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Lord Layard (Labour)

rose to call attention to developments since 1997 in tackling poverty and supporting families; and to move for Papers.

My Lords, there is nothing more shocking than poverty in the midst of plenty. It is shocking in any country, yet that is what existed when Labour came to power in 1997. During the 18 years of the previous government, relative poverty in this country had doubled, so that a quarter of our population was living at below one-half of the average income. Worst of all, child poverty had more than doubled, so that one in three of our children was in poverty on that definition—more than anywhere else in Europe except Italy.

Faced with that situation, the Government had to set priorities and, rightly, they put child poverty at the top of the list. Children are the most vulnerable people in our society and they are also our future. So the Prime Minister made a bold and courageous commitment to halving child poverty by 2010 and eliminating it by 2020. That is an extremely formidable challenge, but the Chancellor has devised a powerful strategy for heading us in the right direction. The strategy has three prongs: first, get more people into work; secondly, improve their pay through better education; thirdly, where people are still poor, transfer income. If we consider each of those elements, we can see how much has been achieved.

On the work front, our problem is with workless families—families in which neither parent is working. In 1997, nearly one child in five in Britain lived in such a family. That is one of the highest rates in Europe. What a terrible start to life, but, also, what a cause of poverty. How to get more people into work? Obviously through a stable macro-economic policy, which has been achieved, but also through supply-side measures to mobilise those who are not in work. It is on the supply side that our Government have done especially well compared with, for example, France and Germany. In recent years, there have been high levels of job vacancy in all three countries, but Britain has mobilised the unemployed to fill those vacancies by a mixture of active help and reasonable pressure.

The Employment Service now provides more help, advice and chivvying than ever before. Through the New Deal, it has largely prevented the tragic drift of people into long-term unemployment, guaranteeing activity to every young person within roughly nine months of their becoming unemployed and to every adult within roughly two years. That is now a right for the unemployed, but there is a corresponding responsibility to make use of that help if they want to receive any help from the state. There is no fifth option. That is the formula. It worked in Denmark and Holland, for example, and it is working here.

For other claimants who are not in work, particularly single parents and people with disabilities, the Government now rightly insist that they attend work-focused interviews at which they consider whether to seek some kind of work. They can take advantage, where relevant, of the more generous support that the Government now provide for child care.

What are the results? They are not bad. There are a million more people in work; the proportion of children living in workless households is down from 18 per cent to 15 per cent, a 3 per cent drop, corresponding to the fall in worklessness; and 52 per cent of lone parents are now in work, compared with 46 per cent in 1997. Of course, that is only a beginning. Five per cent unemployment is very high, compared with what we could have. We still have too many people outside the labour force. We know from other countries that we can go much further in mobilising the non-employed. The Government have committed themselves to an integrated approach to the problem, creating Jobcentre Plus, which brings together work and benefits, and the Department for Work and Pensions.

Work will not end poverty if income in work is too low. During the 1980s, there was an extraordinary increase in pay inequality in this country. It became more unequal than at any time since records began. That was mainly due to the scandalous neglect of the skills of at least a half of our young people. Although our higher education was the best in Europe, our vocational education below degree level was among the worst. Half our young people got no serious education beyond 16. However, since 1997, a major educational revolution has been afoot, with proper standards of literacy and numeracy achieved by 70 per cent of 11 year-olds in 2001 and a stronger expansion of sub-degree vocational education, modern apprenticeship and basic skills for adults as compared with more academic forms of education for the group that will end up at the higher income level.

That policy, if continued resolutely, will, at long last, reduce the disgracefully unequal nature of our education system, one of the most unequal in Europe, which has done so much to produce unequal incomes in later life. Of course, it will take years to affect the overall pattern of wages. If pay is too low to sustain a family, there is no alternative to income transfer. The national minimum wage can play some role, but the main burden must fall on the Exchequer. That is why the Government have hugely increased the scales of assistance to poor families, in work and out of work. I am thinking of the working families' tax credit, child benefit and benefits for the workless. Those increases have gone far beyond the adjustments for price inflation that were provided by the previous government. As a result of the changes in benefits and in personal tax, there are now 1.2 million fewer children in poverty than if benefits and taxes had been indexed to prices. That is a big number.

One thing is clear: such generosity must be repeated again and again, even if we want just to keep poverty constant. We will have to run just in order to stand still because of the logic of the situation. Unless benefits rise at roughly the same rate as average incomes, relative poverty must, by definition, increase unless it is cut by having more people in work or reductions in low pay. Although higher employment rates can make a contribution in the short term, it is unlikely that pay will become more equal at all soon. The main point I make is that if we want to reduce poverty—not just hold the line—we must see a steady rise in the share of national income going to child support. That is not always realised, but it is a logical implication of the Prime Minister's pledge.

In the context of benefits, the argument that we should reduce the poverty trap by further reducing the steepness of the benefit tapers must be strongly rejected. I am sure that someone here will advocate that, but it must be resisted. It is expensive and ill targeted, and it raises the implicit rate of tax for some at the margin, even as it reduces it for others. One problem that must be faced is housing benefit. It traps people into non-employment more than any other benefit, and it distorts the housing market. It must be gradually absorbed into the existing cash benefits.

What can be said about the overall results of the Government's anti-poverty policies? Unfortunately, there is a long lag before the data come. We have had no really good data since 1999-2000. That is over two years ago and before many of the policies that I mentioned began to bite. However, we do have some crude data from the family expenditure survey for 2000-01 that are encouraging when compared with those for the previous year. For all households, the disposable income of the lower income groups appears, at last, to have risen significantly faster than for the middle and higher groups.

The figures cover pensioners, as well as people of working age and their children. As there is no time to look further at every group of poor people, I want finally to consider the record on pensioners. A number of us in the House are pensioners. It is important to realise that the world has changed and that the pattern of poverty has changed; it is remarkable. Today, most poverty is due to low pay or worklessness. Only 20 per cent of the poor are pensioners, which compares with a half in the 1970s. That is because of the increase in other forms of low pay. The risk of poverty for a pensioner is barely higher than it is for the average person. In fact, nearly 40 per cent of all pensioners are in the top half of the overall income distribution. So the Government's policy towards pensioners must be targeted as it is on other groups in the population.

We have debated the subject several times, and the strategy is well known. Pensioner poverty is being attacked by the minimum income guarantee, which is to be indexed to earnings for the duration of this Parliament. About 2 million people now benefit from that guarantee. By next April, those people will be over 20 per cent better off, in real terms, than they would have been under the price index policies that the Government inherited. Of course, the guarantee does nothing for those who fall just above it but are still on the margin of poverty. For those whom it affects, it renders useless any savings that they may have made, which is why, from 2003, the Government will introduce the pensioner credit. It will provide the minimum income for people who have only the state pension, but, for others, it will provide an income that rises by 60p in the pound for additional income that a person may have, up to a maximum. A half of all pensioners will benefit from the pensioner credit.

In the war against poverty, much has been achieved. Looking back, one dreads to contemplate the situation that would have existed had previous policies been continued. Our task is like turning round a liner that was heading in the wrong direction. It will take serious money to deliver the Prime Minister's guarantee. Benefits for children must rise faster than earnings; that is the logical necessity that I mentioned. Real money must go into vocational education for the 50 per cent who are not going to university. A government committed to eliminating poverty should have not only a target for the percentage going to university, but a target for the other group not going to university that demonstrates that we will give them all a skill.

The Government deserve real praise for the radical measures that they have already adopted. However, if they are really to abolish child poverty, they must go much further. I trust that they will not flinch or fail. I beg to move for Papers.

3:20 pm
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Baroness Byford (Conservative)

My Lords, I thank the noble Lord, Lord Layard, for bringing this debate before us today. Tackling poverty and supporting families is a prime concern for any government. As John Prescott wrote:

"Improving the quality of life for the people of this country is perhaps the most important duty of Government".

However, the figures from the Department for Work and Pensions show that there has been "no consistent change" since 1996-97 in the number of children living in poverty, while the number of working-age people in poverty has "remained broadly constant". Millions of people have been trapped on means-tested benefits without any significant impact on poverty trends.

Among individuals living in households with below 50 per cent of mean income, four out of 10 were not in work; between 20 and 25 per cent lived in households without access to a bank account; and between 50 and 60 per cent lived in families in receipt of one or more income-related benefits.

The failure of this Government to improve the situation was expressed recently by the noble Lord, Lord Hattersley, who is not in his place today, when writing in the Guardian. He commented:

"New Labour has fulfilled the party's historic destiny to redistribute income. Unfortunately, it has not happened in quite the way that the founding fathers intended . . . If the prime minister knew how wide the gap had become, self-preservation may have persuaded him to dismiss inequality as unimportant rather than acknowledge that he has presided over a tragedy".

Equal concern was expressed by Child Poverty Action Group. Its report of 26th February last year showed that in 1998-99 4.5 million children in the UK were living in poverty. That figure was an increase of 100,000 during Labour's first two years in office. Those are bleak figures. But what do they mean in practical terms? I suggest that suitable housing and poor health are the major issues, followed closely by under-achievement at school, the difficulty in obtaining jobs and the fear of crime.

I start with housing. We recognise that a warm home in reasonable condition is something we all value, whether through private ownership or through the rental market. But have the Government had any success in achieving an increase in the availability of single-occupancy units and of new affordable houses?

In rural areas the lack of provision of affordable homes is acute. Developers have tended to build three, four or five-bedroom houses. But the new PPG3 regulations require them to build more houses per acre and may increase the number of affordable houses for those who are in work and can afford them. Have the Government any plans to change the rules for the very rural villages by reducing or removing the ratio requirement of large to small homes so that local councils will be able to stipulate small units where they are needed?

The rural housing trust has pointed out that local authorities are often unaware of shortages of suitable accommodation in villages until the people affectedshow up when they move to the town. That was confirmed by the Joseph Rowntree Foundation, which concluded that,

"the most important role for registered social landlords in addressing concerns about social exclusion and the sustainability of socially balanced communities in rural areas, is still undoubtedly the provision of more affordable housing of good quality for low income households".

In another place, on 20th July 1999, Miss Armstrong stated the Government's determination to reduce the number of empty government homes and supplied targets. Can the Minister tell us whether those targets have been met? Lastly on this topic I ask what progress has been made in the rented sector, either private or social housing. In passing, will the Minister comment on the Government's plans for dealing with the problems of the housing benefit system, to which the noble Lord, Lord Layard, referred? Over 4 million tenants rely on housing benefit to pay their rents. For many of them, eviction has been the result of failures in the benefit payments system.

One of the ills of poverty is poor health. We are becoming a sedentary population, overweight and exposing our children to an increased likelihood of ill health in later years. Current research indicates that that will be worsened by the reduction of sport in schools. Will the Minister tell us how many school sports fields have been sold since 1997? Will he also tell us how the new SEN—special educational needs—code squares with the need for poor children to take more exercise?

Given the housing conditions and the health problems experienced by many of our poorer children, a good education is vital for them. The Education Bill, shortly to arrive in this place, is a mighty tome. But I wonder whether the measures contained therein will actually reduce teachers' burdens. Unruly and violent behaviour, bullying and teachers struggling to control their class are still with us despite the Green Papers, the White Papers and performance-related pay. Education is key to helping children, especially those from poorer homes, to learn and gain skills that will enable them to get a job and succeed in ways that were perhaps not open to their parents.

There are other important issues with which families on low incomes have to deal. Debt, or "living on tick", for some is the only way they can get by. I have been greatly concerned, as, I suspect, have many other noble Lords, by reports of the levels of interest charged by private individuals and should be grateful for the Minister's comments on whether or not the Government have any proposals to deal with that situation.

As noble Lords will be aware, I have a hobby horse and cannot resist the temptation, following on from the fourth Question taken in the House this afternoon, to refer to how we make welfare benefit payments. Poorer families rely on the post office to keep them solvent. There is nowhere else for them to go. The closure of sub-post offices and the proposed reorganisation of Consignia fills me with horror; nay, rage. I shall not be affected and suspect most other noble Lords will not be affected either. But millions will. In the four-and-a-half years since 1997 to October 2001, 1,564 post offices have closed. That is over 7 per cent of the total open at the beginning of that period.

I have already referred to benefit payments and remind your Lordships that one of the most important forms of benefit is the distress payment, the emergency handout, sub, or whatever we call it. A cheque or giro cashed in the post office has provided food for infants, a bed at night, a pair of shoes and many other things besides. Time and again I read of delays caused by the new computerised systems. They may be harder to cheat, but that is not much use if one is starving and needs help.

Post offices also pay pensions to many older people who have never had and do not want a bank account. In view of the many choices which this Government insist we are open to as parents, children or refugees, I am appalled that they are preparing to close the choice of post offices in that way.

I once again thank the noble Lord, Lord Layard, for giving us the opportunity today to raise some of the important issues that are daily trials for those on low incomes.

3:29 pm
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Baroness Sharp of Guildford (Liberal Democrat)

My Lords, I join the noble Baroness, Lady Byford, in thanking the noble Lord, Lord Layard, for introducing the debate on this extremely important subject. It is an issue on which more and more data are being published which enable us to track precisely what is happening.

It is right that we should pay tribute to what the Labour Government have achieved. As the noble Lord, Lord Layard, said, in 1997, 4.7 million children in this country—one in three—lived in poverty. By 2001, this had been reduced to 3.2 million children—one in four. It is still an awful statistic of which we should be genuinely ashamed.

According to the Institute for Fiscal Studies, the net effect of the five Labour Budgets has been to increase the income of those in the poorest 10 per cent by some 13 per cent, with the increase going disproportionately to single parents and to full families with large numbers of children, which are the two largest poverty groups.

Three factors have contributed substantially to these improvements. These were acknowledged by the noble Lord, Lord Layard. The first is the increase in employment—perhaps above all the increase in employment. The drop in unemployment has made a great deal of difference. This has been substantially due to the economic cycle and much less to any of the new deals which have been put into effect. Secondly, the working families' tax credit and the minimum wage between them have helped very considerably to increase the gains of those in work at the lower end of the income scale. This again is a major improvement. Thirdly, the minimum income guarantee has been an important gain for those not in work and, particularly, for poor pensioners.

However, there is no room for complacency. As I said, one in four children living in poverty in this country is a shocking statistic. At 25 per cent—at one in four—we have the highest rate of child poverty in Europe. In Sweden it is only 5 per cent—one in 20. Overall rates of deprivation and poverty, as measured by Eurostat, put Britain, at 14.6 per cent, above only Ireland and Portugal; Spain, Italy and Belgium are above us at the 11 to 12 per cent mark; and the Netherlands and the Scandinavians are at the top at 7 to 8 per cent.

It is also notable that while new Labour's measures have helped to lift some of those at the very bottom of income distribution out of poverty, the gap between rich and poor has not decreased but increased. Whereas the net incomes of the poorest 20 per cent increased by 1.4 per cent during the first four years of the Labour Government, those in the top quartile grew by double that amount, 2.8 per cent. So inequality has increased, not decreased.

The big question is whether inequality matters. Can we achieve what we want to achieve by just raising the floor? My noble friend Lord Russell will address this matter later, but we should bear that question in mind during our discussions.

One of the features of the poverty population is that it is surprisingly mobile. Half of the people in the lowest 10 per cent of income in any one year are not among the same 10 per cent the following year. Inevitably, unemployment, illness and family problems mean that there is a degree of mobility among those at the bottom. However, the mobility tends to be among those at the bottom; you do not find people moving from the lowest 10 per cent to the highest 10 per cent. On the whole, they move from the lowest 10 per cent to either the next lowest or the next lowest after that. They move in and out of those brackets.

There is considerable evidence of persistence in economic fortunes from one generation to another. If your father or your family is poor, your chances of being poor are greater than of being better off. Similarly, if your parents are well to do, your chances of being well to do are very much greater.

In the 1960s, I worked at the LSE with people such as the noble Lord, Lord Moser. When we talked about poverty then, the euphemism was "deprivation" or "multiple deprivation", and we talked about the "cycle of deprivation". It was clear from all the studies made in the 1960s and 1970s—it is still true today—that those who were poor were more likely to suffer not only from low income but from poor housing, poor health, poor healthcare, poor diet, poor schools, low educational achievement and lower paid jobs. One was interactive with the other; they were mutually reinforcing of poverty.

This has not changed today. As the noble Lord, Lord Layard, made clear, the attack on child poverty is not only about income and inequalities but about improving life chances. The Government are paying a lot of attention to other areas, such as education, and I shall concentrate the remainder of my remarks on that vitally important subject. If we are to increase life chances, education can provide that very important route out of poverty.

Many of the initiatives undertaken—Sure Start, the numeracy and literacy hours and the new Connexions Service—are doing precisely what the noble Lord, Lord Layard, said; that is, they are trying to help those at the bottom end of the scale to get a better start, to get training behind them and to get into new jobs. The danger, however, is that, for all the rhetoric, some of the measures that have been taken will reinforce inequality rather than promote greater equality.

I am particularly worried by the preference for performance indicators and the fact that schools are listed constantly in league tables. Those schools which have the greatest difficulties are inevitably at the bottom of the league tables, and that tends to reinforce their position.

I should like to draw your Lordships' attention to the problem of specialist schools. One thousand out of the total of 3,500 secondary schools designated as specialist schools are to receive an extra half a million pounds over four years when they are specialist schools. Half a million pounds for a secondary school is a lot of money. Those schools are, disproportionately, the higher achieving schools; they tend to be middle-class schools.

Let us contrast the numbers of free school meals in the least achieving schools with those in specialist schools, or even in average schools. Of those in the least achieving schools, 44.8 per cent have free school meals—nearly half of them are classified as in poverty under free school meals—compared to 15.3 per cent in the average state school. Some 33.18 per cent of children in the least achieving schools have special educational needs, compared to 14.1 per cent in ordinary state schools.

The problem with the specialist schools programme is that it involves a disproportionate number of middle-class schools. The schools that are not achieving are the ones that need the extra half a million pounds. We need positive discrimination in favour of the lower achieving schools rather than the other way round. I know that the Excellence in Cities programme is doing this, but it is only doing it in a small minority of schools in city areas. There are schools in rural areas that need this help.

From these Benches we applaud the aims of the Labour Government in tackling poverty and supporting families. We congratulate them on what they have achieved to date, even if we feel that they have been lucky with their share of the upward trend in the economic cycle and that they have been too cautious in some of the measures they have pursued. We warn them, however, that they will need to be bolder in the pursuit of their targets. In particular, they cannot tackle poverty without also tackling inequality. Unless they are prepared to tackle inequalities in the factors contributing to long-term poverty—I have highlighted the inequalities in the education system but it applies equally to health and to housing—they will never achieve their ambition of abolishing child poverty within this country within this generation.

3:39 pm
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Lord Moser (Crossbench)

My Lords, I, too, thank the noble Lord, Lord Layard, for introducing this important debate. The noble Lord and I have worked together on various statistical projects over many years. Therefore, I start by believing the kind of statistics that he uses, and I have confidence in them up to a point. The noble Lord has taken us to the heart of the problem.

The very word "poverty" has many different uses. It is difficult at the present time to talk about poverty without at least a sidelong glance at poverty in its serious form in the developing countries. We cannot forget that half the world's population now lives on less than two dollars a day. Over a million live on less than one dollar a day. As President Clinton reminded us in his remarkable Dimbleby lecture, every day 1½ billion people do not have sight of a glass of clean water. That is poverty in its most abject form. Let none of us forget it. In this debate, however, we are talking about this important topic in a national context—in the context of a rich society.

The noble Lord, Lord Layard, has brought us up to date. He rightly bases his analysis and conclusions on the official definition of poverty—usually referred to as "relative" poverty. It is quite different from what is normally referred to as "absolute" poverty, under which definition basic needs are valued and then translated against incomes. In a study of relative poverty, low incomes are compared with the general standard of living. On that basis, some 18 per cent of households and 23 per cent of children are below the poverty line. That is the background to the Government's aims to abolish child poverty within 20 years and to halve it within 10 years—seven or eight years from now.

The noble Lord reminded us of the range of policies that are necessary to achieve those targets. Some, as he told us, bear on employment—getting poor people into work—and others on various tax and welfare schemes. Although the figures are not totally up to date, the indications are that the combination of the policies is beginning to bear fruit, with a significant effect on distribution and on inequalities. As a result, some 1.2 million children have been lifted out of poverty, thus defined. That is a fine achievement on the part of the Government. However, the challenge of a further two million to be lifted out of poverty remains.

I want to put these material measures of poverty in the wider context and to comment on what they mean in terms of health, housing, education and life opportunities. It is notable, and cheering, that every speaker has emphasised the importance of education in the context of poverty. I wish to do the same. I declare my interest as chairman of the Basic Skills Agency—a remarkable organisation which has done key work over many years on literacy and numeracy.

All children deserve a good education. Above all, they deserve the ability to read and write and to cope with numbers. Yet we have lived through decades when a substantial minority of children—some 15 per cent—have left school without these abilities. It is not surprising that they have been led down the road to low incomes, unemployment and social exclusion.

The situation is becoming slightly better, especially in schools. A great deal has been done by the Government, largely through the Literacy Hour, so that now fewer and fewer children are leaving school unable to read and write. The noble Lord, Lord Layard, said that 70 per cent of 11 year-olds now have these basic abilities. That is a good figure, but I am more concerned about the remaining 30 per cent of children who still leave school with basic skills impaired as the figure should be nil.

As regards adults, a recent report by a committee which I had the honour of chairing indicated that, in this rich country, between six million and seven million adults have poor functional literacy, resulting in major disadvantages to their lives. The links with poverty are all too obvious. Compared with a person with good normal literacy, someone with poor literacy is five times more likely to be unemployed; and, if employed, he or she is twice as likely to be in the lowest income bracket. I mention this simply to remind your Lordships of the importance in relation to poverty of the whole set of government policies on education—notably literacy and numeracy—as well as other social factors bearing on life opportunities.

I want to make two further points. The first is statistical. It is most important that we all understand how poverty comes about—indeed how all inequalities come about—and the complex underlying causes, as well as the complex consequences of being in poverty. Much of this has been set out in the excellent work of the Social Exclusion Unit and by the Office for National Statistics.

Secondly, I want to mention a statistical source of enormous importance; namely, longitudinal surveys. These are surveys in which the same people are asked questions over a number of years. This country has the best such surveys in the world. We have four sequences of surveys, the most recent beginning with the birth cohort last year. This is the ideal method of assessing life opportunities and the consequences, as well as the causes, of poverty.

Finally, returning to policy, like other speakers I pay tribute to the Government for seeing poverty reduction as a central aim, and for their evident achievements so far. To focus on relative poverty, however, means that progress has to be judged in relation to overall rises in living standards. Therefore, it is important to know from Ministers, first, whether the plan is to continue to assess progress in tackling child poverty in the way in which it has been judged so far, applying the same measures; and secondly, whether, with only eight years to go, the Government's judgment is that this enormously ambitious target is still realistic and whether we are on track towards it.

3:48 pm
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Baroness Andrews (Labour)

My Lords, I am grateful to the noble Lord, Lord Layard, for creating an opportunity for us to reflect on what has been achieved. I also pay tribute to him as one of the architects of some of the most imaginative strategies that have been put in place for employment, and which are making such a difference.

My argument is that the Government have been radical. However, I agree with the noble Lord, Lord Hattersley, although possibly for different reasons, that they have not been redistributive. The Government have not made poor people richer by making rich people poorer. What they have done is to release resources and to direct resources to the poorest. And we are beginning to see the difference in what is happening to some of the poorest children in society.

The debate provides an opportunity to ask ourselves what makes a radical and sound social policy as a whole. I suggest that there are a few defining criteria. One is to tackle the causes of poverty and to break the inter-generational cycle of worklessness, hopelessness and powerlessness in young people. The second is to create a coherent framework, so that policies that tackle poverty directly and indirectly can work together to have the most beneficial effect.

The Government have begun to do both. That is the major difference that they have made. It is a cultural and political difference as much as a technical difference. That is what makes it radical. It has been cast in the European context and the language of social inclusion, which is relatively new in this country. That enables us to place the concept of raising incomes within a framework that demands that we deal with the relationship between poverty, health and education, as many noble Lords have already said.

I agree that by setting a target of abolishing child poverty within 20 years, the Government have taken a mighty risk. They have raised the profile of tackling poverty beyond the obsession of a few highly dedicated and highly skilled campaigners to make it the natural target of everybody who cares about social justice and about how government works. It will be a task against which the Government are measured.

It is fair to reflect on how far we have come on creating incentives for work as well as opportunities for work and on raising living standards in work. I shall take three examples of that process. We are moving towards an integrated tax and benefit system. A Bill will shortly come before your Lordships' House to introduce an integrated child tax credit system. That is a hugely challenging undertaking. It was discussed for decades, with endless academic papers and government initiatives on how it might be done, but it was never seriously countenanced because it was too difficult. We have begun that process.

The minimum wage was the target of a lot of negative propaganda for years, but it is in place and is raising living standards. It is not raising them high enough or fast enough in my opinion, but it has introduced a new ethic to the workplace on what is payable and how well it is paid.

We have also seen moves to tackle the poverty of that group of pensioners who for years were the largest and poorest group in poverty. Through the minimum income guarantee and now through the state pension credit scheme we have a genuine possibility of raising all poor pensioners out of poverty.

It has been difficult to make a judgment about the cumulative effect of all the measures that have been put in place since 1997, because the statistics flow at a glacial rate. They are very suspect, not to say slippery, and one has to look at a number of different triangulated points to get a fix on them. There is a major time lag between policy and effect. I never thought that the Government would be accused of doing good by stealth, when they are so much more frequently accused of over-egging their achievements to the point of beginning not to be believed, but they have done a great deal of good by stealth.

When making those judgments, it is not necessary to rely only on people who would say that, wouldn't they. Just before the election, the Child Poverty Action Group, which has been a critical friend to many governments—often more critic than friend—wrote:

"There is no doubt that when the election takes place there will have been a substantial reduction in poverty, particularly child poverty, by any measure you care to use. This is a great achievement—partly the result of a buoyant economy with falling unemployment, but mainly the result of pursuing redistributive social and fiscal policies".

We do not have the statistics that we would love to have to take us up to 2002, but we have a model drawn up by reputable academics, who have extrapolated data to estimate with confidence that 1.2 million children will have been lifted out of poverty. We have to say "Thank God", because, as the noble Lord, Lord Layard, pointed out, by the middle of the 1990s, after 20 years of redistributive policies flowing in the other direction, Britain had the highest child poverty rate of any country in the European Union and one of the highest in the industrial world. Even after two years of a Labour Government, that situation appeared not to have shifted much.

Significantly, in contrast with other governments, which had managed to use social policies to protect and improve the living standards of children, our governments had not done so. Children were poor not because of global economic trends, but because of the failure of policy makers. We have made a start on reversing that, tackling the causes of family poverty and making the right framework.

As many noble Lords have pointed out, we have also tackled the inexorable link between the failure to thrive and the failure to learn. In that respect, I warmly welcome yesterday's Ofsted report and the statement that there has never been better teaching in this country, as well as the expansion of those initiatives that are directly targeted on the poorest children in the most disadvantaged areas. I hope that those initiatives will not be national projects, but will become national programmes. For too long, we have been a nation of projects and not a nation of sensible and sound policies. Those policies will address the real but diffident talents of children who do not think that they have a right to a place at university.

At the same time, the Ofsted report rang loud warning bells about persistent and growing truancy, much of which is condoned by parents. That illustrates perfectly the difficulty of framing education policy outside family and social policy as a whole.

Tempting though it is, there is no time for a debate on the links between educational failure and poverty. It is diagnosed beyond dispute, but some interesting recent research suggests that the impact of child poverty depends in some ways on the age of the child in poverty, but more certainly on the length of time that the child spends in poverty. As Robert Walker put it:

"While poverty in childhood may not always be a significant problem, poverty throughout childhood most certainly is".

If that is so, we need to look carefully at where and how we intervene to break the cycle of poverty and what instruments we choose to support families. Extending Sure Start and making extra and differential help available for families with primary and adolescent children are part of the answer.

We may agree that economic and social policies are having the intended effect of lifting families out of poverty, but we must ask how far and how fast that is happening and at what point it will make a significant and permanent difference to families.

The New Deal is achieving a lot on behalf of lone parents, who now make up such a significant proportion of society. We know that 122,000 lone parents had found work through the New Deal by last October. They need more accessible education and training and they need to know that, in due course, the childcare strategy will help to provide them with support not just for formal care but—as I hope—for the informal care that many of them have to draw on. Lone parents have to be very careful about where they put their children and whom they trust.

To adapt a phrase, much has been done and much remains to be done. The noble Lord, Lord Layard, called for serious money and other noble Lords have called for serious thought. I call for serious action to sustain and maintain the momentum that I think we have established towards closing the gap. If we have coherent policies, we can have equality as well.

3:58 pm
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Lord Davies of Coity (Labour)

My Lords, I have two comments at the outset. First, I thank my noble friend for introducing the debate. Secondly, in anticipation that there will be a lot of detail in many speeches and a lot of bandying of statistical information for and against what the Government have done, I have decided that in my short contribution I shall largely express what I consider to be conviction and motivation.

When I decided to take part in this debate on tackling poverty and supporting families, I was reminded of a speech that I made on poverty a number of years ago, when I first came to the House. It was a speech that received, as expected, a mixed response. My noble friend Lord Puttnam—whom I did not know at the time, but who had entered the House at the same time as I did—passed me a note congratulating me on my speech and stating that he was glad to be reminded why he was sitting on these Benches.

The noble Lord, Lord Renton, attacked my speech, describing it as "old Labour". That may very well happen again today. On that occasion, however, the late Lord Beloff disagreed with his noble friend and, commenting on my speech, said that someone had to speak up for the poor. I remember thinking that that statement was a little odd as I felt that speaking up for the poor was something that we should all be doing. However, on contemplating the matter further, I reflected on the fact that we are all to some extent products of our environment and that there may well be some who have never experienced poverty or under-privilege or even come close to such circumstances. Those people may feel that poverty arises from individual irresponsibility. They may think that laziness, drunkenness, neglect are but a few of the characteristics that lead to the poverty suffered by the wives and children of such men.

I have no doubt that such cases exist. However, the truth is that poverty arising from such circumstances represents a small minority of those who have suffered the deprivation of poverty over the centuries. The indignity of poverty suffered by whole communities down the ages has clearly resulted from the operation of market forces and unfettered capitalism without the application of the measures needed to establish the necessary social justice. Although that description may seem harsh to some, it was not all that long ago that a leader of a party opposite coined the phrase "the unacceptable face of capitalism". Industrial change from the 19th century onwards has from time to time created widespread poverty, damaging both individual families and whole communities.

With the historical development of this country, none of us can be surprised today at the way in which the trade unions mushroomed in the 19th century. It was not only the individually irresponsible or the unemployed who suffered poverty; millions of workers who worked long hours in hard and often dangerous jobs also suffered poverty. Yet at the same time a few were amassing vast fortunes.

Is it any wonder that the Labour Party was born of the trade union movement, in the knowledge that if social justice and the eradication of poverty were to be achieved, political decisions would have to be taken? These values have been with the Labour Party since its inception and they are still part of Labour's mission today, 100 years later. Although the circumstances have changed, the values have not. They are as important to Labour today as they were a century ago.

As we all know, just about halfway through the 20th century, a Labour government with a landslide victory were elected to form the government who laid the foundation stones of Labour's historical mission: to remove poverty and establish universal social justice. Regrettably, it took another 50 years for another Labour landslide. Last year, for the first time in Labour's history, a landslide was repeated in a subsequent election. This Government are determined to complete the job that the Attlee government started. The measures may be different, because circumstances are different, but the values are the same. For 18 long years, the Conservative Party had every opportunity to tackle poverty and support families. In my view, they failed. I shall not speculate now on whether they did not want to succeed, or whether they did not know how to succeed. However, in 1997, the electorate demonstrated their view. The British public made their decision. It was not the poor, the most disadvantaged or the most under-privileged who voted the Conservative government out of office; it was those who were well off or reasonably well off and those who were relatively comfortable. It was those who were ashamed at what was happening to this country and to large numbers of people living in it, reflected in slogans such as, "Get on your bike" and, "There's no such thing as society".

It is clear to me that, since 1997, this Labour Government have been introducing measures that are consistent with their core values: to remove poverty and to establish social justice by focusing on support for people—individual men, women and children—and collectively focusing on families.

I know that, in his reply, my noble friend Lord McIntosh will where necessary emphasise once again the Government's record—particularly on bringing more people into work, providing minimum levels of income and improving benefits for pensioners and benefits for families. I shall therefore not go into those details, which have already been clearly expressed by my noble friend Lord Layard in introducing this debate.

I should, however, like to say how much I welcome the action of both the Prime Minister and the Chancellor of the Exchequer on world poverty. In the developing world, poverty is very often caused by famine, drought, disease and other natural disasters, as well as by exploitation and abuse. Such poverty is far worse than anything that we experience. Whatever its cause, however, that poverty very soon becomes the breeding ground for fanatical terrorists. I therefore warmly welcome the Prime Minister's proposed tour of Africa, and I warmly welcome the Chancellor's attempts to establish a world-wide, funded coalition to attack world-wide poverty.

Last Sunday, at the church I attend, during his sermon, the minister quoted Martin Luther King, saying:

"Injustice anywhere is a threat to justice everywhere".

In the context of this debate, I say that poverty anywhere is a threat to prosperity everywhere. If 11th September 2001 has not taught us that lesson, it has taught us nothing.

4:06 pm
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Baroness Thomas of Walliswood (Liberal Democrat)

My Lords, poverty and its attendant ills ought always to be a matter of concern to us all. I agree with very much of what the noble Lord, Lord Davies of Coity, has just said—perhaps pausing only very briefly to remind him, in the most gentle possible way, that Lord Beaverbrook was a Liberal—

Noble Lords:

Lord Beveridge.

Photo of Baroness Thomas of Walliswood

Baroness Thomas of Walliswood (Liberal Democrat)

My Lords, I meant of course to say that Lord Beveridge was a Liberal; Lord Beaverbrook is certainly not the right Peer in this context.

Often in the House, the argument revolves around details of a Bill and how they impact on different groups. Today, thanks to this debate, introduced by the noble Lord, Lord Layard, we can take a broader view of this terrible social ill. I shall talk about lone parents, most of whom are women, and about their children. Lone parents have now overtaken pensioners as the poorest members of society. The fact is that 61 per cent—two-thirds—of people in one-parent families live in relative poverty. In other words, three million people, including 1.9 million children, are living below the official poverty level, compared with 442,000 in 1979. Put differently, one-parent families make up 21 per cent of those in poverty, although they comprise only 9 per cent of those in society.

There has been much argument recently about the emotional and social impact upon children caused by single parenthood. I do not propose to enter into that argument except to point out that, on the one hand, family breakdown is the single greatest predictor of offending behaviour, but that, on the other hand, analysis seems to indicate that it is poverty and the burden that it imposes upon the single parent that really does the damage to children. Three fifths of children in lone-parent families are poor, compared with one in four where couples are together.

According to the National Council for One Parent Families, the poorest fifth of the population has seen no real increase in spending on children's clothes, shoes, toys and important dietary items such as fruit in 30 years. The noble Baroness, Lady Byford, gave a vivid impression of the wider impact of poverty on those who suffer from it.

The cause of poverty for those families is the loss of a partner. It is worth mentioning that most lone parents have been in partnerships. An aggravating cause is the fact that most lone parents are women. It is an acknowledged and documented fact that women still earn less than men, even in comparable jobs, and that they are disproportionately concentrated in lower paid work. That is even more the case when we talk about women with sole charge of children. They must try to find work locally. Only 30 per cent of them have access to a car and running a car is expensive. They need flexible working hours to fit in with children's school hours and holidays. Some 90 per cent of them want to work, but, interestingly, fewer lone mothers than mothers in couples actually do so. Obviously, the burden of managing the work/life balance is particularly acute for these lone mothers.

One-third of lone parents, and 44 per cent of those not in work, have no academic qualifications. Many noble Lords have referred to the importance of education in that situation. There is also the difficulty of suitable training opportunites, and the recent government initiative to deal with that problem by allowing lone parents to train on income supplement is therefore most welcome.

When the Government first started their drive to encourage lone mothers to work, the manipulation of benefits to encourage them to do so appeared likely to disbenefit large numbers of mothers and, therefore, their children. However, as the noble Lord, Lord Layard, and others pointed out, the increase in benefits targeted towards children has been a welcome change. The increased child element of working families' tax credit, the increase in child benefit itself and the ability to receive maintenance while also receiving working families' tax credit have been a great help. Unfortunately, the latter point will help only the one-third of lone parents who actually receive child maintenance.

Although the results have not yet shown up in the statistics, as the noble Baroness, Lady Andrews, said, modelling of the effect of these changes suggests that about half a million children in lone parent families will be lifted out of poverty—part of a total of 1 to 1.5 million children. That is something upon which the Government are to be congratulated, as no doubt they will be if the figures turn out as expected.

Unfortunately, that is not the end of the matter. To move into greater security, lone mothers need better jobs and to get and hold them they need above all affordable, flexible and reliable child care. It is not an accident that only 51 per cent of lone mothers are in work in this country compared with 70 per cent of mothers who are in couples. The figures for lone mothers in work in France and Sweden are 80 and 70 per cent respectively. The problem is lack of child care. If you have no one with whom you can share child care, you need affordable child care provided by someone else. Child care at a recently reported average cost of £6,000 per annum will not do for the parents about whom I am speaking. What can the Government tell us that will encourage us to feel that locally based, affordable and flexible quality child care is a major part of their programme of poverty reduction? Do they recognise that neighbourhood nurseries could also have a positive effect in terms of community building?

I turn briefly to the subject of the treatment of mothers and expectant mothers by some employers, particularly smaller employers in lower grade occupations. The CAB, responding to the Government Green Paper, Work and Parents, pointed to a gap in that paper's approach to improving and simplifying maternity benefits. Every year the CAB handles about 700,000 employment inquiries, of which tens of thousands are related to maternity or parental rights. Women are being penalised for visiting their doctor during pregnancy. They are even being sacked because they are pregnant—a case was reported this very day—and they are being refused the ability to return to work.

I was reminded by my noble friend Lord Russell, who will speak later, that in reply to my Starred Question last week the noble Baroness, Lady Scotland of Asthal, suggested that British people might have no need of the option of an appeal to the United Nations Convention on the Elimination of all forms of Discrimination against Women. However, I am talking about existing rights which are being flouted and ignored by employers. I agree with the CAB that as well as extending maternity and paternity benefits, the Government should take steps to monitor the application and implementation of those that exist. My final question, therefore, to the Minister is to ask whether the Government have taken that point of view on board and whether they will do anything about it.

4:16 pm
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Lord Lea of Crondall (Labour)

My Lords, I congratulate the noble Lord, Lord Layard, on introducing the debate. This is an important matter and it is high time that it is addressed in a debate of this kind.

It also gives me great pleasure to follow the noble Baroness, Lady Thomas of Walliswood, as I substantially agree with what she said. I refer to the extraordinary difference in statistics as regards the UK and the EU on the matter of single mothers. The number of single mothers in Britain is miles above that of any other country in Europe and twice the European average. Those statistics constitute social problems in a rather pure form in some respects but they have major economic consequences.

The raw data have been described in a number of ways, but I do not think that the data I shall discuss have been mentioned. I refer to an article in the April 2001 edition of Economic Trends issued by the Office for National Statistics entitled, The effects of taxes and benefits on household income, 1999-2000. The article states:

"Before government intervention, the top fifth of households have an average of £54,400 per year in original income (that is from sources such as earnings, occupational pensions and investments). This is around 19 times as great—"

I am not just talking about David Beckham, but the top fifth of households—

"as the figure of £2,800 for the bottom fifth. However, after taxes and benefits, the ratio is greatly reduced to four to one".

Of course, a tremendous amount of work is carried out by staff through the tax and benefits system to reduce that ratio considerably. They undertake a huge task to arrive at a situation which most people may consider is not a million miles away from a relatively satisfactory distribution, although many of us would like to see bigger strides made towards greater equality. I repeat that before government intervention the figure of original income for the top fifth of households is 19 times as great as that of the bottom fifth. That increase grew exponentially in the Thatcher years of 1980-1990. We now have to climb a mountain to get back to the income distribution, the GINI coefficient, that pertained at the start of that period.

The official Economic Trends states,

"Inequality of disposable income was fairly stable in the first half of the 1980s. This was followed by a period where it increased rapidly, reaching a peak around 1990. Inequality then fell slightly in the first half of the 1990s, although the fall only reversed a small part of the rise seen in the previous decade. However, the latest figures show that inequality of disposable income rose again in the late 1990s".

As my noble friend Lord Layard mentioned at the start of this debate, that information is probably out of date. One must give credit where credit is due for the enormous amount of work done by the Government and the Chancellor in particular.

Perhaps I may mention a couple of statistics. There are 1.2 million fewer children in relative poverty now than in 1997. On average, families with children are £1,000 a year better off in real terms. Families with children in the poorest fifth of the population are on average £1,700 a year better off in real terms. A family with two young children with half average earnings (£12,700) is £3,000 a year better off in real terms. By April 2002, pensioner households will be £840 a year better off on average with the poorest pensioner households being £1,000 a year better off in real terms since 1997. One could continue with other major statistics and commitments for the future such as maternity provision, parental leave and so forth.

I now wish to look at some of the fundamental questions from my perspective on these matters. I have taken it as axiomatic, as many speakers have done, that poverty is part of the bigger problem of inequality. The issue of public expenditure and public services all come into the question in a world of advancing globalisation. My position on the issue goes back to the three years I spent on the Royal Commission on the distribution of income and wealth in the late 1970s under the very distinguished chairmanship of my noble friend Lord Diamond.

At that time we made one of the important breakthroughs on the question of family poverty, which was the "wallet to the purse" provision. Noble Lords may recall that we in the trade union movement agreed, with some major difficulty, to a big transfer of money from the wallet to the purse and a large expansion in the role of child benefit. There have been many important moves under the present Government to extend some of that thinking to the working families' tax credit, pensioner credit and so forth.

But we cannot tackle poverty in isolation from the great changes in society both at home and abroad. The question of single mothers has been mentioned. But we have to look at inequality per se because poverty of esteem always follows inequality. It is not just a question of having absolute increases. We need a background social philosophy in which we can address the problem. I would include as an important part of discussions the European social model. Jacques Delors got it absolutely right. He said that the problems of atypical, marginalised workers, fixed and short-term contract workers, part-time workers and other issues such as maternity leave and parental leave were central to dealing with poverty.

The social policy questions are linked with those of the labour market. All the self-serving propaganda against these measures by the Institute of Directors et al is proving to be grossly overstated. Indeed, many employers now admit that the challenge of giving proper mainstream terms of employment, which I call quality terms of employment, to many atypical workers is a big incentive for them to undergo training and improve the value added, in order to justify the outlay on the minimum wage and other benefits.

I now turn to the philosophy to which the noble Lord, Lord Moser, alluded. It is reasonable to have a relative concept of poverty. There is the idea that it is ridiculous to say that one is poor because one does not have a washing machine or motorcar. Nobody had them 100 years ago. Even the upper and upper-middle classes did not have such things 100 years ago. We now say that to be deprived of something which others have is a way of considering poverty. So the relative concept of poverty must be accepted side by side with the absolute level of poverty.

Finally, it would be useful if the Minister were to say a little more about mobility. It is very important although we must not caricature the situation by saying that this generation's poorest can be the next generation's plutocrats. A very important study by the Cabinet Office indicates that there are many barriers to income mobility. We have heard about that as regards the education system. In the professions the phrase is "hoarding opportunities". In the debate about inheritance tax there is an argument for the redistribution of income through increasing income tax and inheritance tax. I do not believe that that would be universally popular, but we have to look at what obstructs people from changing their position as regards wealth distribution.

4:26 pm
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Lord Paul (Labour)

My Lords, I congratulate my noble friend Lord Layard on introducing this debate. One of the reasons that I, along with many others on these Benches, joined the Labour Party was in the interest of social justice and what needs to be done to tackle poverty and to support families. So I am proud to rise this afternoon to speak about the advances this Government have made during the past five years in strengthening British families and combating the blight of poverty, both at home and abroad.

In 1997, when Labour took office, United Kingdom unemployment was widespread and the level of child poverty was high. Homelessness was growing at an alarming rate, as was the gap between rich and poor pensioners. These problems were unfolding against a backdrop of global poverty that was being left largely unattended.

Between 1997 and 2002, Labour has not only slowed these damaging trends, but reversed them. Over one million new jobs have been created, helping employment to rise to record levels. Long-term unemployment among young people has fallen by 75 per cent, 1.2 million children have been lifted out of poverty, and the families supporting them have been given the smallest direct tax burden since 1972.

On the world stage, the Government are taking great strides to fight global poverty, committing much more of their resources to foreign aid and ensuring that the world's most heavily indebted nations are not punished for the aid they are given.

Along these lines the Labour Government have cancelled the debt owed to Britain by 42 troubled countries and have pledged to halve the number of people living in extreme poverty by the year 2015. Here I congratulate my friend the Chancellor of the Exchequer on the work that he is doing towards that.

Homelessness—Britain's most visible manifestation of poverty—has been alleviated in the past five years through a series of sensible measures that include the Rough Sleepers Unit, which has reduced the number of people sleeping on the streets by about 30 per cent in the past three years. There are new laws to ensure that councils will accommodate homeless persons until suitable long-term housing becomes available.

As president of Family Service Units, I have paid special attention to the ways in which the Government have sought to improve the lives of Britain's children, especially the many children living in poverty. I am proud, then, that we have raised child benefit for the first child by more than 25 per cent since 1997 and have made the children's tax credit worth up to £520 per year. Both changes dramatically improve the quality of life for children.

I also commend the Government on introducing SureStart, their programme to ensure that infants in the most under-privileged areas get a good start in life, and on their extension of the disability living allowance to three and four year-olds, which will go a long way towards providing improved care for disabled children.

After all, it is families that need the most support if we are to prevent child poverty and cycles of youth unemployment. In 1997, Labour pledged to advance policies that would build strong families and strong communities. And I am happy to report that it has done just that, through introducing such policy measures as the working families tax credit, parental leave and extended maternity leave. That is a powerful show of support for Britain's families.

Our minimum income guarantee has made the poorest pensioners at least £15 better off than they were in 1997. Over the past five years, our commitment to combating poverty has not ceased at our borders. As I mentioned, Labour has reversed the trend of shrinking foreign aid and has extended debt relief to dozens of heavily indebted countries. Our foreign aid is being used to support education in developing countries and to improve healthcare for the poor, specifically in the fight against HIV and AIDS. In addition to increasing aid for developing nations, the Government have increased government involvement in international development through the creation of the Department for International Development. I congratulate the Secretary of State for International Development.

But, no matter what has been achieved so far in eradicating poverty and raising the quality of life for families, there is still a lot to do. We must push for further initiatives at home, such as the pension credit for pensioners who want to save money and the neighbourhood renewal action plan for deprived communities that want to pull themselves out of decline. And we must continue to couple our goals for fighting poverty at home with the desire to fight poverty across the globe. As the Prime Minister said only this week,

"you can no longer divorce foreign policy from domestic policy".

We must craft our anti-poverty and pro-family measures with a view towards their global applications.

Truly, we cannot claim to be working for families if we work towards the improvement of only our own family and not our neighbours. Likewise, we cannot claim to be fighting poverty if we are fighting only our own nation's poverty and not the poverty of our neighbouring nations. I commend the Prime Minister on taking the trip to Africa tonight and I wish him all success.

Labour has made a good start and set us on the path toward lasting progress. Let us make sure that we do not impede that progress and that we work to extend it to more communities within Britain and to more of the global community.

4:34 pm
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The Earl of Listowel (Crossbench)

My Lords, I thank the noble Lord, Lord Layard, for this opportunity to celebrate the Government's achievements over the past five years in supporting families and tackling poverty. I shall concentrate on what more can be done rather than on what has already been achieved. I should be grateful if the Minister would be good enough to read my speech in Hansard of 19th December, at col. 256, in which I took trouble to describe at length the great achievements that have been made.

I should like to concentrate on the importance of a child-centred approach to child poverty and to the association between poverty, family dysfunction, prison and the care system. In the Government's drive to combat child poverty, I am concerned that we should not overlook the needs of the child. During the past 18 months I have been attending seminars at the Anna Freud Centre, which is a centre of excellence for child psychotherapy and the psychotherapy of parents. It was established by Anna Freud at the end of the Second World War for refugee children. I have been trying to understand the rudiments of child development. The more I learn, the more aware of my ignorance I become. But one thing is clear: the relationship between an infant and his primary carer is most important. Ideally, the primary carer should be available to give his or her attention—individual and undivided—to the needs of the infant in the first two or three years of life.

I believe that although the Government are well aware of that need of the very young child, they are determined to encourage as many parents as possible to work. That is the best way to relieve child poverty, as demonstrated in Scandinavia and other countries. Their tax reforms in that area have lifted many children out of poverty. However, do we really want to encourage the lone parent of, for example, a four month-old baby to leave her child in inadequate child care so that she—most probably, the person will be a "she"—can work to provide an adequate income for herself and her child? Surely, with such a young child, she should feel that she has an adequate income to sustain herself and her child if she chooses to work at home caring for her infant.

I understand that in Norway there are substantial financial incentives for a parent to work at home caring for his or her child until that child reaches the age of three. On the Continent—this is a very important point—it is very much less the practice that the primary carer of a very young child goes out to work.

Is there not a danger of our perpetuating our culture of child neglect—albeit inadvertently—in this area? Today, the National Childcare Trust announced that our child care costs are the highest in Europe. The noble Baroness, Lady Thomas, drew attention to that. The cost of child care provision has risen by 10 per cent during the past year. Demand for places is exceeding supply.

Barnardo's reports that last year there were 42,000 free or subsidised child care places for under 3 year-olds. In 1999, there were 600,000 children in poverty. While SureStart and other initiatives are indeed most welcome, even when they are taken into account there will still be a large gap to fill, according to Barnardo's.

Does it makes sense in those circumstances not to balance incentives for all parents to return to work with incentives for the primary carer of very young children to work at home caring for his or her child if that is the parent's choice? At the very least, they should surely be able to afford to make that choice, and the income support scale rate—or whatever now replaces it—should be set at such a rate as to enable them to do so.

Could more be done to enable mothers of young children to work part-time when they so wish? I know that there have been improvements in that area; that matter too was mentioned by the noble Baroness, Lady Thomas. Perhaps the Minister can indicate whether he will take up these concerns with those of his colleagues with responsibilities in the area of child poverty and family support.

I turn to my concerns with regard to the association between poverty, family dysfunction, the prison system and the care system. According to my information, 32 per cent of young offenders have been in care. The percentage of fathers under 21 who are in prison is 25 per cent, which is far above the national average. While researching for the Adoption and Children Bill, I learnt that most children being taken into the care system, and most of the 2,000 or so adopted each year, come from families in poverty. Further, it is often the case that these children's parents have been in care; indeed, often those parents had parents who were put in care.

Again, rates of pregnancy in teenagers who are, or have been, in care are far higher than the deplorable, but happily decreasing, national average. It appears to me that there is a nexus of deprivation within the group of those who have been in care, in prison and in poverty. The Government have been giving welcome attention to this area but, as they admit, there is still a long way to go. For example, information accompanying the launch of the report by the Prison Reform Trust and the Federation of Prisoners' Family Support Group into prison visitors' centres published last week suggests that the number of prison visits has declined by one-third since 1997; yet prison numbers have soared. We have the second highest imprisonment rate in Europe.

Moreover, of member states of the Council of Europe, only Romania, Estonia and Lithuania have higher rates of imprisonment than England for those under the age of 21. About one-third of these will have been through the care system; 25 per cent of them are fathers. Family breakdown and inadequate corporate parenting may be an important factor in their incarceration. What more could the Government do to address this nexus, and break the cycle of family dysfunction and poverty of this group? They could make a positive response to the suggestions in the Just Visiting report, the review of the role of prison visitor centres.

In particular, the Government could do even more to encourage the many young fathers in prison to have regular contact with their children. For example, I am told that many teenage girls arrive at Feltham Young Offenders' Institution during visiting hours. Much more could be done to make such visits attractive to these young girls and to introduce parenting support during those visits to their partners. They could ensure that the Quality Protects Initiative is made a permanent part of the care system. Further, as Professor Sonia Jackson, the authority on education for children in care, suggests, they could ensure that our system of care becomes more similar to that on the Continent. The professor would especially like to see an immediate injection of large numbers of graduates into the residential social work profession, with a clear career path made available for them, as well as a raising of the educational attainment as regards foster parents.

I see that my speaking time has run out. I look forward to hearing the Minister's reply. I apologise, again, for not taking more time to praise the many important achievements of this Government.

4:44 pm
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Lord Haskel (Labour)

My Lords, why should the Government tackle poverty and support families? Is it a matter of economics, or is it a matter of morality? My noble friend Lord Layard is an eminent economist and I think that he has demonstrated that it is actually a matter of both. I congratulate him on moving the Motion. I join my noble friend Lady Andrews in congratulating him on researching and stimulating government action on poverty.

I agree with my noble friend Lady Andrews and the noble Baroness, Lady Sharp, that tackling poverty means tackling inequality. This is what this debate is all about. A belief in equality is the boundary that separates the political left from the political right. Perhaps that explains why there is relative lack of interest on the Tory Benches opposite in this debate—apart, that is, from the honourable exception of the noble Baroness, Lady Byford.

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Baroness Byford (Conservative)

My Lords, I know that it is something that is done but, to be honest, when it is a debate on agriculture, it is not something that I do. Some people have a greater interest in one topic than they do in another. There are two of us on these Benches this afternoon, and there are three Liberal Democrats in the Chamber. I believe that there was a great empty Bench behind the Minister on the previous agricultural debate.

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Lord Haskel (Labour)

My Lords, I congratulate the noble Baroness on participating in this debate.

We on the left—the old left and the new left—do not seek uniform equality of outcome. Our aim is rather to create social conditions that give very different individuals an equal chance for a full and flourishing life. So the economic and moral case for tackling poverty stems from our belief in equality. A belief in equal worth—equal worth not only between the rich and the poor but also between men and women. This belief in equality between men and women is one reason why I welcome the Government's support for families. The new deal for young people, for the long-term unemployed, for lone parents, and for the over-50s is rooted in this belief. So is the national minimum wage.

Since 1997, the Government have increased child benefit, introduced the children's tax credit, and the working families' tax credit and raised children's allowances in income support. Those initiatives are all rooted in support for equality. That is only right. I agree with the noble Baroness, Lady Thomas. If there is no support for the family, it is women who become less equal than men. The benefits of all this are not difficult to find. They relate to breaking the cycle of disadvantage about which the noble Baroness, Lady Sharp, and the noble Lord, Lord Moser, spoke.

In traditional societies every person born has an allotted place in society. All this does is pass poverty and inequalities from one generation to the next. There is much research that charts this course. My noble friend Lord Layard told us that working-class children do worse at school than do middle-class children. The death rate from coronary heart disease is three times higher among unskilled men than among professional men. Other speakers have explained that the sons and daughters of high earners are far more likely to become high earners themselves than the children of parents on low incomes. This is what I mean by the "cycle of disadvantage".

All this was forcefully brought home to me by some research carried out by academics John Bynner and Heather Joshey. Their extensive work was based on two longitudinal surveys mentioned by the noble Lord, Lord Moser: 16,000 people born in single weeks in 1958 and in 1970 were tracked throughout their lives. The research analysed the obstacles and opportunities affecting those people. One of the most striking revelations to emerge from that work confirms the extent to which child poverty haunts people through their lives. The children of parents on low incomes performed worse at school. Children whose parents had the same occupational level and the same educational background still did significantly worse on average if they had financial problems than if they did not. That is why the government policy to raise the income of families with children is so important—not only does it tackle inequality and poverty, it also breaks the cycle of disadvantage.

The research also demonstrated very clearly that, as well as income, there is another very important element in tackling poverty; namely, education. That point has been made by nearly all noble Lords who have spoken today. The research showed that educational achievement is now the single most important factor in determining later success. Those who do well at school early tend to finish with good qualifications, and those who gain good qualifications do much better in the labour market later on. According to the research, men with no qualifications were 12 times more likely to be out of work by the age of 26 than those with qualifications. Indeed, the research showed that in some areas the detrimental effect of inequality of opportunity is growing stronger and more debilitating.

That point is illustrated, in particular, in the findings on teenage pregnancy. The noble Earl, Lord Listowel, spoke of that. The research showed that the relative risk of a girl from an unskilled family compared with a professional family becoming a teenage mother almost doubled between the 1958 and the 1970 cohorts. Daughters born in 1970 whose fathers were unskilled were an astonishing nine times more likely to become teenage mothers than girls whose fathers were more highly qualified.

Much of this is not new. Previous governments and social reformers have all been aware of it. Indeed, people can argue that, in fact, it does not matter because we are all better off today as income and living standards rise across the board. I do not agree. There is still a large gap. My noble friend Lord Lea and the noble Baroness, Lady Byford, spoke of that. I agree with the noble Baroness, Lady Sharp: that gap matters.

Raising the income of families through employment, education, childcare and the tax and benefit system helps to close the gap. I agree with my noble friend Lord Paul that education increases the opportunities for children growing up on a low income and, together with programmes such as Sure Start, gives them an important advantage. It also helps to close the gap. Closing the gap by tackling poverty and supporting the family has an enormous moral and economic pay-off. That pay-off is breaking the cycle of disadvantage. If we do nothing about it, it will span the generations.

4:52 pm
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Earl Russell (Liberal Democrat)

My Lords, I thank the noble Lord, Lord Layard, for introducing this extremely important debate. I say at the outset that I agree entirely with everything that he said about the proportion of support which must go to children. In the reference in his Motion to supporting families, I congratulate him on avoiding the definite article, to which I am allergic.

The definition of a family is, of course, a matter of discussion. I want to recommend to the noble Lord and to the Government a phrase from St Augustine:

"An assemblage of reasonable beings united by a common agreement as to the object of their love".

That was, in fact, St Augustine's definition of the state, but it seems to me that it serves equally well as a definition of a family.

I want also to thank the noble Lord for his kindness in making available to me and for discussing with me off-prints of a number of his articles. I do not believe that it will surprise him greatly that I do not entirely agree with them. That happens among academics and I believe that we are quite used to it. But I am well aware—I have read enough criticism of my own work to know it very well—that, in criticising work a little outside one's field, one may misrepresent it. If I do so, even in a timed debate, I shall willingly give way to the noble Lord.

My noble friend Lady Sharp of Guildford pointed out that the Government have been applying these measures in an exceptionally benign economic climate. It is not easy to disentangle the effect of the Government's policies from the effect of the economic climate. The question must be asked: how high could unemployment go without exceeding the budget which the Government have set for the New Deal?

I must admit that in relation to the Government's measures I am very much of a sceptic. I believe that they rest largely on a mistaken diagnosis. I consider that they are misapplied in practice and that they consistently miss major problems to which they should be paying attention.

The theoretical part is, first and foremost, the work of the noble Lord, Lord Layard. He sees a clear link between the length of time for which unemployment benefit is payable and the length of time for which people remain unemployed. These are his exact words:

"The longer unemployment benefits are available the longer unemployment lasts".

He believes that it must follow that the basic problem is making people want to work. That is not merely an economic problem.

Once, when I had a sabbatical term just after I had finished a book instead of just before, my wife and I switched jobs full-time and I became the sole full-time carer for our one year-old. I do not know what it did for his education; I know that it did wonders for mine. The desire for employment is as much social as economic, and economic factors alone are not enough to bring about that desire.

The noble Lord suggests that if we have a large pool of unemployed people who remain unemployed because they have generous benefit levels, that may explain why unemployment remains at a high level. But there are other explanations: there are other rigidities in the labour market; the jobs are in one place and the people are in another; and there is the question of transport.

Incidentally, the noble Baroness, Lady Byford, made an important series of points. On the previous occasion that we debated poverty, the right reverend Prelate the Bishop of St Albans drew attention to a single parent who was spending 10 per cent of her weekly benefit on fares in going to collect the benefit. That is a 10 per cent cut in benefit. Such matters are serious, as are age discrimination, dismissal because of pregnancy and the areas which are like the rock pools where the tide has not come back after the recession. The post office closes; the school closes; the bank closes; and the shop closes. In the Question relating to the Post Office, I would have asked, if I had had the opportunity, whether the Government have made an estimate of the effects of post office closures on the increase in poverty and unemployment. If they have, are they prepared to share that estimate with the House?

The noble Lord also suggests that if, through the welfare-to-work programme, we help the most unemployable people back into work, that will generate additional jobs. I was intending to read the passage in which he argued that point—it appears on page 26 of his OECD essay—but I do not believe that time will allow that. Therefore, I say only that, in my opinion, it rests on a considerable number of hypotheses. If the noble Lord has evidence to justify any of those, I look forward to hearing it when he replies.

The execution of the policy also leaves something to be desired. Of course, the measure of success rests unduly on the claimant count. If people are taken out of the claimant count during the time that they spend in the welfare-to-work programme, that automatically reduces the number of people who are long-term unemployed without there being any change. If one looks at the labour force survey, the reduction, although it genuinely exists, is a great deal smaller, and that should be borne in mind.

If one looks at the reaction of those who participate in these schemes, it suggests that they are not entirely satisfied with the quality. Forty per cent of those who left the 18-to-24 scheme did so for what was not sustained employment. "Sustained employment" is defined as lasting for 13 weeks—that is not a particularly great achievement. In December 2000, 32 per cent of those who left the New Deal for under-25s left for no known destination. If a note is now on its way to the Minister to say that that is an old figure, I say, we know that; we have tried to update it. The figures are no longer collected, and that does not encourage me to believe that they have improved.

With regard to the full-time employment and training option, the completion rates leave a lot to be desired. They are 6.6 per cent of starters and 10.9 per cent of leavers. The figures in relation to Oldham illustrate the point about areas where the tide has not returned. In Oldham the completion figures are 1.4 per cent of starters and 2.5 per cent of leavers. I grant that that is better than nothing, but it is not particularly good. The execution leaves much to be desired. As my honourable friend Mr Webb pointed out on the day that the Government's poverty strategy was announced, it rests heavily on creaming off from the top of the poor and not nearly enough attention is paid to those in deep poverty.

The noble Lord, Lord Moser, dealt with the concept of absolute poverty. I grant that it is rare in this country, but the last crisis survey of the street homeless in London showed that there were 347 deaths on the streets in one year. I would not be surprised if none of those people was in absolute poverty. It is in fact very easy to disappear from statistics. Today Ofsted reports that 10,000 should-be schoolchildren have simply disappeared from the figures.

I agree with the noble Lord, Lord Layard, when he said that being disconnected for a long time from the world of work makes it much harder for one to return to work. But long-term sickness and crime also make it harder to return to work. In the context of crime, the Home Secretary would do well if he reversed the previous government's changes to housing benefits for prisoners.

It appears to me that a Government who impose sanctions without having the least idea of what their effect is are in no position to make a comparison between the extent to which long-term unemployment takes people out of the world of work and the extent to which benefit sanctions take people out of the world of work. I do not know what might be the answer to that comparison—nor do I have the figures—but not to have attempted it is in my opinion not only a political crime but also an academic one.

5:02 pm
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Lord Higgins (Conservative)

My Lords, I join all noble Lords who have congratulated the noble Lord, Lord Layard, on introducing what has been a fine debate. It has differed from the debate held in December, which was primarily concerned with child poverty, in several respects. On that occasion a number of noble Lords referred to the situation in a global context. In today's debate that has been mentioned only briefly, although the noble Lords, Lord Moser, Lord Davies of Coity and Lord Paul, referred to the problem of international poverty. It is important that we put the situation in our own country into that context. By and large today we have been talking about relative poverty rather than absolute poverty—apart from the point made by the noble Earl, Lord Russell.

I listened with great interest to the noble Lord, Lord Layard, when he introduced the debate. He made some important points about the share of national income that goes to children. He and my noble friend Lady Byford referred to housing benefit. I was puzzled by what the noble Lord said in his introductory remarks. He appeared to argue for integrating housing benefit with other benefits. Those two kinds of benefits are distributed in different ways: housing benefit is distributed through local authorities and other benefits are distributed from the centre. Perhaps in his closing remarks he will seek to enlighten me as to how he believes that that can be brought about. It is an important point.

Clearly, we have established that we should distinguish between the absolute level of poverty and the relative level. In that context the noble Lord, Lord Moser, in particular, but also other noble Lords, referred to the Government's aim of abolishing child poverty in 20 years and halving it in 10. The noble Lord, Lord Moser, pointed out that in that regard time is running out. We are already into the 10-year period. The problem is that it is a moving target. As the standard of living in the country rises, the target in relation to relative poverty becomes more difficult to achieve. Perhaps the Minister will elaborate on that important issue.

As has been rightly pointed out, in talking of reducing relative poverty to some extent we are talking about equality rather than poverty. In that respect there was some division on the Benches opposite—and perhaps around the House in general—between new Labour and old Labour. Some noble Baronesses and others placed more emphasis on equality rather than on the removal of poverty. There is much confusion about the Government's, indeed the Prime Minister's position. The Prime Minister appears to be more concerned with raising the absolute level of income at the bottom end of the scale regardless of whether it is raised at the top whereas the Secretary of State for Work and Pensions appears to be concentrating more on the issue of equality. Perhaps the Minister will elaborate.

I want to pay particular attention to the issue of whether 1.2 million children were taken out of poverty during the previous Parliament. As I pointed out in the debate in December, that figure has a strange provenance. Two quite separate analyses produced that figure: one was a PolyMod study and the other was the Government's figure. Both produced a figure of 1.2 million, albeit on totally different bases which is perhaps a little curious.

The Government's last manifesto stated that over one million children have been taken out of poverty. A number of noble Lords referred to that as an achievement, in particular the noble Lord, Lord Paul. I have always thought that myth has a great role to play in politics. If one can establish a good political myth, it will indeed be a powerful weapon. That figure is something of a myth. Not even the Chancellor of the Exchequer believes that that is the figure because in December what appeared to be a clear-cut undertaking of taking one million children out of poverty turned out not to be quite what everyone had supposed. One would have thought that if one took the figure of the number of children in poverty at the beginning of the Government's time in office and reduced it by one million you would end up with a fairly clear-cut figure. In fact, you do not end up with that figure. It turns out that the latest Treasury report states that there are,

"1.2 million children fewer in poverty than there would otherwise have been".

So one cannot simply subtract the figure of one million and end up with the figure that one would suppose. That is an important point. I ask the Minister what the Government's target is now in relation to that.

A number of noble Lords referred to the various points raised by the Government in introducing one benefit or another, but as those who debated the State Pension Credit Bill last week, and no doubt those who will debate it again next week, have stressed, that has meant an enormous increase in means testing. With the Chancellor of the Exchequer's passion for credits of every conceivable kind, enormously increased complexity is being introduced in the various measures. In other debates on work and pensions I have taken the view that possibly only the noble Baroness, Lady Hollis, who regrettably is not in her place today, understands such matters. It may be that the Minister who is to wind up does too. If so, I suspect that they are the only people in the country who do.

That is not a trivial point. There are real problems regarding the complexity of the introduced measures and of take-up. The Government keep announcing more and more increases in the amount they are going to spend on a particular benefit. It is then found that actually far less is spent because of the lack of take-up. That is a very real problem. We need to take it into account in appraising the extent to which the Government's policies are actually working.

There are a number of other aspects which have not been mentioned in this debate. There is the problem of the Social Fund. The Select Committee on Social Security in another place suggested that, because of the way benefits are claimed that would actually work very much against the Government's aim of reducing poverty and social exclusion.

As to the number of workless households, the trend is not in the favourable direction that one would have hoped. I am relying there on the Office for National Statistics. After the "fiasco"—I think I might reasonably so describe it—regarding its views on how much money there is in pension funds at the present time, perhaps one must increasingly take its figures with a degree of scepticism.

Overall, this has been an extremely helpful debate. One must take into account the Government's proposals when they first came into office in 1997. That is the date selected by the noble Lord for the purposes of this debate. The Prime Minister clearly stated that, by the end of a five-year term of a Labour government,

"I vow that we will have reduced the proportion of national income we spend on the welfare bill of social failure",

and so on. In reality the way that the Government have proceeded has led to a significant increase. The extent of social security, as it used to be called—work and pensions, I regret to say, it is now called—has actually increased. It has gone up from something like £100 billion to something like £110 billion. That is not exactly the kind of reduction promised in 1997. Of course one welcomes, as I have, the State Pension Credit Bill. That will help various pensioners and others. The noble Baroness, Lady Castle, and others have taken the view that one would do better to go for an increase in the basic state pension. I do not take that view myself, although many noble Lords on the Benches opposite may. It might have been a different way of tackling the problem.

The complexity issue is very real. If we are going—as we must all wish—to try and reduce the level of poverty and to help the position of families, it is right that we should look at the detail of the various measures concerned and to put the matter in a broader context, as we have today. That was most helpful. We must congratulate the noble Lord for initiating the debate.

5:13 pm
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Lord McIntosh of Haringey (Deputy Chief Whip (House of Lords), HM Household; Labour)

My Lords, I am proud of many things that this Government have done. I pause to anticipate the interjection—"He would say that, wouldn't he?" I am proud of the fact that we have a strong, stable and growing economy, of our active participation in Europe and of the increased money that we have made available to tackle world poverty. I am proud of the reduction in unemployment, of improvements in educational standards, particularly in primary schools, of the increased investment and staffing in the National Health Service, of action against oppression and terrorism in Kosovo and Afghanistan. But what I am most proud of, and what makes me most happy to be a member of this Government, is our policies, our strategies and the way in which they are working against poverty and in support of families.

We had a debate, as the noble Lord, Lord Higgins, and other noble Lords have reminded us, about child poverty. I shall address this matter from a slightly different starting point. The themes of what I shall say are basically that there is a pre-condition—of course there is—for effective action against poverty; that is a strong and stable and growing economy—the macro-economic policy which has been referred to. Its most important effect has been on the incomes of the less well off. The most important way in which that has been achieved has been the increase in employment of 1.3 million since 1997. Incidentally, for anyone who queries that, that is the lowest figure since the 1970s, both on claimant and ILO criteria. I say that to the noble Earl, Lord Russell. That is not just because of economic success but because of deliberate policies—the policies of the New Deal and of encountering the unemployment and the poverty trap—in other words, the policies of making work pay.

It is also true that we would not be tackling poverty effectively if we only did so by increasing incomes, because we must tackle poverty in its non-household finance sense; in other words, in the quality and the targeting of public services. It is an unfortunate fact, and has been for many years, that the middle and upper classes have greater access to public services, to the services in particular of education and health, but also to some extent of housing. Unless we put more investment into our public services and their efficient reform, and in addition ensure that those in most need are capable of taking them up, then we will not be tackling poverty effectively.

Clearly, I do not have time in the course of this debate to tackle the broader issues of the quality of our public services. However, I have time, and I want to spend a certain amount of time doing so, to talk about the way in which public services are being targeted to those most in need.

So what am I going to say? I have already spent three minutes doing so already. The statistics are on the record and have been well aired in the course of this debate. I propose to follow the reference of the noble Lord, Lord Moser, to a combination of policies—the structure of the policies which constitute our approach to these issues. If in doing so I fail to answer questions as varied as the Prime Minister's visit to Africa or vacant government housing, I hope that noble Lords will forgive me.

I start with the economy. I shall not go over the ground of macro-economic policies, except to say that if we are able—as we have—to spend £4 billion less on the cost of unemployment over the past two years than we did before, and if we are able to spend £8 billion less on debt repayment in a year than we did before, then the opportunities for positive action are that much greater.

In terms of our expenditure on public services, by 2003-04 the Government will be spending £10.5 billion more on education and training than in 2000-01. Annual capital investment in housing will be £4 billion by 2003-04, compared with just £1.5 billion planned spending in 1997-98. That is underpinned by the target to ensure that more is spent in improving services in the more deprived areas that have in the past missed out on economic prosperity. That is the subject of the public service agreements which we have with the public service spending departments.

I return to the issue of employment opportunity. The increase in the employment figure is 1.3 million, I think we can now safely say. One important factor of that is that it is equal in every single region. There are no regional inequalities. The New Deal for young people has helped more than 345,000 18 to 24 year-olds find work. In total, New Deal has helped more than 600,000 into jobs. I am aware of the concerns of the noble Earl, Lord Russell, and I acknowledge that the drop-out rate must be taken into account and is serious. He must not assume that "no known destination" means that people have not got other jobs. On the contrary, from my experience of researching youth opportunities programmes during the 1980s, the most common actual researched outcome of "no known destination" was that people had come off the lists because they had other jobs and were no longer interested.

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Earl Russell (Liberal Democrat)

My Lords, I thought that the Minister would raise that point. The same piece of research to which he refers shows that only 25 per cent of those people kept their jobs for six months, and only five per cent found them through their New Deal personal adviser.

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Lord McIntosh of Haringey (Deputy Chief Whip (House of Lords), HM Household; Labour)

Yes, my Lords, as far as was known about the first jobs that they achieved through the New Deal. My point is that people who go through the New Deal, as through previous programmes such as the Youth Opportunities Programme, do not necessarily stay in the same job but go on to other jobs.

However, much more important than that is the problem to which the noble Baroness, Lady Andrews, who is expert in the field, referred, which is the work that we must do to improve work incentives to deal with the unemployment trap, in which the difference in family income in and out of work is too small to provide an incentive to take a job, and the poverty trap, in which those already in work are discouraged from working longer hours or taking a better job because their marginal tax rate or loss of benefit rate is too high. We need more than one policy to tackle this difficult and complex problem. We need the minimum wage, which is benefiting a large number of people, 70 per cent of whom are women—that is an important point to make.

We must take into account the fact that we have halved the marginal rate of tax for almost 2 million people through the introduction of the 10p starting rate of tax in April 1999 and the widening of the band last year. We must also take into account the fact that in April 2000 we cut the basic rate of tax to 22 per cent—the lowest rate for 70 years—and we have aligned the national insurance contribution threshold, which means that about 1 million low-paid workers no longer have to pay national insurance contributions.

On top of that, we must take into account the working families' tax credit and the disabled person's tax credit, which target support on those who need it most. Nearly 1.3 million families receive working families' tax credit and, on average, they are £35 a week better off than they would have been under the old family credit. The childcare tax credit component is worth 70 per cent of eligible costs up to £135 a week for a family with one child and £200 a week for a family with two or more children.

That combination must be acknowledged—as it has been in this debate, for which I am grateful—as an outstanding success. We can now guarantee a minimum level of income for people with children moving into work. Combined with the national minimum wage, the working families' tax credit guarantees a family with one earner working 35 hours a week a minimum of £225 a week. We have reduced to a third the proportion of families who face marginal benefit reduction rates of more than 70 per cent—that is the poverty trap—compared with 1997.

Reference has been made to housing benefit. Housing benefit is what happens when we stop rent control—that is basically the truth of the matter. Unless everyone is able to afford decent housing, that is what we get. Therefore, the most important thing we can do with respect to housing benefit is to take people off it. The working families' tax credit starts to do that. We have already taken 70,000 people off housing benefit and we must continue that process. At the same time, we must make the benefit simpler and its collection more efficient. We have a target for 2010—I am looking at the noble Baroness, Lady Byford, as I say this—of a decent standard for all social housing, with an intermediate target of improving a third of social housing by March 2004.

Let me turn to the wider agenda of public services. The important point is not the total amount spent on public services—well, of course it is, but that is not the subject of this debate—but the targeting of those areas, and therefore those people, most in need. We have established public service agreement "floor targets" covering the key public services to ensure that as average outcomes of public services improve, the worst-off groups living in the worst neighbourhoods also benefit from improvements—a point raised by the noble Baroness, Lady Sharp of Guildford. That is why we are providing £900 million over three years for the Neighbourhood Renewal Fund and targeted programmes such as Sure Start, Excellence in Cities and the New Deal for Communities. That is also why we are also seeking business involvement in the most difficult and disadvantaged areas.

Perhaps the headline issue here is child poverty. We inherited a situation in which one in three children lived in households with an income below 60 per cent of the national median—which is the definition—and that was getting worse. The number of children in low-income households had doubled during the previous 20 years. In trying to turn round this problem, we are not just turning round a tanker that was stationary but one that was steaming at high speed—as far as tankers are capable of that—in the wrong direction. As the noble Lord, Lord Lea of Crondall, and others have reminded us, we had the highest rate of relative child poverty in the European Union and the highest proportion of children in households where no one worked.

I shall not concentrate on the statistics of child poverty, other than to respond to two specific points made by the noble Lord, Lord Higgins. First, yes, of course a relative poverty target is difficult to achieve because it is a moving target. But the absolute is also difficult to achieve—the Irish Government are trying to do so with great difficulty. Also, the relative target is real—it is real to people. If people are worse off than those around them, they feel poor. We cannot get away from that. Similarly, in answer to the noble Lord, Lord Lea, I shall not describe policies designed to encourage social mobility, but poverty is the most profound barrier to social mobility and the most serious damage that can be done to a child's future chances of having a decent job and leading a decent life in a decent society.

In December, following the pre-Budget report, the Treasury published a paper entitled, Tackling child poverty: giving every child the best possible start in life. I wish that, in congressional terms, I could have that document read into the record, because it contains the answers to many of the questions asked today.

My second response to the noble Lord, Lord Higgins, concerns the question of there being 1.2 million fewer children in relative poverty than there would otherwise have been. The noble Lord called that a myth. What we mean by "would otherwise have been" is, if previous policies or trends had continued. That is exactly my point about the tanker moving heavily in the wrong direction.

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Lord Higgins (Conservative)

My Lords, it has absolutely nothing to do with a tanker moving in the wrong direction. Does the Minister deny that it is untrue to say that a million children who were in poverty, under the usual definition, at the time when the Government came into office, are now out of it?

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Lord McIntosh of Haringey (Deputy Chief Whip (House of Lords), HM Household; Labour)

My Lords, they are five years older, for a start. It is a different cohort of people. I am saying that it is different from what it would otherwise have been. That is the description.

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Lord McIntosh of Haringey (Deputy Chief Whip (House of Lords), HM Household; Labour)

My Lords, this is a timed debate—

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Earl Russell (Liberal Democrat)

My Lords, I am most grateful to the Minister. Would he also concede that not all improvements in the global economy since 1997 are to the credit of the Chancellor of the Exchequer?

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Lord McIntosh of Haringey (Deputy Chief Whip (House of Lords), HM Household; Labour)

My Lords, they are a credit to the British people, their resourcefulness and their industry.

The tests of changes in child poverty are that, as a result of all our policies combined, families with children are, on average, £1,000 a year better off in real terms. Families with children in the poorest fifth of the population are, on average, £1,700 a year better off in real terms. For example, a family with two young children on half average earnings—£12,700—is £3,000 a year better off in real terms. That is because of increased child benefit, the children's tax credit, the working families' tax credit and the raising of the children's allowance in income support.

The noble Earl, Lord Listowel, among others, referred to the New Deal for Lone Parents. We must take into account the nature of the New Deal for Lone Parents, which is voluntary and in the first instance requires only those with children aged five and over to attend a work-focused interview. The effect of it—there are 350,000 participants, with 130,000 placed into work—is that any lone parent working 16 hours or more has a minimum income guarantee of £166 a week or £225 a week for full-time work. For those working fewer hours, there is an increase in the income support disregard as support for those who cannot work.

We must consider the direction in which the tanker was going. The noble Baroness, Lady Thomas of Walliswood, made the point that, between the 1970s and the mid-1990s, the number of lone parent households doubled, and the number on benefit trebled. That is the tendency that must be turned around. I thought that the noble Baroness, Lady Andrews, was percipient on that point. Again, I say to the noble Earl, Lord Listowel, that what we are doing in respect of maternity and paternity pay and the duration thereof is surely important, particularly for very young children.

The noble Lord, Lord Lea of Crondall, referred to the issue of wallet-to-purse in the child tax credit, which we will introduce from 2003. Of course, one of the features of that is that it will be a secure stream of income for families with children, paid direct to the main carer. It will unify all the income-related child payments, and it will provide greater flexibility and a common framework for assessment, so that everybody is part of the same inclusive system. It will target help on those who need it most, when they need it most. It is an important new development, in the direction in which, I think, noble Lords wish to move. Decisions on the rates and thresholds will, of course, be set out in the Budget this year.

I have so little time to speak about our childcare provisions, although I acknowledge the concern that was expressed. The number of new places that have been created is sufficient evidence of how serious such matters are. Again, I have so little time to speak on pensioner poverty, which ought, of course, to be an important part of the debate. As the noble Lord, Lord Layard, said in his opening speech, it is no longer the case that pensioners are more likely to be poor than anybody else. Therefore, targeted help for pensioners is the only conceivable solution that will achieve results. We have given above-inflation increases in the retirement pension for this year and next year; we have introduced the minimum income guarantee for the poorest pensioners, which benefits over 2 million pensioners, and that has been linked to earnings for the rest of this Parliament; and, of course, there are the free TV licences and the winter fuel payments.

More attention was rightly paid to the next step, which is the pension credit. The noble Lord, Lord Paul, set out the basic facts about it. I must respond to the point made by the noble Lord, Lord Higgins, about complexity. The pension credit will abolish the weekly means test and will apply for a much longer period. We have already successfully reduced the complexity of the application process, and we are moving in the direction of combining targeting with effective delivery.

I am grateful to the noble Lord, Lord Layard, and to all who have taken part in the debate.

5:36 pm
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Lord Layard (Labour)

My Lords, I thank the Minister for his helpful reply. I also thank everybody else who has participated in the debate, which has been a good one. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.