The absolute low income target

Question proposed, That the clause stand part of the Bill.

Despite the clause’s title, it is based, as Committee members have pointed out—the hon. Member for Northavon will shortly seek to catch your eye on that point, Mr. Key—on a rather curious methodology that it will perhaps cause the Government little difficulty to achieve. It refers to the absolute low income target but relates to an equalised net income for households with less than 60 per cent. of median income, with a base year of 1 April 2010. Ordinarily, a normal amount of economic growth should lift the vast majority of families in the UK comfortably above that baseline. By 2020 we will hopefully have had 10 years of growth, as we are told that the UK economy is returning to growth as we speak and we all hope that we will avoid another horrid recession in the coming decade.

There are questions about whether the target is demanding and whether it is a genuine absolute low income target. When giving evidence to the Committee, Rev. Paul Nicolson and others mentioned minimum income standards, such as the cost of feeding a family, which might be the type of definition that members of the public would more easily identify with the phrase “absolute low income”. What is the absolute minimum amount of income one needs to put food on the table and clothes on the backs of one’s family and to keep one’s house warm? Would the Minister explain the methodology used and state why that particular target has been set in relation to absolute low income?

I suppose every Bill has its clause 4 moment, and this is it for this Bill. As someone famously never said, I am not convinced that we need a clause 4. It relates to one of four targets, and it is the one that could be done with one’s eyes closed. It is the one that has been put in the Bill to enable Ministers to sleep at night.

The figures for households below average income provide that sort of statistic for the preceding 10 years, so the 1998-99 median is used as the baseline and the figures from nine years later show that in the baseline year 3.4 million children were living in poverty. However, holding the baseline constant, that figure had halved to 1.7 million by 2007-08. I cannot think of a meaningful definition of poverty to which the answer would be, “It  has halved in the past 10 years”, and I do not think that in his heart of hearts the Financial Secretary could either. Is it even an interesting question? It is a little like saying, “Well, the Victorians used to think that an inside lav was the height of luxury, but things have moved on since then.” If we are serious about tackling child poverty in any meaningful way, holding things constant and assuming that the world is still as it was a decade ago will not lead us to ask interesting questions.

There is a more serous point. If we have four targets, one of which is a “gimme” that we can effectively tick now, does that undermine the ability to hold the Government to account for failing to meet one or more of the others? If we got rid of clause 4 so that we had only three targets and the Government failed to meet two of them, one might say that was hopeless. If we have four targets, of which we can assume that one is already met so that the Government are halfway there, perhaps the public opprobrium and the pressure for action will be less. Although in theory the enforcement mechanism is judicial review, we all know that the famous court of public opinion and the extent to which our electorate demand action from us will come into play. If we just have targets that are easy to meet, and not stretching, we may inadvertently con the public into thinking that something has been achieved when it has not. I suggest that clause 4 does not stand part of the Bill, because it does not add anything.

The hon. Gentleman asks whether there is any way that we can see poverty on any measure having reduced over the past 10 years. The proposal is to raise the absolute income target figure with inflation over the years. The truth is that, at an absolute level, not a relative one—that is the point and it is clear in the clause title—the number of people who do not have that level of money today will increase in future, so there will be a reduction, and there is a measurement of something real. The measure is an actual amount of money, not a measure against everyone else. Perhaps the school trips will be better, the holidays longer and the presents required bigger, but there will have been an absolute increase in the level of the household’s income and therefore there is a purpose to having the target.

I think I asked whether there was any meaningful definition of poverty on which we could say poverty had halved in the past 10 years. That is what has happened on the absolute poverty measure for the past 10 years, holding the baseline of 10 years ago. I do not think that there is a meaningful definition. We may differ, but I do not think that that is an interesting question, although in a sense that is a slightly academic point. The principal point is that it is one of four targets that the Government will meet with their eyes closed. Even a Conservative Government could meet that target. That is why I think it would be an unnecessarily easy target to have in the Bill.

The hon. Gentleman again makes an interesting point. I take his point about the target being unambitious, but much though we recognise that relative poverty is important, he appears to be arguing that absolute poverty is unimportant, or is something that we should not be too  worried about. Perhaps the better approach, given his argument, would be to have a more ambitious absolute poverty target as opposed to getting rid of that target altogether.

There is a bit of confusion about the word “absolute”. It is not absolute in a “can you feed and clothe yourself?” sense. I can do no better than quote footnote 2 in the Library note, which says:

“Confusingly, Government statements sometimes refer to figures on individuals in households below income thresholds held constant in real terms over time”— that is these ones—

“as indicating the numbers living in ‘absolute poverty’, but this is quite different from the ordinary meaning”.

In other words, we are not talking about how many people can do the basics of life—feed and clothe themselves and all the rest of it. We are talking about how many people are below a price-indexed version of the 60 per cent. median before housing costs and equivalised definition from 10 years ago, which is not interesting. It does not measure anything—it is just a number off a graph from 10 years ago.

It is true that we are hitting a moving target on the relative measures and that is a problem, but in my understanding poverty is where a person is. In the third world it is about clean water and food, but in this country our understanding of poverty must be deeper and richer than that. That is my essential contention and why I do not think that such an undemanding target should be in the Bill.

The reason we have included the absolute low-income target is to ensure that the incomes of the least well-off families rise in real terms over the next decade, and to ensure that such families are able to improve their standards of living and provide their children with the basic essentials. It is true that over the past decade gross domestic product has been growing and living standards rising. In that sense, for much of the decade—although not all of it—the number below the threshold set in terms of 1997 incomes was declining, although the number in absolute poverty has stabilised over the past few years, so it is not absolutely automatic that the number will always go up whatever happens.

Subsections (1) to (4) require that by 2020, less than 5 per cent. of children are living in households with an income below 60 per cent. of the 2010 median income before housing costs. There was support in the consultation for including an indicator of that kind. That is at the heart of my argument. We asked people whether they thought that there should be an absolute poverty indicator. There was a variety of views, but a small majority—a majority nevertheless—favoured including one. I think the reason was to make absolutely sure that in terms of living standards, we do not go backwards for the poorest families. There could be a scenario where relative poverty falls, but absolute poverty as defined in this way might not. There is therefore an underpinning, or a backstop, provided by the target, which the majority—a small majority, but nevertheless a majority—of people we consulted thought was worth having.

The crucial thing is whether the incomes of the least well-off families will rise, at least in line with prices. During a downturn such as the one we are in at the moment, when average incomes may be flat or falling,  one can envisage that while there may be fewer children in relative poverty, their family incomes may actually be falling.

The Minister is right to say that over the very short term the number has been static, but is he really asking us to believe that it is a credible scenario that real living standards will be lower in a decade’s time than they are now? That is presumably the only circumstance in which one target will not dominate another one.

The question is whether we will achieve the 5 per cent. target. It is not a static target, but 5 per cent., which means that we will have to make a fair amount of progress on the indicator over the next 10 years. As I said, it is a kind of backstop safeguard for the incomes, in real terms, of the least well-off families. The majority view in the consultation—I think rightly—was that it was worth including.

I think I am right in saying—although I hesitate in going into this territory because the hon. Gentleman knows a great deal more about it than I do—that this is how it is done in the US. There is a lot of talk in the US about people in poverty. I think an absolute measure—absolute in terms that were defined a long time ago—is used there. I take the hon. Gentleman’s point that we certainly should not use it as our only measure, as they do in the States. However, as one of four, it is a helpful backstop and safeguard, as the majority in the consultation thought, too. On that basis, I commend the target’s inclusion, and the clause, to the Committee.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.