Child Poverty Bill

My Lords, I thank the noble Lord, Lord Freud, for his amendment, which, again, has prompted an interesting debate, if somewhat shorter than our previous one. Amendment 12 seeks to specify that the method used to equivalise household incomes—that is, to adjust them for household size and composition—should be accurate in reflecting relative costs of living. The Government wish to assure noble Lords that the methodology used to measure progress towards child poverty targets is as unbiased and technically sound as possible. As the noble Lord recognised, we use the modified OECD equivalisation scale, which is used for comparisons across Europe and was chosen after extensive consultation in 2002-03 on measuring child poverty. Although it was used for comparison, it was not driven for that particular reason, as I understand it. However, as my noble friend Lady Hollis said, there is an ongoing debate among academics about the performance of the OECD scale for different household types. I acknowledge the Joseph Rowntree Foundation report, which concluded that using the current equivalent scale underestimated the additional income needs of families with children and the extra costs of single-person households. Therefore, we were underestimating the poverty rates of families with children and single-person households and overestimating the poverty rates of childless couples and single and couple pensioners. I think that that was the import of the report. The noble Lord referred to the scale that we used to use and the fact that we had changed from it. Regardless of the scale used—and the scale currently used is the international benchmark—the relative risks of poverty across household types tend not to change. The change in 2004-05 to the OECD scale had the effect of increasing the total number of children in relative poverty but in general did not change the risk characteristics of children most at risk of poverty. Therefore, the choice of equivalisation scale in that context does not overly affect which types of household are most in need and hence will not affect our policy responses. Clearly this is a matter on which there will be ongoing significant debate and analysis, and we need to make sure that we use best practice when dealing with these matters. We have no plans to switch from the current equivalisation arrangements but we need to engage in that debate. I ask the noble Lord to withdraw his amendment.