Child Poverty Bill

I stand corrected. I was not clear, from what the noble Lord said, as to whether he was talking about assumptions about the inability to draw a proper tax take from the self-employed because of corrupt cash transactions and so on, or he was concerned about the implications for benefits and income transfers, which is what we are dealing with today. I do not think anybody would deny that, certainly, with the self-employed and payments in cash and so forth, there is a significant black economy. I would not wish to challenge the noble Lord’s assumptions about the figures; I have no way of knowing whether he is right or wrong on that. He talked about low-hanging fruit taking the figure to more than 60 per cent. It is certainly the case that one of the big reasons why it is so difficult to be precise about poverty and get below 55 or 50 per cent is, as the noble Lord says, the disparity between reported income and reported living standards. I am surprised that he does not loop this back into his discussions on other amendments. It is not just that people are in the black economy. You may be dealing with shopkeepers who are living on their stock, or using wholesale rather than retail prices. I remember a discussion on the Welsh hill farmers not that long ago when BSE was hitting across the country. Welsh hill farmers were reported as earning on average something like £7,000 a year. I was briefing colleagues in what was then a version of MAFF that they should be taking up working tax credit and child tax credit but, of course, they could not because they were living off their land. Their real income was well above their declared income and, being reasonably—though not entirely, I do not doubt—honest souls, they were therefore not claiming benefits which, on the basis of their income, they were entitled to. There are many dimensions to this issue, apart from those who are, perhaps rather deliberately, cheating the system. That is my first point. The other thing that one picks up is how dependent people with very low earnings are on intergenerational and family loans, gifts, trading and care in kind. It makes it very hard to depart from the reported figures. My first question is to the noble Lord. If we depart from the reported figures, as he says, and we have a putative assessment, a putative add-on to declared income of everyone who is self-employed for benefit purposes, that is not just rough justice but profoundly unfair. In some jobs, such as plumbing or gas-fitting, it may be easy to add to the black economy, but there may be other areas of self-employment where it is impossible to do so. His assumption would be to add maybe £20, £50 or £100 a week for all those declared incomes, whether or not they were actually received through the black economy. I suspect that that would force at least as many children into poverty as his assessment would save in terms of taxes on the taxpayer. My second question is to my noble friend, and I think the noble Lord may not disagree with me, having seen some of his material on the dynamics of benefits. Would it not be a more appropriate way, particularly with lone parents, to tackle this through disregards so that we help to build fraud out of the benefits system for the lowest-paid? One territory is lone parents, who currently get a disregard of £20 a week and may do some part-time cleaning, pick mushrooms, see to caravans and boats in the summer season and so on. If they do not declare that, they are in the grey economy. As a result, there is again a nebulous quality to what their entitlements may be. I was delighted to see my noble friend’s response to the Welfare Reform Bill, reinforced by the Chancellor’s commitment in the PBR, to be considering extending a £50 disregard to all lone parents. First, that would certainly address some of the problems that the noble Lord has raised regarding those who are in, if not the black economy, at least the grey economy, and would help to build fraud out of the system. Secondly, it would also help employers to have a more flexible supply of above-board labour. Thirdly, it would lift those parents out of poverty. Fourthly, it would help to train them into work by preparing them through mini-jobs. I hope that the noble Lord, Lord Freud, will join me in encouraging my noble friend to be as explicit as he can on this remedy for at least some of those who may perhaps be understating their incomes.