Child Poverty Bill

My Lords, Amendment 5 would change the threshold of median income used to determine whether a household is in relative income poverty from 60 per cent to 60.15 per cent. I recognise that this is a probing amendment, as was the amendment that we have just discussed. As I have already stated to the noble Lord, HBAI is the key dataset for the analysis of income poverty. However, we can agree that surveys are subject to a degree of uncertainty. It is for this reason that it is necessary to round the statistics to the nearest 100,000 children or percentage point. The change from a threshold of 60 per cent to 60.15 per cent of median income would not have a noticeable impact on the statistics when rounded to these levels. The threshold of 60 per cent of median income is in line with international best practice. The National Statistics publication Households Below Average Income contains statistics on the number, proportion and characteristics of children in households with incomes below 50, 60 and 70 per cent of median income both before and after housing costs, as well as in low income and material deprivation. This gives an idea of the sensitivity of trends in the figures to the particular threshold used. As I said before, there will always be criticism that households whose income is just over the percentage of median income set in the target will not benefit from the legislation, and that this is arbitrary. But a level must be set and we believe that this is the right one. Just to reiterate, the Bill contains four challenging child poverty targets that must all be met by 2020. Together, they provide a comprehensive definition of success, and that is why we believe that the figure of 60 per cent is appropriate. We use a relative measure of poverty because we accept that poverty is a relative concept. Living standards that would have been considered normal 100 years ago, such as not having running water or an inside toilet, are now indicators of unacceptably low living standards. Most academics and experts now agree that poverty in the UK should be measured with a relative measure. Among others, Professor Peter Townsend’s work in the late 1970s contributed to this consensus. Initially, the relative measure used was 50 per cent of mean income. This definition was easy to understand and represented a level of income that experts generally agreed was a reasonable threshold for acceptable living standards. Since then, it has been recognised that using the median rather than the mean provides a better threshold because it is not unduly affected by the incomes of the very rich. However, changing from 50 per cent of mean income to 50 per cent of median income dropped the poverty threshold below the level of income that had been generally agreed to provide acceptable living standards. The measure of 60 per cent was therefore adopted. So using a median income threshold recognises that poverty is a relative concept which changes over time, and is the basis on which we have adopted the target. It was suggested that using the 60 per cent threshold encourages policy makers to help the easiest to reach. Our goal is to eradicate poverty for all children. The framework that the Bill establishes for achieving the goal, using national child poverty strategies and duties on local government to tackle child poverty, applies to all children in the UK. The Bill contains safeguards to ensure that policy is not focused on the children that it is easiest to help. Indeed. Clause 8(2)(b) states specifically that the strategy must set out measures to ensure, ""as far as possible that children in the United Kingdom do not experience socio-economic disadvantage"." This provision ensures that the strategy must set out measures to cover all children regardless of whether they are covered by the targets and regardless of target levels. The noble Lord reverted to his now famous "iron triangle", and I am sure that we will have a chance to debate it in due course. The issues around making work pay are very important and we have always accepted that. The Government have done a great deal in recent times to make sure that work does pay. Clearly, marginal deduction rates in relation to income transfers and withdrawal of benefits impact on incentives to work. But I would just say to the noble Lord that the number of families facing the highest marginal deduction rates, above 70 per cent, have halved since 1997, and the Government have made significant efforts to reduce the poverty trap by making work pay. Inevitably, given the generosity of the tax credits, more households will see support withdrawn as their income rises, because more people are in receipt of those credits. Again, the 60 per cent figure that has international credibility and that was originally founded on an assessment of what level of median income moved people into hardship or began to do so is the basis on which the 60 per cent is structured. I could not say to noble Lords that 60.5 per cent or 59.5 per cent would not be better measures, but I believe that it is an appropriate measure, and it is one that underpins our approach to the Bill.