000, then the average withdrawal rate is necessarily 75%".

The higgledy-piggledy system that we have at the moment is a lot less efficient than this and there are many examples of people suffering withdrawal rates in the region of 90 per cent or even higher.

According to Robert Moffitt, the higher the out-of-work benefits, the more costly it is to reduce withdrawal rates, because not only does the level of in-work benefits need to be higher, but it is also likely to stretch up to the point of the population where there is much higher earnings density, making many more people net recipients of benefits. He says that in "Welfare Work Requirements with Paternalistic Government Preferences", which was published in the Economic Journal of November 2006. This leads directly to the grim conclusion in Dynamic Benefits that,

I hope that this sets into context for noble Lords why our policy on child poverty concentrates on the causes of poverty and on helping people to get out of poverty through their own endeavours rather than through income transfers. I am dismayed at some of the discussion in this Committee, where the Government seem unable to understand the importance of the distinction. The question that I ask the Minister is: did the Government undertake this kind of analysis when they set the financial targets? Have they any estimate of how much extra dependency they will create by aiming to solve child poverty purely through income transfers? The purpose of this amendment is to make sure that the Government complete this kind of proper analysis when they set up strategies to reduce child poverty on a genuinely sustainable basis. I beg to move.

4 pm

Baroness Hollis of Heigham: This is an interesting amendment, but it is frankly irrelevant to the Bill because it is part of all government strategy. We

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understand perfectly well that there is inevitably a tension between decent enough benefits for those out of work, decent enough wages for those in work and appropriate taper and withdrawal so that there are incentives to increase working hours. It is not a triangle, it is a square, but I will forgive the noble Lord for that. The fourth point of the square is that it should be affordable for the taxpayer. That is not some mathematical law; it is called politics. All Ministers and civil servants working on this issue within the DWP and the Treasury spend their time juggling precisely those four points: decent enough benefits, decent enough wages, a decent enough taper and appropriate costs. That is what politics is all about.

In that sense, what the noble Lord is saying is superficially true; it is simple and we all take it for granted. However, there is a more profound point, which is why I really object to this analysis. The notion that economic rationality is a model of human behaviour has, to my certain knowledge, been exploded. My late husband, a professor of philosophy, wrote on the subject of economically rational man with a professor of economics, Ed Nell, suggesting that this is an inappropriate model of human behaviour.

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