Low Income Statistics

– in the House of Commons at 1:30 pm on 7th June 1995.

Alert me about debates like this

Photo of Frank Field Frank Field Chair, Social Security Committee, Chair, Social Security Committee 1:30 pm, 7th June 1995

We go from hefty to low income statistics in one jump, if not in one move.

I am grateful for this opportunity to debate the Social Security Select Committee's reports on low income statistics. Given that the Under-Secretary is present, I hope that we may take the debate a few stages further. If it had been taking place 160 years ago, the Prime Minister would be in his seat on the Treasury Bench to initiate it. Robert Peel believed that one had to have not only a feel for politics but a passion to know what was happening in evolving Victorian Britain. He thought that it was a prime job of government to provide information on which politicians could make sensible decisions and that would provide the expanding electorate with a more informed view of policies debated in the Chamber. It is a double compliment to the Minister that the present Administration feel that he is a proper substitute for Robert Peel. Anybody who has been through the baptism of fire of the Child Support Agency knows of the respect and affection in which the House holds the Minister in respect of that and other topics.

On the Victorian theme, if one walks along the Library Corridor, one sees local government reports for every year. At the turn of each calendar year, reports were published by the House containing information on how the Poor Law was working. If there had been a set-to and a punch-up in the Peckham workhouse, the inquiry report would be included in the year's annual returns to the House. What people ate and their comings and goings to and from the Poor Law were faithfully recorded.

It is a strange indictment of our society, given how much we have invested in modern technology, that we probably know less about what is happening in our society than the Victorians knew about what was happening in theirs. That is a double disadvantage because we need a basis for rational debate, and society is again changing rapidly. One has only to look at the labour market and at fiscal and benefit policies to know that it is crucial to have an up-to-date picture of what is happening, so that policies can be shaped according to the real world, not according to the fantasy world that politicians, sadly, too often inhabit.

The budget for which the Minister and his colleagues are responsible is approaching £90,000 million and is the largest single item of Government expenditure. Although taxpayers have, until now, with not too grudging approval, agreed to those funds, they know as we do that one reason for spending £90,000 million is concern for people at the bottom of society. Under Harold Wilson's Government, an Administration began to collect data on low-income statistics. The frequency of their publication was increased so that, at the 1979 general election, those statistics made an annual appearance—albeit many years after the year to which they applied.

For reasons that I do not need to give, the Government decided to set aside that series of statistics and to introduce data on incomes below average earnings. The Select Committee took a different view and has continued at regular intervals to publish what would have been the low income statistics series, had the Government continued it. As I have commented before, the Government would have a better record to put before the electorate if they had stuck with the old series.

Both series are valuable, but that value is limited. Both provide a snapshot of people on low incomes at any one time. The information contained in the Government's official data on households having below-average incomes far exceeds that which we expected to gain from the low-income families data. Certain information given in the series set aside cannot be obtained from the data on households having below-average incomes. Although the Government publish information on the numbers of people below income support level who do not claim for reasons other than non-eligibility, the low-income series gives a much more comprehensive picture of the group that appears to be eligible and is not claiming and that which is below eligibility levels for income support but is not claiming for other reasons, such as ignorance of entitlement.

I hope that we shall spend most of our time debating not the old-fashioned snapshot approach but the urgency of obtaining information about what is happening to the same people over time. We have a lot of information about what is happening to groups at certain income levels over time, but not about whether the same people form those groups. If Robert Peel were participating in this debate, he would say that the Government are setting off with maps that are equivalent to those of the world drawn up by people who believed that it was flat, when what is needed are maps that take into account the fact that the world is round. Instead of having Brownie snapshots of income levels at any one time, we need a movie camera to keep a gaze on particular groups over time.

In the 1970s, the new earnings survey was used to provide such information. In one particular year, the lowest decile was taken out and that group was followed for the next five years. Of course, some people were lost from the survey, and at the end of the five years it was not complete. However, we learned that it was wrong to think that, because someone is poor or on a low income now, he will be in the same position next year—let alone in five years' time. The new earnings survey showed an enormous movement of people up the income scale. Some people bounced up from the bottom to the second-from-top decile in the space of five years.

Part of the emphasis in this debate should be on calling attention to the importance of data that look at the same people over time. One is grateful to the Institute for Fiscal Studies for producing such data recently, showing that the poor form not a homogeneous group, but one that varies. There is a flip side to the cheerful news that that brings to the Government, who can rightly point out that, at any one time, the poor are not the same group. Of most concern to the House is the group in the snapshot that remain poor over a long period.

I wish to make two pleas. First, under the old supplementary benefit system, returns were made which showed us how many people claimed benefit not only for one or two years, but for three, four, five, 10 and 15 years, and more. Since the introduction of income support, there have been no equivalent data. Instead, there has been a grouping of everyone who has claimed for more than two years. Is it possible to include additional information in our returns on income support?

I move on to my second plea. I congratulate the Government on the family resources survey, which will begin our movie camera approach to what is happening to poorer people and richer people, but surely we should have regard to the three great cohort studies that were initiated after the war, in 1946, 1958 and 1970. We should ascertain to what extent we can build on to their retrieval of information, given that there is still contact with most of the people in each of the samples. There are questions that I would like to be answered.

Photo of Peter Bottomley Peter Bottomley , Eltham

I know that my intervention will go slightly beyond the focus of the debate. Would it not be a good idea for the Government to consider establishing a framework of successive cohort studies every seven years, whether in the United Kingdom or throughout the European Union, with a return every seven years, so that we are aware of changes within the changing picture?

Photo of Frank Field Frank Field Chair, Social Security Committee, Chair, Social Security Committee

The cohort studies were initiated by Sir Brandon Rhys Williams, who for a long time was a Member of Parliament. If he were still alive—sadly, he is not—there might have been some follow-up studies consequent on the 1970 study. I agree with the point made by the hon. Gentleman.

We need desperately to know by what exits people leave benefit and gain work. If they gain work, is it full-time or part-time? If it is part-time work, is that what they wanted or did they want more? If they get a part-time job, are they able soon to move up the rungs to a full-time job? If that full-time job is a low-paid one, how do they get themselves into much better paid positions within the same firm or another firm?

There is a great need for answers to the questions that I have posed. There may be exits from poverty which we have not considered and which we need to encourage once we have the relevant information. There is an obvious place at which to start, and it is not the new study that the Government have commissioned, on which I congratulate them. We should make the maximum use of the three cohort studies which were initiated in the earlier post-war period, which could begin to answer the questions that I have asked.

Photo of Malcolm Wicks Malcolm Wicks , Croydon North West 1:42 pm, 7th June 1995

I shall make only a brief speech, because I am anxious to hear the Minister's response to the remarks of my hon. Friend the Member for Birkenhead (Mr. Field).

I am struck by the fact that social security expenditure is at record levels. Yet one of the major worries in British society is what might be called social insecurity. Paradoxically, there is an equation between social security expenditure and social insecurity. Pensions and child benefit, within the social security budget, provide evidence of social security. Much of the rest of that budget—for example, expenditure on unemployment and expenditure through income support on one-parent families—is, in a sense, evidence of insecurity in society.

One of the difficulties for Ministers in the Department of Social Security, whether now or in future, is assessing the forces within our economy and society that make for social insecurity. It is their task to determine the best way in which to attack some of those forces. That challenge points to policies within the public sector that are often the province of Departments other than the Department of Social Security.

It is my plea that there should be a coherent approach to family policy. As a new member of the Select Committee on Social Security, it strikes me that, while some of the data on low incomes are available because of factors that are well known, especially unemployment, increasingly family poverty wears a newer face. Much of that poverty is the result of the growth of one-parent families. Whatever we say about that growth, we should all be concerned that there is almost an equation between one-parent families and poverty.

We know that seven of every 10 one-parent families depend on income support. Of the never-married single parents with children—they constitute one of the most vulnerable and fastest-growing groups—85 per cent. are on income support. Our expenditure on income support is very much a symptom of insecurity and family breakdown. One of the great challenges in social policy is to determine how we should start to shift resources away from breakdown—in other words, spending on breakdown—to investing in families on income support.

We have heard something about data, and the relevant reports are full of data. They relate to millions of children within families on income support or with incomes just above that level. I shall mention a one-parent family who came to see me at my surgery—a young woman of 21 years with a two-year-old boy. The mother and her child are entirely dependent on the state in the sense that they have a local authority flat—it is a pretty poor one that is badly heated—and are on income support. The child has asthma and it is often necessary for the mother to call in the national health service. That family is an example of great dependency on the state.

The family I have described, and many others like it, are costing the country dear. The nation is contributing billions of pounds to assist vulnerable families. At the same time, the standard of living of the individual family to whom I have referred is extremely poor. I was especially concerned because the mother has great ambitions. She told me that she did not want to be on income support. She wants a job. She told me that she wanted to be a traffic warden. That is a brave decision, given Croydon's traffic circumstances. She told me of her idea and she wanted support to help her secure that job.

I replied, "When you deal with the Department of Social Security or any other Government agency, has anyone talked to you about your ambition, including the training that you might need to become a traffic warden or to take on another job? Has anyone discussed with you child care implications?" Sadly, the answer was no. That was partly because, being on income support, she did not have to report for work. There was no requirement that she should search for work. Under the current system, there was no package of training, advice about child care or counselling.

When the Minister replies, I hope that he will take up the wider aspects of social security and tell us when, at last, the Government will get to grips with family policy.

Photo of Alistair Burt Alistair Burt Parliamentary Under-Secretary (Department of Social Security) 1:47 pm, 7th June 1995

First, I congratulate the hon. Member for Birkenhead (Mr. Field) on securing the debate. Over about 15 minutes we have ranged extremely wide, from Sir Robert Peel through to pleas for a coherent family policy. There has been reference to Lone families and statistics. As the House knows, I could cheerfully debate each item for far longer than 15 minutes. I shall do my best to confine my response.

I make no claim to be Sir Robert Peel. I do, however, come from the same place as Sir Robert. We are both from Bury in Lancashire, where Sir Robert's tower still stands overlooking the town. He is remembered with great affection and his statue is in the town square to celebrate what he did in terms of the corn laws and feeding the people. He is especially well remembered.

I welcome the opportunity to debate and to discuss low income statistics. As the hon. Member for Birkenhead said, it is vital that we have reliable and up-to-date information about those on low incomes. It is important that we are able to identify which groups on low income are most at risk and the circumstances that produce those risks. There has been a variety of statistics. Probably the most well known of the current statistics is that set which is known as households below average income. Those statistics provide us with the overview that we now use. The statistics are not used alone. I shall be making reference to other studies and talking about other information that we can use. I hope that my remarks will be helpful to the hon. Gentleman and to the hon. Member for Croydon, North-West (Mr. Wicks)—I have in mind especially his final remarks.

It is, of course, entirely within the aim of government to have as coherent a family and social policy as possible, bearing in mind the complexity of family structure now, and particularly the change in relation to lone parenthood, which we have discussed a number of times in this place.

Photo of Peter Bottomley Peter Bottomley , Eltham

Will my hon. Friend join me in welcoming the report from the board of social responsibility of the Church of England? Unlike the headlines in the papers—broadsheet and tabloid—and reports from the BBC, that report accurately says that four out of five children are brought up by two-parent families, that two thirds of lone parent families were not single parents to begin with and that, by having respect for families and for family responsibilities, and by building up their confidence and their competence, we are likely to have fewer people falling into the low income statistics, and more coming out faster.

Photo of Alistair Burt Alistair Burt Parliamentary Under-Secretary (Department of Social Security)

I welcome the analysis that is contained in the report, of which I have read something. I do not necessarily agree with all its conclusions and I do not necessarily agree with its failure to promote a particular form of family as the ideal. The report is right to look at the complexity of family life today. It is right to seek an end to condemnation, but one can look forward to an ideal of family structure without necessarily condemning those who are on their way towards it.

To remove completely the aim and aspiration of a married relationship does not seem correct to me, but that is a matter for the Church, and no doubt we shall be hearing much more about that. Its attempt to analyse, and to supplement the analysis of, the complexity of family life that we have today is extremely relevant and it attempts to deal with the world as it is. It is the Government's job to deal with the world as it is and families as they are, but, if it is anyone's job to say where they would like the world to be and where they would like people to be, I believe that it is for Christians and for the Church to make a statement in relation to that as well.

The households below average income statistics are based on the family expenditure survey. It looks at the incomes of individuals on the assumption that each person shares the total income of the household. Using that information, it estimates the pattern of incomes of the United Kingdom and how it changes over time.

The HBAI provides information on how individuals fare, relative to their counterparts in the year of analysis, by looking at the number of individuals below various fractions of average income. It also allows comparisons to be made with earlier time periods by looking at numbers of individuals below fixed income thresholds. Income growth is estimated for the population, broken down by position in the income distribution, economic and family types. Information on who makes up the low income groups is also provided.

Over recent years, the HBAI has also included information on those with above-average incomes. This provides a complete picture of the changing income distribution. It is an evolving analysis that seeks to shed new light on aspects of income distribution, but it does suffer from the problem of being a snapshot. I shall say a little about longitudinal studies in a moment. I shall outline briefly some of the results from the latest edition, which bear some repetition. They were more positive than negative. The results show that the average income of British households has risen by around 38 per cent. Increases were not confined to a few top earners. The average income of all family types reported on in the HBAI has increased.

Pensioners have fared particularly well—the average income of pensioner couples, after housing costs, has increased by 53 per cent. in real terms. There are also far fewer pensioners in the bottom 10 per cent. of the income distribution—only 8 per cent., compared to 31 per cent. in 1979. It is also encouraging to note that average income has increased for the unemployed and for those in full-time work on low pay.

Income has increased for the majority of the working population, although there continues to be a dispersion of earnings, probably reflecting a shift towards skilled labour and an improvement in labour market flexibility. Even the least well-off have been able to improve their living standards, as various studies showing the increase in consumer durables among the bottom 20 per cent. have shown over time. However, the results for the lowest income group need to be interpreted carefully—I think that the House understands that better than some analysts outside—particularly those for the bottom 10 per cent. of the income distribution.

There are two important considerations, of which the first is changes in composition. An increase in the number of people reporting low incomes can affect the average income of the bottom decile and cause an apparent reduction, even where incomes are higher than those of individuals in a similar position in 1979. Changes in employment are especially important there. Since 1992, unemployment has fallen by nearly 600,000, but the snapshot of society at the time that the statistics were compiled naturally reflects the higher unemployment figure then, and the number of people reporting low incomes, especially the self-employed, has had its impact.

Secondly, incomes are not always a reliable indicator of true living standards for lower income groups. Of course, the bottom decile includes many people on low incomes and correspondingly low living standards, but it also includes, especially at the very bottom, many people, often self-employed, reporting very low incomes but with relatively high expenditure. The number of self-employed reporting zero or negative incomes has increased significantly. However, of the 150,000 self-employed reporting no income, around 60 per cent spend more than the average for the population as a whole.

That casts some doubt on the bottom decile statistics, particularly in relation to those who are in occupations where reporting a lower income than one might have is rather an advantage. The bottom decile spends more than the second decile and, according to the Institute for Fiscal Studies, the expenditure of the bottom income decile, after housing costs, has risen by about 30 per cent. since 1979.

I now come to the longitudinal studies, and I pay tribute to the IFS work. When individual fortunes are followed through, a different picture emerges from the snapshot. Recent work, again by the IFS, shows that up to a half of those in the bottom tenth of the income distribution in 1991 had left it by the following year, and for those who had left, income rose by 45 per cent. Even among those who remained, income rose slightly over the year. That research, therefore, tells us what the snapshot does not: the poor are not, as they are so often portrayed, a stagnant group with gradually declining living standards. It also shows that, over relatively short periods, there is a significant movement into and out of the lowest decile of the income distribution.

We are, as the hon. Member for Birkenhead has pointed out, very aware of the need to complement analyses like the HBAI with information about how the position of individuals changes over time. I hope that some details about our current programme of research will be of help to the hon. Gentleman and the House.

The Department's current programme of research includes a number of projects, both longitudinal and cross-sectional. First, analysis of the British household panel survey continues. It is a longitudinal study of a nationally represented sample of more than 5,000 households in Great Britain and involves an annual survey of each adult member in the household, making a total of more than 10,000 individual interviews.

The aim is to collect and analyse evidence of the experiences of a representative panel of the British population over a number of years, to improve our understanding of the incidence, pattern, duration, interrelation and impact of everyday issues and experiences and to examine how individuals, families and households confront them. That is precisely the information that the hon. Member for Croydon, North-West was looking for to deal with some of the complex situations that arrive in our surgeries every day.

Secondly, work based around the national child development study continues. That longitudinal study follows the lives of all those living in Great Britain who were born between 3 and 9 March 1958. It was started by the National Children's Bureau, which carried out a follow-up survey of the 16,500 people in that group when the children reached age seven in 1965, and continued with further surveys at ages 11, 16 and 23. The most recent wave was conducted by the City university in 1991, when the respondents were aged 33.

We clearly intend to incorporate that information, including the information that I mentioned earlier by the IFS, into our work over time. As we get more information, we shall bring that in.

The new earnings survey panel was mentioned earlier. I am glad to say that the longitudinal data from it are becoming available and provide similar information on the mobility of earnings to that available from another source, but the survey has a less full coverage than information from contribution records, which are already being investigated at the hon. Gentleman's request. I am sure that he will be pleased to hear that we intend to use information from national insurance contributions records to track changes in circumstances. A database is being developed that will show the employment history of a representative sample of adults. The importance of employment patterns in changing incomes suggests that that data will provide valuable insights.

All that will provide us with a wealth of valuable data, but data alone will not help those who are on a low income. The important point is to identify the main causes of low income and to take positive action to help people to improve their circumstances. The clear message from the HBAI and from other information we have is that the rise in unemployment, changes in the labour market, and particularly the widening distribution of earnings, have had a major impact on the distribution of incomes. Another significant factor has been the increase in the number of families with children becoming unemployed or dependent on social security benefits.

From information, anecdotal and based on survey, the Government have deduced that getting people back into work is the very best thing that we can do for those who are relatively poor. Hence all the work that has been done in recent years—the improvements in family credit, with changes in hours and disregards, and the work done to reduce national insurance contributions at the lowest level—and the work being done—in October 1996, an in-work benefit for single people and couples with children will be piloted, and the back-to-work bonus will be introduced in October 1996. All those measures aim to bring people back into work.

We shall therefore continue to use the information on low income statistics to do the job that Governments should do best—that is, to ensure that people move out of poverty and into a position where they can be truly self-sufficient, contributing not only to their own self-esteem but to society at large.