Child Benefit (Rates) (Amendment) Regulations 2008

I thank the Minister for introducing these draft regulations, but the fact that he has done so in relatively brief terms will not necessarily influence the amount of attention that I shall give them. Fundamentally, the regulations are not controversial in that they set out the expected uprating for child benefit and lay the ground for bringing forward the date on which it is paid from April to January, but that needs to be passed in another order rather than the regulations before us. These regulations are part of the Government’s famed fiscal loosening. According to the Pre-Budget Report, it will cost the government finances £170 million, so taken on their own they will not do much in the context of our economy, which has of course suffered from 10 years during which the Government have wilfully racked up one of the largest structural deficits in the world. That structural deficit is a severe constraint on the Government’s ability to use fiscal measures to stimulate our economy, as many such as the OECD and the IMF have correctly pointed out. We believe that the policies outlined in the PBR are fundamentally flawed since they will saddle future generations with a level of unaffordable debt. If the Government’s growth forecasts prove to be optimistic, as many observers believe, the outlook for the country’s finances is even more dire. Against that background, we will not oppose this little bit of fiscal loosening on the simple grounds that we would choose to run the economy in a different way. However, we would like to understand why the Government have chosen child benefit as one of the few measures in the PBR. I assume that they have done so on the careful basis of its impact on the economy. Indeed, that was what the Chancellor was trying to convince us about in the PBR. However, we find the use of child benefit, a universal benefit that is not taxable, a curious choice, and I hope that the Minister will explain the rationale. In that context, will he tell us what estimates the Treasury has made of the amount of the additional child benefit that will be spent, saved, or used to reduce debt? Since the benefit is payable to families whatever their income, the impact is likely to be less direct than, say, if child tax credits were used. I believe that the PBR is broadly predicated on a spend half/save half assumption. Can the Minister shed light on the assumptions in relation to child benefit? The Minister raised the subject of child poverty, and that is what I now turn to since child benefit is one of the tools the Government claim they are using to reduce child poverty. It is not a particularly targeted tool in that regard, but the Government claim it as one that they wish to use. In the Pre-Budget Report speech, the Chancellor referred to child benefit immediately after making the usual commitment to eradicating child poverty by 2020, and of course through the forthcoming Bill, on which we look forward to working. However, we have yet to be convinced that there is any substance behind the Government’s commitment and whether a Bill can help that, but my noble friend Lord Skelmersdale is looking forward to working on the detail. The Government like to brag about their record since 1997 on reducing child poverty, but the statistics simply do not add up. The number of children living in families on less than 40 per cent of median earnings, which is an absolute poverty measure, has risen in the past decade by 600,000. In 1997, there were an estimated 3.4 million children in relative poverty on the Government’s favourite measure. By the end of 2006-07, the latest period for which we have statistics, there were 2.9 million. However, the Government pledged to reduce that figure by 25 per cent by 2004-05, which is nearly four years ago, to 2.55 million, so they have missed that in spades and are still missing it. In the two years to 2006-07, child poverty increased by 200,000. The Minister has already referred to the Government’s next target, which is to reduce child poverty by 50 per cent by 2010, and that requires a further 1.2 million children to be removed from relative poverty. However, will the Minister say whether the Government have any chance of meeting that target on current policies, because 2010 is getting awfully close? The ultimate target is eradication by 2020, as the Minister reminded us, although the Government have never said exactly what they mean by ““eradication””, and they have certainly not said how they will get there. If the Minister has any more information on that, that will be valuable. The PBR claims that measures since the 2007 Budget will lift 500,000 children out of relative poverty, which of course is nothing like enough to meet the 2010 target. However, the PBR does not differentiate between the different measures that contribute to this figure of 500,000. We have had the 2007 Budget, the 2008 Budget, the 10p rate climbdown in April 2008 and now the latest Pre-Budget Report. Paragraph 4.18 of the most recent Budget made exactly the same claim as is in this PBR—that 500,000 children will have been lifted out of poverty since the 2007 Budget. This implies that the PBR itself, including the measure before us today, will have no impact on child poverty, because exactly the same claim was made in the Budget last March. Alternatively, it may mean that since the last Budget the direction of child poverty has gone backwards again and that this Pre-Budget Report is required to correct that movement. I hope that the Minister will cast some light on what is happening in child poverty. It is important to understand not only what the Government are doing today but whether they have any hope whatever of meeting the targets for the future.