On 25th January 2016, the Bishop of Durham, Rt Revd Paul Butler, led a debate on an amendment he had tabled to the Government’s Welfare Reform and Work Bill. The amendment, at the Bill’s Report Stage, sought to ensure that Government would continue to use income as part of its measurement for child poverty.The amendment was supported by the Labour and Liberal Democrat frontbench and by a crossbench Peer. The Bishop put the amendment to a vote, which the House passed by 290 to 198. His speech and others from the debate are below.
Before Clause 4, insert the following new Clause—
“Child poverty: reporting obligation
(1) The Secretary of State must lay before each House of Parliament an annual report on child poverty.
(2) The report must include information on the percentage of children living in households where—
(a) equivalised net income for the financial year is less than 60% of median equivalised net household income for the most recent financial year;
(b) equivalised net income for the financial year is less than 70% of median equivalised net household income for the most recent financial year, and which experience material deprivation;
(c) equivalised net income for the financial year is less than 60% of median equivalised net household income for the financial year beginning 1 April 2010, adjusted in a prescribed manner to take account of changes in the value of money since that year; and
(d) equivalised net income has been less than 60% of median equivalised net household income in at least 3 of the survey years.
(3) For the purposes of subsection (2)(d), the survey years are the calendar years that ends in the financial year addressed in subsection (2)(a) and (b), and the 3 preceding calendar years.”
The Lord Bishop of Durham: My Lords, I start, as I began my speech in Committee, by recognising that everyone in this House has a shared commitment to tackling child poverty in this country. We all want to see the end of child poverty; I am sure that no one in this House would want deliberately to keep children in a state of poverty. This debate is, therefore, not about the ends but about how we monitor progress towards that goal. Previously, I expressed my agreement with the Government that to maintain that income poverty alone is an adequate way to measure child poverty is no longer sustainable. I agree that there are other root causes, such as lack of work, low skills, poor housing, family instability and addictions, which must be recognised and tackled. But then we must also remember that many children in poverty are in families where a parent is in work; these children are currently trapped in poverty. I, along with the many organisations that work in this area, remain convinced that financial poverty is a crucial matter that must be recognised and reported on adequately.
It is, of course, possible to overstate the importance of material well-being alone. Many other things matter in children’s lives, including loving parents, good schools and safe neighbourhoods. They are all needed for children to thrive and achieve their potential. But it is also possible to understate the importance of income, or the lack of it—especially among those of us who have plenty, and perhaps take such things for granted. According to the latest deprivation statistics, 1.7 million children live in families that cannot afford to heat their homes properly, 1.3 million children lack the funds to take part in at least one organised activity each week, and 1.1 million children cannot afford to have their friends around for tea or a snack once a fortnight.
We know that money matters, because this is the experience of people in poverty, and of the many organisations and charities that work with them daily. There is also a wealth of academic evidence pointing to the damaging effects that income poverty has on children’s well-being, including their health, education and future employment prospects. We know, for example, that low income impacts on children’s cognitive ability, educational attainment, conduct problems and mental health, with serious implications for their future life chances.
Does the Minister accept that low income is an important influence on children’s outcomes and life chances, as his own department’s review of the evidence concluded in 2014? Can he explain why the Government are studiously ignoring the views of nearly everyone who responded to the consultation on child poverty measurement in 2013? According to a recent analysis by the London School of Economics, 202 out of 203 respondents to that consultation believed that income should be included in the poverty measures.
If I have heard the Minister correctly, the Government’s concern about the current child poverty measures is that they have encouraged an overdependence on income transfers, diverting attention from policies that tackle the root causes of poverty. However, the amendment does not seek to reassert the primacy of the existing child poverty measures: it simply requires that income-based measures of poverty be reported on alongside, and on a level footing with, other life chance indicators, such as worklessness and educational attainment, in order to acknowledge the significance of family income for children’s well-being and future prospects.
Furthermore, the amendment is about indicators for monitoring progress, not about targets or deadlines, so there is not the same risk that it could drive policy in an unhelpful direction. And with all due respect, the temptation to place too much emphasis on income transfers as a means of reducing child poverty is not one that the current Chancellor appears to struggle with. I agree that it is important to tackle the underlying drivers of poverty, but that can be done without abandoning all the existing income-based measures of poverty. The real issue is committing to, and resourcing, an effective long-term strategy to reduce child poverty, rather than finding alternative ways to measure it.
No economic or social indicators are perfect. Let us take the employment statistics. I note that recent trends in employment are encouraging, but those statistics do not allow for the quality of employment, and hide substantial levels of underemployment. Similarly, GDP statistics give equal weight to desirable and undesirable economic activities, and take no account of many priceless commodities. It is no surprise that existing poverty measures have flaws too.
The relative income measure, in particular, has been criticised for showing a decline in poverty during the recent recession. But that is precisely why there are three other measures of poverty in the Child Poverty Act. The absolute poverty measure is not affected by annual variations in median income in the same way. The deprivation measure, which focuses on the affordability of basic necessities, has the added benefit that it captures people’s living standards more directly than low-income measures. Nor can it be manipulated—if that is the right word—by targeted government transfers to low-income households. I therefore encourage the Minister to consider seriously the adoption of a deprivation-based measure of poverty as a way of recognising the importance of material poverty within the proposed set of life chance indicators.
The biggest gap in the proposed set of life chance indicators is that the existence of in-work poverty is completely ignored, even though nearly two-thirds of children in poverty have at least one parent in paid employment. We all agree that work is usually the best route out of poverty for those who are able to work but at present, sadly, it is not sufficient for many parents in low-paid or insecure employment. It seems inconsistent that, while introducing a national living wage and in-work conditionality to encourage people to look for better-paid jobs, any reference to in-work poverty in the indicators is omitted from them, and they will be used to monitor progress. This is why I also support the amendment in the name of the noble Baroness, Lady Lister, to introduce an indicator of in-work poverty alongside the worklessness indicators.
I anticipate that the Minister will respond by saying that the existing poverty measures will continue to be published and will be available for everyone to scrutinise each year. However, without a statutory reporting requirement, there will be nothing to stop a future Government or the Office for National Statistics, if it is its decision, from ceasing the annual production of the HBAI statistics at some later date. Dropping these measures also sends a clear message that income-based poverty does not matter to this Government, which, unless I am mistaken, is not their view or the Minister’s view.
In conclusion, first, I thank the Minister for offering to meet with me. My apologies: I could not make it but my daughter’s graduation trumped him. I note that consistently in response to our previous debates, the Minister has argued that the Bill is but one part of the Government’s programme to move towards a society with more people in work, on higher wages and paying lower taxes. He has noted other measures, such as the national living wage, the increasing thresholds for paying tax, and others, stating that these measures combined will raise the living standards of many. Of course, this is disputed by others. However, my point here is that since the Government are confident that their measures will be successful, they need have no fear of a statutory duty to report these income figures. Indeed, they should welcome it as a clear statement measuring their anticipated success. I commend the amendment and beg to move.
Baroness Sherlock (Lab): My Lords, we on these Benches are fully supportive of Amendment 2, to which I have appended my name. The right reverend Prelate the Bishop of Durham has made a strong case for his amendment, backed up ably by my noble friends Lady Lister and Lady Hollis, and I will not add a great deal to the fundamental case that they have made. However, I do wish to say a brief word.
The Bill has a lot in it which will have a serious impact on the incomes of millions of families in Britain, particularly families with children and households with disabled people in them. I would love to send the whole Bill packing, as I would love to dispatch various statutory instruments recently passed through both Houses, but that is not what we are going to do; it is not our job. Our job over this week is to send back to the Commons for further consideration parts of the Bill where they have simply not begun to understand the consequences of some of what they have done; where the costs can be significant but often have just been shunted rather than taken away.
The great advantage of this amendment is that it does not cost any money and yet it would be incredibly powerful in holding the Executive to account, something which this House always takes seriously.
I have been struck, not only in listening today but in re-reading the excellent debate on this subject in Committee, that the Minister was signally unable to persuade Peers from around the House of the case that he made. Let me summarise the Government’s case. The report to Parliament by the Secretary of State for Work and Pensions on the drivers of child poverty said this:
“From the range of academic and institutional evidence reviewed we can confidently conclude that”—
“The key factor for child poverty now is parental worklessness and low earnings … The other main factors include low parental qualifications, parental ill health, family instability and family size”.
It also highlighted child education attainment as a key factor in increasing the risk of a poor child growing up to be a poor adult.
So what have the Government done in response to that evidence? This Bill guts the Child Poverty Act 2010, removes the requirement to report on income poverty at all and requires Ministers in future to report on only two factors—worklessness and educational attainment. That leaves a couple of key questions.
First, Ministers are not saying that these factors equal poverty but that they drive it. So presumably the Government will seek to address those factors and, if they are successful in addressing them, child poverty will fall—but how will we know? If we do not expect the Government to report on the effect on child poverty of the work they are doing, then how do we know whether their strategies are succeeding or failing? The Minister may point to the fact that data on households below average income are currently published, but, as the right reverend Prelate pointed out, there is no guarantee that that will carry on indefinitely without a statutory routing. If the Government are so confident, why will they not report on the impact of their policies on child poverty and be accountable for it?
Secondly, Ministers have cherry picked some of the factors on their own list and ignored others. In particular, as has been mentioned, why have the Government ignored the key factor of low earnings, which is the first in their line of analysis of drivers for staying in poverty. Is it because, by definition, it must be an income measure, to which there was therefore a political objection? Or is it because, as the noble Earl, Lord Listowel, pointed out, they know full well that two-thirds of poor children are living in households where a parent is in work. I will return to this issue in a later group but I remind the House that if the Government continue to damage work incentives by attacking universal credit and cutting the value of in-work benefits they can hardly be surprised to find that work is no longer a route out of poverty.
No one is arguing that money is all that matters—the right reverend Prelate the Bishop of Durham expressed that very well. I fully recognise his comment that the idea that money does not matter is often most closely held by those who have plenty of it. I make an exception in the case of the noble Earl, Lord Listowel, who despite, as he said himself, having always been comfortable has shown an impressive concern for those who have not had the benefits to which he found himself entitled. I commend him for that. Nobody is arguing that, but when 202 out of 203 responses tell you that you have got it wrong, it really is time to think again. The odds on that only one being the one that is right have to be pretty small.
The Government’s own statutory Social Mobility and Child Poverty Commission, in its response to the consultation, said this:
“In our view, lack of income is central to the experience of poverty and therefore needs to be central to poverty measurement. However, other things matter too. So a broad approach is sensible”.
Of course it is: how could that not be true? Of course income matters, right from the start of a child’s life. CPAG reminded us that children from low-income families are more likely to die at birth or in infancy, to suffer chronic illness in childhood or have a disability. As the right reverend Prelate pointed out, their experience of everyday life is fundamentally affected by money. If you cannot afford to invite your friends round to tea, that creates social isolation. If your parents cannot afford to heat your house, that makes it hard to do your homework or to sleep or to grow up healthy. These things matter enormously.
Nobody is trying to stop the Government measuring and reporting on educational attainment and worklessness. All this amendment does is to ask them also to report on income measures alongside the others. The data for this are already available, so there is no extra cost in gathering them. I urge the Minister to accept this very reasonable amendment, and if he will not, to explain very clearly to the House why he will not. Otherwise, we can conclude only that the Government are not willing to account to the public and to Parliament for the consequences of their policies. This Bill is full of measures that will drive more children into poverty. If the Government are willing to do that, they should be willing to stand up and account for it.
Lord Freud: My Lords, Amendment 2 seeks to insert a new clause that would expand the annual report to include data on children living in households with low relative income, combined low income and material deprivation, absolute low income, and persistent poverty. It would effectively reintroduce the same income-based poverty measures as set out in Sections 3 to 6 of the Child Poverty Act 2010—measures that fail to tackle the root causes of child poverty. I know that the amendment is well intentioned, but as it is drafted, it is technically faulty and cannot achieve what the right reverend Prelate, the noble Baroness and the noble Earl want it to achieve. For example, the amendment refers to how equivalised net household income is to be adjusted by regulations, but there is no regulation-making power in relation to the life-chances clauses in the Bill.
However, this is not the foundation of my disagreement with the amendment. I firmly believe that the existing statutory framework, set around the four income-related targets, simply does not drive the right actions to transform children’s lives. That is what we are all aiming for, so I think it is important for me to spend some time explaining why income measures are not the way to achieve what we all want to see. There will always be natural variations in income levels in society. However, having less money than someone else does not necessarily mean that an individual is in poverty. Income measures do not take this into account effectively.
Income measures focus on the economics of poverty and ignore the human dimensions: the social causes and the reasons people can get stuck in poverty. But even as economic indicators they are flawed. They are an indirect and imperfect indicator of poverty. They do not account for the full needs of the family or other financial deductions that reflect a family’s true financial situation, such as the amount of debt a family has, or even their non-income based resources, such as the benefits from education, such as the pupil premium. Households that have large savings or capital can still count as being in income poverty. This means that income measures can provide only a partial reflection of a family’s economic well-being.
There are other weaknesses, too. For example, the measures are based on current parental income and do not incentivise action to prevent poor children becoming poor adults. They do not reflect government action on raising attainment and improving life chances for disadvantaged children. These are some of the general weaknesses of income measures. I would now like to speak briefly in turn about why specific measures of relative low income—including persistent poverty, absolute low income and material deprivation—are unhelpful in tackling poverty.
If we first consider measures of relative poverty, the problem is that a household can be moved into or out of relative low income without any change in its circumstances. For example, in a recession, as median income falls, so does the relative poverty line. This means that many households that were previously in poverty will now be above the new, lower poverty line, even though their income and life chances have not changed. This incentive of “poverty plus a pound” does not drive transformative change in the lives of family members who still face multiple barriers to lift themselves out of disadvantage.
Conversely, policies such as raising the personal tax allowance and introducing the higher national living wage that give poor families a higher income could lead to increased average household incomes. This in turn raises the poverty line and brings more children into low income, punishing Governments for doing the right thing. As an example, while the economy grew from 2003 to 2009, income measures incentivised the previous Government to tackle the symptoms of poverty through expensive income transfers, such as spending £300 billion on working-age welfare and tax credits. This strategy did not tackle the root causes of child poverty or make a long-term difference to children’s prospects as the number of children in relative poverty remained broadly unchanged. Given that the proposed persistent poverty measure is based on families being stuck below the relative low-income line, it, too, will suffer from these same weaknesses.
I turn now to the disadvantages of absolute low-income measures. By definition, absolute poverty measures the proportion of children below a fixed income line, which is only adjusted each year to account for changes in prices. The current measure of absolute poverty uses the relative poverty line for 2010-11. However, the decision to use this as the absolute low-income line is essentially arbitrary, in the sense that there is no logic to why this is better than any other reference threshold that could be chosen as the absolute standard of what households should be able to count on in order to meet their needs.
Notwithstanding the clear criticism that this measure is subject to some of the same flaws as the relative poverty measure, it also leads to illogical changes in the level of children in absolute poverty. When the absolute poverty line was rebased to the 2010-11 relative poverty line, the number of children in absolute poverty under this measure went from 1.4 million children under the old baseline to 2.3 million children under the new one. These children saw no material difference in their lives or changes in their circumstances, yet just because the line was being drawn somewhere else they were all brought into poverty.
Finally, measures of material deprivation simply do not capture real material living standards robustly. The material deprivation measure asks subjective questions around whether families think that they can afford a certain set of items. We have looked into the accuracy of what it is trying to measure. Analysis from the IFS shows that almost 50% of children who live in a household that is deemed to be materially deprived have incomes well above the most commonly used relative low-income line. This brings up questions around whether material deprivation measures accurately reflect the true living standards of families. I hope that I have been able to show why the existing income measures are a poor test of whether children’s lives are really improving and a distraction from the aim of tackling the key drivers of child poverty.
Baroness Hollis of Heigham: Before the Minister goes on to his next point, I am puzzled. He is going through the individual indicators as though those are the exclusive and sole measurement of child poverty. That is precisely why the previous Government introduced a suite of measures. Each one captured some aspect and together they captured the broad range of issues that determine how we assess child poverty. So deconstructing and challenging each individual measure is not the point: it is the suite of measures that is being dumped, and it is that suite which caught what it means to be in poverty.
Lord Freud: The noble Baroness is making a presumption that the suite of four is self-reinforcing and that the weaknesses of one are balanced by the strengths of the others, but I hope that I have been able to describe that there is no necessary reason why they should be self-reinforcing. In fact, they may be taking us all in the wrong direction. That is the presumption that I challenge.
On the right reverend Prelate’s points, the consultation demonstrated support for a wider range of measures of child poverty beyond income. More than 90% of respondents showed support for measures that drive the Government’s action in tackling child poverty. Our new approach—this is a point that the noble Baroness made—has been informed by our evidence review, which underlies the crucial importance that worklessness and educational attainment play in improving children’s life chances.
Poverty is highly complex and affected by a large number of interrelated factors. The evidence review showed that low income is one of several factors affecting educational outcomes, but worklessness is the most important driver of low income. The evidence also showed that the best way to increase incomes and exit poverty is to enter work. We want to drive the action that will make that difference. That is why the two measures cover worklessness and educational attainment.
On the point about working families with low incomes, work remains the best route out of poverty. Around 75% of poor children in families where parents move into full employment leave poverty altogether. We will return to this on a later amendment, so I will not go into it in any more detail.
The income measures that the amendment would introduce are essentially symbolic. It is important that we recognise this for both sides of the debate. The Opposition have laid out their argument of how these measures are a symbol of where the Government should focus their action. However, to us they are a symbol of the old world—of how easy it is for Governments to be incentivised to push people’s incomes £1 above the poverty line without any real transformation to their lives. This is of huge importance to us as we want to move away from these types of drivers and instead focus on the right type of actions.
In response to the concerns from the right reverend Prelate and the noble Baroness, Lady Sherlock, about the information, the Government have made a strong commitment to continue to publish the HBAI figures. I should add that HBAI is a national statistic. That means that it complies with the Code of Practice for Official Statistics, which states that it must be produced independently of political influence. That may be a stronger position to protect the statistics than a statutory base. It is hard for them to be removed.
Baroness Lister of Burtersett: The Minister says that the figures are independent. What if those producing them are under great financial pressure, and they look around and think, “What measures can we stop? What data can we stop collecting and statistics stop analysing?”. They could say, “The Government show that they’re not interested in these statistics, so perhaps we should stop analysing them”. Whatever the Minister says, without a statutory obligation we cannot be absolutely sure that those statistics will continue to be produced and analysed. That is one reason why we had a bit of a debate on this in Committee. The Minister said that he thought that the only real difference between us was the word “statutory”. That is why we believe that statutory accountability is so important.
Lord Freud: We have made this commitment to continue to publish the HBAI figures. They are national statistics and part of what is almost a huge industry of measurement around the world, as countries do it in the same way. It is always conceivable that that outcome could happen, but in the real world it is almost unthinkable.
Baroness Lister of Burtersett: If countries around the world are doing it in the same way, does that not suggest that it is the right way?
Lord Freud: We had this debate in Committee. We all measure this in the same way; we are the only country in the world that has put it in an Act. We are now moving to how other countries treat these statistics. The behaviour of other countries supports in practice what we are doing in leaving these as national statistics, with the commitment I have just made to make sure that they continue to be published.
I have spent time on these points because this Government believe that the measures we opt for really matter. Let none of us be in any doubt that there is an important choice to make with this amendment and with Amendments 8 and 11, which follow. Resources are finite and it is crucial that we prioritise the actions that will make the biggest difference for our children. Do we choose income measures which would disincentivise a range of actions which will actually help improve the life chances of children, and incentivise others which will not tackle the underlying factors at play? Or do we put our wholehearted effort into the areas which can help transform children’s prospects—worklessness and educational attainment? Indeed, I was pleased to note that the right reverend Prelate the Bishop of Durham prioritised his daughter’s graduation, showing what he thinks of educational attainment compared with anything else, for which I commend him. This amendment would end up taking resources away from these areas. I firmly believe that it would end up being detrimental to the transformational actions we want to see.
I think noble Lords will agree that these are the key drivers which the Government must focus on. The evidence behind this is set out in our published 2014 evidence review and I have spoken at length on it on previous occasions and now. The statutory life chances measures of educational attainment and worklessness are the right measures that will incentivise government to bring about real change in children’s lives.
I urge the right reverend Prelate to withdraw the amendment.
The Lord Bishop of Durham: I thank the Minister for his very full response, for which I am grateful. If the amendment is technically faulty, my understanding is that it could be redrafted, so that is not a reason for not pressing it. I am grateful to the noble Earl, Lord Listowel, for his support and was moved by his story about Ms Sculley. I am also grateful to the noble Baronesses, Lady Lister, Lady Hollis and Lady Sherlock, for their expressions of support and the points that they made. I hope that the comment of the noble Lord, Lord Northbourne, on family was addressed by the noble Earl, Lord Listowel.
I will not go through all the points that the Minister made, because I think that we fundamentally disagree about the importance of reporting on income statistics. This amendment would not in any way detract from the drivers that the Minister wants around worklessness and educational attainment; those would absolutely still be there. This is simply about a reporting mechanism which we believe is important as part of the monitoring. I say “we” because I have consulted with bodies such as the Child Poverty Action Group, the Children’s Society and many others which work with children and families in poverty day in and day out and are still convinced that this is important information to have alongside tackling the other drivers. Therefore, although I know that the Minister will not be pleased with me, I wish to test the opinion of the House.
Division on Amendment 2
Contents 290; Not-Contents 198. Amendment passed.