Child Poverty Bill

My Lords, this has been a wide-ranging and fascinating debate. I thank the mover of the amendment and all noble Lords who have spoken. The Child Poverty Bill makes clear our robust commitment to eradicating child poverty. It is clear, as set out in Clause 8(5), which covers the strategy, that financial support is an important building block in an effective child poverty strategy. We will consider all potential methods of achieving our child poverty targets when we develop our strategies, including assessing the role of support for those who cannot work. However, I have some disagreement with the thrust of these amendments. We are committed to ensuring that the tax and benefits system provides adequate financial support. Over the last 10 years, we have invested heavily in supporting families. Families in the poorest fifth of the population are £5,000 per year better off as a result of personal tax and benefit changes since 1997. There are several considerations that we must take into account when considering Amendment 67. We have recognised in this debate that the causes of poverty are multiple and complex, and that eradicating child poverty will require a comprehensive strategy to tackle each of these. Amendment 27 could, however, unbalance the strategy by requiring excessive weight on treating the symptoms of poverty and, to quote the noble Lord, Lord Freud, an excessive focus on one lever of tackling poverty—that is, guaranteeing that a household with children has a minimum income that would be sufficient to lift children out of poverty. Placing this obligation in the Bill would reduce the flexibility that the Bill provides for forthcoming strategies. It would force a focus on a particular approach to tackling child poverty that might not be as effective as other options. More importantly, it does not present a sustainable approach. Several noble Lords focused on the importance of the strategy being sustainable. We know that escaping poverty through work has wider beneficial impacts on families, compared to escaping through financial support alone. Entering work has many social benefits. It may reduce stress in the family and provides role models for children. Supporting families into work is also the most sustainable approach to tackling poverty. However, Amendment 27, by placing more emphasis on minimum incomes than on labour market incentives, could reduce the financial incentives to enter employment. The Government need to have the flexibility to balance these objectives. We also have to recognise that many aspects of the benefits system are designed to provide short-term support in response to changing circumstances, such as short-term unemployment, rather than long-term sources of income. Requiring the Government to include measures in their strategy that create a minimum income does not take account of this purpose of the benefit system and could have a perverse impact on its effectiveness. A requirement to prepare a child poverty strategy containing measures guaranteeing that out-of-work benefits lift families out of poverty could result in a resource-intensive and unsustainable approach to tackling child poverty. It would require substantial spending to achieve and could, potentially, entrench the intergenerational cycles of worklessness that are one of the underlying causes of child poverty. It runs directly counter to our objective of having a sustainable approach to tackling poverty. Finally, there are also technical difficulties with adhering to minimum income standards in guaranteeing a minimum household income. With the survey techniques we use to assess household income, it is not feasible to ensure that no household falls below a certain income level. This is why our child poverty targets have been set at levels of 5 per cent or 10 per cent rather than at zero. Amendment 67 would have a similar effect, by creating pressure to increase out-of-work benefits based solely on the impact on minimum income guarantees without taking into account the distorting impact on incentives to work and an undue reliance on unemployment benefit. Moreover, by setting the national minimum wage too high, Amendment 67 also risks damaging employment prospects. It proposes that the Secretary of State should have regard to minimum income standards in setting out-of-work benefits and the national minimum wage, and that he should consider research into the minimum cost of living. The level of unemployment benefit and the national minimum wage are set at levels designed to accommodate competing demands. For example, the national minimum wage rate is subject to a comprehensive annual review by the independent Low Pay Commission, which takes into account a wide range of evidence when recommending the rates. Its aim when setting the rate is to help the low paid, while making sure that employment prospects are not damaged by setting it too high. By placing undue weight on a single factor, this amendment could undermine the independence of the Low Pay Commission, which is key to ensuring support for the policy by wide sectors of society. The Government welcome the research that has already been carried out on minimum income standards. We have heard about that today, particularly the work completed by the Joseph Rowntree Foundation. We continue to follow this research with interest. However, we do not agree that this approach should be enshrined in law in the way proposed. Indeed, the researchers do not believe that minimum income standards should be used as poverty thresholds. The noble Lord, Lord Kirkwood, effectively acknowledged that when he moved his amendment. Instead, we believe that the Government should have the flexibility to balance these objectives, as we currently do, against other objectives around labour market incentives, burdens on business and, ultimately, the impact upon individuals and the UK economy. The Government have consulted extensively on the long-term measure of child poverty. Minimum income standards were ruled out because different research methods tend to make different assumptions, and it is difficult to get one answer to the question "How much income is enough?". Even if it were possible to define income adequacy on a fully consistent basis, it would be difficult to generate a long-term, robust time series, which is essential for measuring progress. It would therefore be inappropriate to give such explicit consideration to minimum income standards when considering rates of unemployment benefit and the national minimum wage. Taken together, the four income targets in Clauses 2 to 5 define a stretching goal. Achieving them will not only mean the lowest poverty rates since records began, and which will be in line with the best in Europe, but will tackle material deprivation and mean that the same families are not persistently poor. Although temporary periods of low income, such as that caused by a short spell of unemployment, can create difficulties, the most damaging effects of poverty are caused by long-term and recurrent spells of relative low income. The approach set out in the Bill, using a combination of four targets, is therefore a crucial part of ensuring that poverty does not affect children’s life chances over the long term. A number of additional points were raised. The noble Lord, Lord Kirkwood, talked about the time that it takes for data to come through, and I think that we acknowledged that point. One way in which the Bill helps is through the local needs assessment, by which it is possible not only to deal with the regional differences to which the noble Lord referred but to understand in near time what is happening on the ground. We have to live with the time that it takes for the surveys to wend their way through, because integrity and the robustness of those surveys are very important. A number of noble Lords, including the noble Baroness, Lady Finlay, and the noble Lord, Lord Freud, referred to a benefit raise. The rates quoted were correct but they would typically not include additional benefits such as passported benefits, free school meals and exemption from NHS charges. They do not include housing benefit, council tax benefit or mortgage interest support, for example. It was suggested that housing benefit levels in London were insufficient to cover housing costs. The structure of the reformed housing benefit, the local housing allowance, was intended to ensure that in any particular area housing benefit would bring half the potential properties within the scope of people who wished to rent. However, a review of housing benefit is under way, and we wait with interest to see where it goes. The noble Lord, Lord Kirkwood, raised the question of how much was enough for a family to live on. The reality is that different families have different needs and wants and will spend their income in different ways. Taken together, the four targets outlined in the Bill will provide a good indication of whether progress is being made on the various facets of poverty, such as persistence of poverty and material deprivation. My noble friend Lady Hollis, as ever, made some telling points—in particular, on the disparity in the numbers of people on relatively low incomes who are not in material deprivation. We had an interesting debate, which I do not think we should open up again, on the informal economy and the other issues that perhaps drive some of the reasons for that. The noble Lord, Lord Kirkwood, touched on the complexity of the benefit system. He knows well, as we have debated it endlessly, that the Government have an aspiration to simplify the benefits system. We know, as we take steps along the way to do that, that inevitably it will be challenging. There are often significant costs involved, but we shall continue to strive to do that. Again, it was the noble Lord who made reference to international comparisons. I agree with him in the sense that issues around minimum income standards should be part of the debate. The Government are not saying that we would not give consideration to those, and I think that he called them a valuable tool. However, as he acknowledged, no country exclusively uses minimum income standards when setting benefit levels, although come countries consider them—in particular, the Nordic countries. The noble Baroness, Lady Finlay, raised the issue of research into minimum income standards. We have not ruled out such research; we expect to take it into account in developing the child poverty strategy as part of a range of research and evidence that we will draw on. Indeed, we are doing that at the moment. It is not as though we are closing our minds to it. The noble Lord, Lord Rea, raised issues concerning a healthy diet, particularly for pregnant women, young children and babies. His expertise in that area makes that a pertinent point. My noble friend Lady Hollis referred to the lump sum available to low-income families to help with the cost of a new baby and asked whether it could be paid in two parts. We shall certainly consider that but part of the problem is that, in order to access it, one needs to have gone through an assessment and engagement with a health professional around the general welfare and health needs of the new baby. It is unclear whether the noble Lord’s approach would be consistent with that. The noble Baroness, Lady Meacher, referred to reports on inequalities of health. Again, I acknowledge her expertise in this area. Health is a key building block in the strategy. Inequalities of health can sustain poverty and disadvantage. My noble friend Lady Hollis said that the material deprivation component of our targets is already in the Bill and asked why that is not doing the job. The noble Lord, Lord Freud, asked whether the 60 per cent median threshold is enough and whether benefits are set appropriately. There is no direct link between benefit rates and the level of income needed to be lifted from poverty. Most benefits are uprated annually to ensure that the level keeps pace with inflation, and the uprating method varies by benefit type, but in general most contributory, non-contributory and extra-cost benefits are uprated by RPI. What people need to live on varies greatly and depends on their needs and a range of factors. Different research methods make different assumptions and generate a range of estimates, which is why we need the four targets in the Bill and not just one, and why we need to focus on the causes of poverty as well as the achievement of those targets. That is probably an inadequate response to a wide-ranging and knowledgeable debate, but I hope that I have been able to set out the Government’s position on these matters and that noble Lords will not press their amendments.