Child Poverty Bill

My Lords, I thank noble Lords for a fascinating debate and for their generally warm welcome for the Bill. I acknowledge the honest doubts of the noble Lord, Lord Northbourne, and I hope that along the way we will be able to encourage him to feel warmer about the Bill. I congratulate the right reverend Prelate the Bishop of Hereford on his impressive and wide-ranging maiden speech and I look forward to his future contributions, some of which, I hope, will be on subsequent stages of this Bill. He talked to us about the role of the church in supporting families, and he made the telling point that setting targets of itself does not change things; those targets have to be met. I agree with that. He referred to issues around poverty of aspiration. The Bill is not only about targets; it is about strategies that should seek to ensure that all children do not suffer socio-economic disadvantage. There are fascinating issues around lone parents and how we encourage them into work and the support that we have given them in the Welfare Reform Bill which we debated not long ago. It is encouraging to listen to the many interesting contributions to this debate. It is clear that this House, across parties, is passionate about tackling child poverty and ensuring that every child has the opportunity to realise their potential. I look forward to working with noble Lords to ensure safe passage of this measure through your Lordships’ House in what we know will be a truncated Session. I shall try to deal with as many of the points raised as I can. I shall start with the noble Lord, Lord Freud. I say to him, as he talked about figures since 2004-05, that I do not think he gave proper recognition to the measures that were announced in and since the Budget 2007 which should lift a further 550,000 children out of poverty. I will come on to some of the detail of those measures later. There is also the simulation and the work that IFS did, which predicted that child poverty would fall by more than half a million between 2006-07 and 2010-11 to around 2.3 million; so it is not right to represent that these things are mired and moving in an increased direction. The noble Lord talked about the UNICEF report and suggested that the UK performs badly on child well-being. We accept that the 2007 UNICEF report highlighted some significant challenges for children’s well-being in the UK, and we are not complacent. However, much of the data used are old, with some taken around 2003 and some relating to 1999 to 2001. The noble Lords, Lord Freud and Lord De Mauley, suggested that in a sense our approach is all about income transfers. That is not the case. Certainly, income transfers, the working tax credit and child tax credit in particular, have been a key part of the strategy to tackle poverty and child poverty, but the building blocks set out in Clause 8 cover a whole range of key policy matters—some of which, from the noble Lord’s analysis, we actually share. It is to do with employment and skills; it is to do with health and education; it is to do with childcare and social services; and it is to do with housing. It is not just about looking at income. Regarding the iron triangle, if the noble Lord, Lord Freud, looks at the data, he will see that fewer people experience high rates of withdrawal of benefits than under the predecessor Government. I am not sure if that was the noble Lord’s party at the time, but if he looks at the data, that is the case. A lot of effort has gone into making sure that work pays through things such as the national minimum wage and tax credits. The commission is not a political appointment and the OCPA rules will apply to it. It is a genuine advisory body and I hope that the noble Lord would welcome that. He asked why we use the 60 per cent median income measure. The Government consulted widely on the measure of child poverty during 2002 and 2003, and it was strongly agreed that income was central and that 60 per cent of median threshold is an internationally recognised standard. While other EU countries do not have statutory targets on this measure, all use this indicator as part of the annual monitoring of social inclusion undertaken by each member state. The noble Lord and others asked why we focus only on targets around income. The targets explicitly focus on tackling income poverty and material deprivation. This reflects our aim that children should not live in poverty in the UK or suffer the effects of wider socio-economic disadvantage, and of ensuring a focus on income and material deprivation is central to that. Indeed, income poverty is at the heart of the Bill because of the evidence of the impact that it has on children’s lives, both in their experiences now and their chances for the future. The noble Lord, Lord Freud, also talked about the accuracy of the poverty statistics and said that these were not a sound basis on which to be judged. The HBAI is an annual statistical series that has been running for two decades. It is a well-established comprehensive data source for estimates of poverty and measuring UK household income distribution. It complies with international best practice in measuring household income. A number of noble Lords—the noble Lords, Lord Freud and Lord Northbourne, and the right reverend Prelate the Bishop of Hereford in particular—talked about child poverty and family breakdown, and touched upon marriage. Research shows that the quality of parental relationships and family functioning, rather than its form, has the greatest effect on children. It is just too simplistic to say that family breakdown causes poverty. Research has shown that children are at an increased risk of adverse outcomes following family breakdown. However, the difference between children from intact and non-intact families is small, although statistically significant. Some children can actually benefit when breakdown brings to an end a harmful family situation—for example, when there are high levels of parental conflict, including violence. Evidence suggests that although child poverty is associated with family breakdown, there is no clear causal link. It is the high level of worklessness among lone parents that increases the risk of poverty for children in lone-parent families, rather than the family structure itself. The noble Lord, Lord Northbourne, asked when we would publish the families and relationships Green Paper. We are planning to do that later in the year; I do not have a precise date, and I cannot promise that the paper will be available in draft by the time we reach Committee stage. The noble Lord, Lord Freud, also referred to the couple penalty. Tax credits treat couples and lone-parent households equally and are not designed to favour any particular arrangements. Lone-parent households face particular difficulties, as is evidenced by the fact that the risk of a child growing up in poverty is twice as high in a lone-parent family as in a coupled family. Arguments that the tax and benefits system disadvantages couples are too often based on simplistic comparisons that assume that a separated couple will continue to pool their income. At this juncture I shall not dwell on reinstating on some basis the married couple’s allowance and on how much that might cost. However, it seems to me that any approach of that nature is most likely to produce less for the poorest in our society compared with the richest. The noble Lord, Lord Freud, and others talked about equality in income distribution. Although income inequality is slightly higher today than it was in 1997-98, movements have been small compared with the sharp increases in inequality in the 1980s. The Institute for Fiscal Studies’ analysis showed that tax and benefit reforms since 1997 have clearly been progressive, benefiting the less well-off relative to the better-off. Without those reforms, inequality would have risen a good deal further. The noble Lord chided new Labour for being friends of the rich. He may wish to know that living standards for the poorest 20 per cent of households have risen by more than 1.5 per cent a year in real terms since 1997-98, keeping pace with the incomes of the richest 20 per cent of households. In the 1980s and mid-1990s, living standards for the poorest 20 per cent of households rose by less than 1 per cent a year compared with 2.5 per cent for the richest 20 per cent of households. It does not seem to bode well to propose inheritance tax cuts for the very rich. I do not see how that will help child poverty. The noble Baronesses, Lady Thomas and Lady Walmsley, said that a target of 10 per cent would not mean the eradication of child poverty. I suggest that less than 10 per cent is an ambitious but challenging goal for sustaining the eradication of child poverty and will put the UK’s child poverty rate firmly among the best in Europe. A relative child poverty level of below 10 per cent would be the lowest in this country since at least 1961 and would more than reverse the doubling of relative child poverty between 1979 and 1998-99. I acknowledge that it is a challenging target. The noble Baroness, Lady Thomas, talked about disability costs and equivalised income. She is right that the current low-income measure does not take into account the extra costs of disability. This is a difficult issue. We recognise that additional costs are associated with disability but research shows that these vary significantly in level and nature. There is no general agreement on how to measure these costs but perhaps we can develop these discussions further in Committee; indeed, I am sure that we will. The noble Baroness also asked whether local strategies add up to the national target. Local action to tackle child poverty will make a big contribution towards achieving the national targets. Success in tackling child poverty requires the delivery of high-quality services to support parents into employment, increase the take-up of financial support and improve children’s life chances. However, the 2020 targets cannot be achieved by local action alone; national Governments must, for example, take responsibility for the tax credit and benefit system. The noble Baroness, Lady Thomas, and the noble Earl, Lord Listowel, raised issues concerning looked-after children and asked whether they were missing out on the measurements. The vast majority—something like 84 per cent—of looked-after children and children in care are placed with foster parents, for adoption or with their parents and so reside in private households, which will be captured by the targets in the Bill. Therefore, the majority of looked-after children will be covered. The noble Baroness asked whether the measure should be after housing costs. There are a number of reasons why the Government have chosen to maintain a before housing costs measure in the Bill, although I noted that the noble Lords, Lord Sheikh and Lord Freud, quoted the after housing costs data. First, income is measured before housing costs to allow comparisons with other European countries that also measure poverty in this way. We have stated our ambition to be among the best in Europe and therefore such comparisons are vital. Secondly, as the noble Baroness predicted I would say, measures of housing quality are currently included in the list of items used for the combined low-income and material deprivation measure. Of course, measuring income after housing costs can understate the relative standard of living that some individuals may have by paying more for better-quality accommodation. The noble Baroness also asked about burdens on local partners and whether we would impose a duty on local authorities which would add burdens and bureaucracy to what they already face. Fulfilling that duty need not be an additional burden. Local partnerships should already be taking action to improve outcomes for the most disadvantaged families in their areas. A number of local authorities are already taking significant strategic action to tackle child poverty.