Child Poverty Bill

I thank the noble Baroness, Lady Hollis, for making that point. The fact is that, until this year, there was no model that could do the dynamic analysis. The Treasury model has relied on a static analysis. The lead in this area has been taken by a working team chaired by Dr Stephen Brien, supported by the Centre for Social Justice, and Oliver Wyman. As I said, the team has built a dynamic model of how the benefit system works in practice. In particular, its document Dynamic Benefits points out that there is a mathematical relationship between three factors: the level of benefit, the earnings break-even point and the rate at which benefits are withdrawn. The iron triangle imposes mathematical limits on what we can do. The example offered by Dynamic Benefits is this: "““If break-even earnings are £16,000 per annum and out-of-work benefits are £12,000, then the average withdrawal rate is necessarily 75%””." The higgledy-piggledy system that we have at the moment is a lot less efficient than this and there are many examples of people suffering withdrawal rates in the region of 90 per cent or even higher. According to Robert Moffitt, the higher the out-of-work benefits, the more costly it is to reduce withdrawal rates, because not only does the level of in-work benefits need to be higher, but it is also likely to stretch up to the point of the population where there is much higher earnings density, making many more people net recipients of benefits. He says that in ““Welfare Work Requirements with Paternalistic Government Preferences””, which was published in the Economic Journal of November 2006. This leads directly to the grim conclusion in Dynamic Benefits that, "““there are mathematical constraints on the design of the benefits system. These mean that simply pouring money in will make little difference—and indeed is massively inefficient—and that we must take a normative choice based on a societal vision: a society mostly on benefits or off benefits. This choice will determine the trade-offs that we make within the constraints of the iron triangle””." I hope that this sets into context for noble Lords why our policy on child poverty concentrates on the causes of poverty and on helping people to get out of poverty through their own endeavours rather than through income transfers. I am dismayed at some of the discussion in this Committee, where the Government seem unable to understand the importance of the distinction. The question that I ask the Minister is: did the Government undertake this kind of analysis when they set the financial targets? Have they any estimate of how much extra dependency they will create by aiming to solve child poverty purely through income transfers? The purpose of this amendment is to make sure that the Government complete this kind of proper analysis when they set up strategies to reduce child poverty on a genuinely sustainable basis. I beg to move.