Child Poverty Bill

This is an interesting amendment, but it is frankly irrelevant to the Bill because it is part of all government strategy. We understand perfectly well that there is inevitably a tension between decent enough benefits for those out of work, decent enough wages for those in work and appropriate taper and withdrawal so that there are incentives to increase working hours. It is not a triangle, it is a square, but I will forgive the noble Lord for that. The fourth point of the square is that it should be affordable for the taxpayer. That is not some mathematical law; it is called politics. All Ministers and civil servants working on this issue within the DWP and the Treasury spend their time juggling precisely those four points: decent enough benefits, decent enough wages, a decent enough taper and appropriate costs. That is what politics is all about. In that sense, what the noble Lord is saying is superficially true; it is simplistic and we all take it for granted. However, there is a more profound point, which is why I really object to this analysis. The notion that economic rationality is a model of human behaviour has, to my certain knowledge, been exploded. My late husband, a professor of philosophy, wrote on the subject of economically rational man with a professor of economics, Ed Nell, suggesting that this is an inappropriate model of human behaviour. Why is that? What are those fallacies that the Dynamic Benefits model overlooks, as does some of the LSE lecture? First, it assumes that people respond directly and only to financial incentives. If work does not pay enough, people will not work and vice versa. However, that pulls labour out of its cultural context. DWP research shows that many men will work for below the rate that they could get on benefit because of the dignity, sociability, worth, status and hope of promotion that work affords. It is also seen as setting a good model for their children. Equally, the research shows that, when the previous Tory Administration reduced the family credit line from 24 hours to 16 hours, at which you could claim tax credits—a policy that I supported—lone parents did not work longer hours because it was worth more but reduced their hours, because they had a target income and were balancing other considerations such as childcare, health, leisure and so on. In other words, they were not motivated by the assumptions of strict economic rationality on which the noble Lord has focused. My second objection to the model is that it assumes that there is only a supply-side problem of incentives—that 600,000 more people would move into work if only it paid enough. But where is the work? It may be available in the service industries, where work generates a flurry of other work, but not in manufacturing. It is a demand-side as much as a supply-side problem if we sectoralise our economy, as I think most economists would surely agree. Thirdly, the model ignores the alternative approaches. It is not just about tweaking MDRs and tapers; it is not just about holding all those balls in balance, which is what politics is about. It is about thinking outside the box and exploring such things as risk-sharing with the employer, which is what tax credits do. It is about thinking about the minimum wage, which could make a huge difference. It is about looking at regional economic premiums. They are all possible ways to address further a problem that in its most simplistic form has existed since 1948. I hope that this rudimentary, module-101-economics model of male behaviour—that you work only for more money and that, if the money is not there, you do not work—will not go on to infuse the noble Lord’s thinking about responses to child poverty, because it has been exposed as a dead end for more than 25 years. I am very happy to send him the book.