Child Poverty Bill

My Lords, this amendment deals with the poverty trap, as it used to be called, and the iron triangle of benefit reform, as it has more recently been dubbed. Noble Lords will not be surprised that, as the shadow Minister for Welfare Reform, I take a great interest in this topic. If your Lordships will indulge me, I will go back more than 30 years to the centre-page feature in the Financial Times on 19 June 1979, I think, which warned about the looming problem of the poverty trap. I remember the piece not just because I was the journalist who wrote it, but mostly for the help that I got from Frank Field, a new Labour MP who was still then closely associated with the Child Poverty Action Group. I quoted him then: "““It has become impossible for individuals to break back into the mainstream of the country’s life””." Little has changed in the past 30 years, except that the problem seems to have become much worse. Twenty years later, and somewhat bloodied by his experience of trying to reform the system, Frank Field wrote: "““Welfare is a most powerful agent for shaping behaviour—for good or ill—and politicians ignore this elementary fact at enormous cost to society at large””." I am quoting from a piece called ““What Then Was Unthinkable””. There is no secret about the enmity that the current Prime Minister held towards Field’s activities. I would only state, from our Benches, that it is a tragedy for this country that Field’s approach has been abandoned by his party and that we have lost a decade of reforming time. The issue was summed up by Milton Friedman in 1980: "““All radical welfare schemes have three basic parts that are politically sensitive to a high degree. The first is the basic benefit level … The second is the degree to which the programme affects the incentive of a person on welfare to find work or to earn more. The third is the additional cost to taxpayers … To become political reality the plan must provide a decent level of support for those on welfare, it must contain strong incentives to work and it must have a reasonable cost. And it must do all three at the same time””." I suspect that not many Lords in this Room are devotees of Milton Friedman. Nevertheless, he captures the point, while this Bill does not. The Bill concentrates on a level of support for people and is decidedly thin on work incentives and costs to the taxpayer. In other words, it does not, "““do all three at the same time””." At Second Reading, I pointed out the large sums that had been transferred to the poorest in our community and the disappointing outcomes in terms of poverty reduction, particularly in the 2004-08 period. The question that is naturally raised is whether this Government, in providing extra help for the poor, have done it in a way that has blunted incentives to work. To the extent that this is the case, the Government are like a mouse on a treadmill: they pump in extra money but they disincentivise more people from working and establishing independent incomes than they support directly. When the Government set their rates, they never examine the dynamic effects of such policy but purely look at them on a static basis. This is, of course, why I fear that the £19 billion cost, estimated by the IFS to eradicate child poverty through income transfers alone by 2020, is hopelessly optimistic. It does not take into account the dynamic effects of such transfers.