Child Poverty Bill

My Lords, poverty, like wealth, is too often inherited, unmerited and unearned—especially for children. We all know which children are poor and in what families they live—large families with two parents churning between no or low-paid work. Others have a lone parent, a disabled parent, a BME parent or an unemployed parent—usually a mixture of them all. Therefore, this Bill is about income and outcomes for children. It seeks to turn the Government’s aspiration, which I am sure is shared by the House, of halving, then eradicating child poverty, into targets—binding targets. Normally in draft legislation, we do not insert a Clause 1 as a statement of intent. Here we have an entire Bill devoted to it. It cannot be done. It has to be done. It is impossible, but it is essential. Why? In the other place, much of the debate, as my noble friend mentioned in his opening speech, centred around whether tackling poverty of income should be the objective of the Bill, or whether, given that poor children were by definition within poor families, there were drivers behind that poverty of family income—education, worklessness, debt, addiction, family relationships and poor mental health—which should be tackled first. That argument was run by the noble Lord, Lord Freud. The Government argued, rightly in my view, that their work in other fields—Sure Start, schools, the New Deal for Lone Parents—have progressed in parallel with their pledge on child poverty, and that therefore it was right that this Bill should remain focused if we are to transform the life chances of every child. Without an assault on income poverty, the successful outcomes that we all want to see—happy, healthy and well-educated children—are infinitely harder, if not impossible, to achieve. We need this Bill, not a different Bill. However, that does not make the task that this Bill sets for itself any easier. Why is it so difficult—perhaps even impossible—while at the same time essential? There are four tests of poverty in this Bill, and they are mostly problematic, as I want to suggest. The first relates to relative poverty—those at below 60 per cent of national median income. It is of course a statement about inequality at least as much as poverty, as the right reverend Prelate the Bishop of Leicester absolutely rightly said. Fewer children in Greece, I suspect, may be—or are, indeed—below the 60 per cent line. But does that mean that there are fewer children in poverty? No, because I suspect that Greek incomes are lower and, therefore, children above the poverty line in Greece may in real terms be worse off than children in England below the poverty line. In other words, international comparisons—I agree with the noble Lord, Lord Freud—without carefully worked-out equivalences of livings standards between countries are, frankly, a waste of space. Indeed, it is arguable that if you take the total benefit package into account, UK children are in the top three or so of OECD countries. There is a second problem. Conventionally, benefits for people of working age are increased by inflation. Those in work, however, can normally—I do not mean now—expect to see wages rise each year by 2 per cent above inflation. Those below 60 per cent median, as the noble Baroness, Lady Thomas, rightly said, keep falling behind. To catch up, benefits not only have to be linked to earnings, rather than the RPI, to maintain the status quo—and that is expensive enough—but need actually to increase faster than earnings, in order to narrow the relativity gap. Only then will you decrease inequalities. Even if that were acceptable and affordable, if you have several children and only one unskilled earner, what then happens to work incentives? The poverty trap becomes an unemployment trap, unless you revisit the work stop of the 1970s. Not surprisingly, but unfortunately, therefore, we mostly see a reduction in children in relative poverty where there is recession, where earnings fall and the median bar drops. Thereby, we reduce relative poverty because the country is getting poorer and inequalities close. I am not absolutely sure about this, but that may account for the question of the noble Lord, Lord Freud, as to why attempts to achieve the child poverty targets have done relatively badly since 2004. I suspect that that is due to real wages rising rapidly between 2004 and 2008 and, therefore, the bar has risen faster than children on benefits could keep pace with. That shows the problematic nature of the measure. This Government admirably have sought to square this circle and make work pay through the minimum wage and tax credits. However, again, if they seek to reduce in-work poverty, as they must, the median bar is raised ever higher and it becomes harder for relatively poor children on benefits to hurdle. In a sense, the Government have set themselves up to fail. Despite my profound misgivings about the deliverability of the relative poverty target, I do not for a moment believe that it should be discarded. My noble friend reminded us that some 500,000 children have come out of relative poverty, and he hopes that a further 500,000 children shortly will join them. Many lone parents with children under 14, for example, already receive benefits above the 60 per cent median line. But however difficult and demanding it is—and it will be—we have to go further, otherwise children in the bottom quintile will fall further and further behind. As society becomes more unequal, children see themselves as onlookers—the excluded—while other children’s well-being rises. I will support anything that increases equality and reduces inequality, as this test does. Therefore, as a test of poverty, the relative poverty measure is flawed, but in terms of social decency, so that children are not left behind, I judge it to be essential. What none of those who understandably may press for amendments in Committee in order to go further and faster—5 not 10 per cent of children below the line; AHC rather than BHC—should forget, which I am sure they do not, is that the targets in this Bill are frankly already truly heroic and, if we can achieve them, transformative. The second test—income combined with material deprivation—is also in my view deeply problematic. It combines in one test both income and expenditure, thus brigading what we used to call primary poverty, which is real enough, with in some cases additional secondary poverty—that of expenditure choice. Research shows that of two families with identical income, one may suffer material deprivation, the other not, according to whether those in one family smoke but those in the other do not, or whether they belong to a credit union or, alternatively, have loans at very high APR figures, which plunges them into debt. Expenditure also quite properly reflects people’s choices. To put it flippantly for a moment, if I may, a member of my family is below the poverty line on material deprivation indicators while being a higher-rate taxpayer. I realise that the index is weighted both for preference and for widely available goods, and of course it is combined with low income. I also recognise that the material deprivation indicator importantly allows us to pick up people whose income seems nominally high because of their housing or disability benefits but whose expenditure is equally high, or higher, as well. Bedroom overcrowding—a problem that has grown with reformulated families, each partner bringing children into the relationship, and to some degree with immigration—or keeping the house warm, which is important where there is a disabled parent or child, are key examples. However, I have always thought it a somewhat odd list of indicators, originally modelled on the Irish bundle of goods. Household contents insurance, for example, is often a generational choice, and safe play facilities or open space close by are less about income than the built environment, but those are alongside the big ticket items, such as overcrowding, and very modest ones, such as affording the 35p once a fortnight for a baked beans and sausage tea for a friend. I remain somewhat hesitant about this list. Incidentally, talking about housing—and despite the noble Baroness, Lady Thomas—I think that the Government are absolutely right to go for BHC rather than after housing costs. I absolutely understand the argument that housing costs vary dramatically, but equally it can also be argued that they may reflect a choice of higher quality over other goods. However, an argument that I think has so far not been made is that high housing costs usually run alongside cheap transport. Cheaper housing, outside London, usually comes with higher transport costs, estimated to be on average £20 to £30 a week more—the result of sparsity and poor public transport. AHC weights for London at the expense of the rest of the country. Before housing costs, I believe, more fairly assess country incomes as a whole. If you want AHC, you have to run with it by including transport costs, but in all fairness I do not think that we have the detailed statistics to do so. Similarly, the noble Baroness, Lady Thomas, raised the issue of DLA and disability costs. However, DLA does not pay for costs; it is assessed on care needs. Someone living at home with severe depression, for example, may be on the middle rate, receiving the DLA care and mobility elements, but have few extra financial costs in the way of diet, heating or appliances. There may be a case for raising DLA, and I would support the noble Baroness on that, but that is not part of this Bill. The third test, absolute income, is also not trouble-free. It sets a benchmark, an underpinning to relative poverty figures, which I support. We have been using the 1999 figures, and they show that half the cohort of children who were below the poverty line in 1998-99 were by 2009 lifted above that line. We are talking about 1.7 million children, which is a huge achievement. As this benchmark is independent of what is happening to earnings, it is about real standards of living rather than relative ones. The difficulty is that, even with RPI built in, every decade or so you have to rebase your figures, otherwise the benchmark gets too far behind generally accepted standards of living, and you therefore build in a jagged edge every time you rebase and do not end up with the consistent statistics that you need to guide policy. However, consultation with the lobby groups showed that they wanted to retain this and I think that they were right. Persistent poverty, the last of the four tests, is in my view the most important of all. It is the poverty that scars and affects about 10 per cent of our children. A temporary drop into poverty—while, for example, for six months dad draws contributory JSA—will for most families be fairly quickly overcome when they join the world of work and rebuild their lives. If however you are persistently poor, everything is more expensive—each square foot of your living space, the cost of your fuel, your food, your loans, and certainly your ambitions and aspirations. Persistent poverty defeats the parent and denies the child most of the things that make up the good life. It is the one that really matters. Therefore, I think this is a brave Bill and it is one for which I applaud my noble friend. I edited Opportunity for All on behalf of the Government from its inception to 2005 or so, and 20 or so of our 40 poverty indicators expressed child poverty targets. Those reports sought to measure child outcomes across the field of government activity. This Bill, I believe, completes the jigsaw, turning an aspiration to end child poverty into a commitment, enshrined in law, by which any and every Government rightly should be judged. I think it will be impossibly hard to deliver but we must try. We owe all our children nothing less, for every child matters.