New Clause 2

Child Poverty Bill – in a Public Bill Committee at 5:30 pm on 3rd November 2009.

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Benefit levels

‘The Secretary of State shall ensure that a household wholly dependent on tax credits or social security benefits has an income at, or above, the relative low income target in section 2 (the relative low income target).’.—(Steve Webb.)

Brought up, and read the First time.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I beg to move, That the clause be read a Second time.

Photo of Robert Key Robert Key Conservative, Salisbury

With this it will be convenient to discuss new clause 4—Minimum income standards—

‘(1) In the exercise of his duties, the Secretary of State shall have regard to minimum income standards.

(2) It shall be the duty of the Secretary of State to commission research into the minimum levels of household incomes necessary to sustain a healthy diet, other necessities, safety and wellbeing for children (in this Act referred to as “Minimum Income Standards”).’.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I think that everyone was baffled by those decisions, Mr. Key, but I am sure that you know what you were doing.

We have now reached the final group of new clauses, which touch on a fundamental point about the Bill—whether it is possible to achieve the 2020 child poverty target with benefit rates that are not themselves above the poverty line. Under new clause 2, someone who is wholly dependent upon benefits or tax credits would have an income of at least 60 per cent. of the median poverty line. New clause 4 was tabled by the hon. Member for Beverley and Holderness, and I have added my name to it. I know that the Committee appreciated hearing the evidence of Rev. Paul Nicholson and the Zacchaeus 2000 Trust, who suggested amendments along these lines. I shall return to new clause 4 in a moment.

New clause 2 is fundamental. We talked earlier about levers and what local and central Government can do. New clause 2 is about what central Government can do and the rate of social security benefits and tax credits. If we do not accept new clause 2, there is a logical inconsistency in the Government’s position. To quote the Bill, they want to “eradicate” child poverty, but they are not prepared to set the rates of benefits and tax credits at levels that lift people clear of the poverty line.

Government rhetoric at moments such as this is, “Yes, but we do not want people on benefits. We want them in work.” Unless we are going to have full employment, nobody out of work and nobody at home looking after their children, there will always be somebody on benefits and tax credits. The question is whether it is acceptable to have a Bill about eradicating child poverty and an explicit lever of Government policy that puts people into child poverty. It is that fundamental inconsistency that we are seeking to raise through new clause 2.

In the spirit of inquiry, I asked the House of Commons Library staff to do some sums for me, which they are always pleased to do. I asked them to compare the poverty line in the Bill—60 per cent. of median—with what somebody wholly dependent on benefits and tax credits would have to live on. They came up with some very interesting figures. They calculated that a lone parent on benefits and tax credits—getting average amounts of housing benefit I assume—is already clear of the poverty line. That does not mean that there are no lone parents living in poverty. The House of Commons Library figures show that taking the Government’s tax benefit model tables and assuming full take-up with people getting everything to which they are entitled,  including, I think, an average amount of housing benefit, a lone parent would already be clear of the 60 per cent. median poverty line. However, the figures also show us that many lone parents are not clear of the 60 per cent. median poverty line. That raises an issue of why not, to which we shall come back.

Couples, interestingly, are not clear of the poverty line. On average, a couple with one child, getting all the benefits and tax credits to which they are entitled, based on the tax benefit model tables, is 7 per cent. below the poverty line and a couple with two children is 11 per cent. below the poverty line. On the basis of those figures, the Government are paying couples with children a benefit and tax credit rate below the poverty line while trying to pass legislation to eradicate child poverty.

Photo of David Gauke David Gauke Shadow Minister (Treasury) 5:45 pm, 3rd November 2009

Has the hon. Gentleman just identified or described what is sometimes called the couples penalty?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

No, for reasons that I will explain. There is a fair point about rates of benefits and tax credits to couples relative to their poverty line, which is different from that of lone parents. There are relativities in the system. Why do lone parents get more money? It is not necessarily pro rata to their needs but because they are, on average, more deprived in other ways. The amount they are paid in benefits and tax credits is trying to do something else, as well as meet needs.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

I asked the Library to produce similar figures—though not for the same purpose—at the time of the 10p tax issue or disaster, whatever one wants to call it. It was particularly marked that in two-parent households with children, income and poverty levels were entirely dependent on quite small changes to the number of hours worked. If both parents worked a few hours or one of them worked full time, the relative changes in the income level were marked. Could the hon. Gentleman say how the figures he has would look if one person did part-time work or if one worked full time, so that their entitlements changed?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

To be clear about the figures I am using, the question I asked was, “What would be the income of a couple with children wholly dependent on benefits?” In other words, the bit of their income that the state controls. That is not to do with wages. If they are earning, as the hon. Lady rightly says, there can be quite big jumps as soon as they do 16 hours or whatever it happens to be. My point is that there will always be families with children, couples and lone parents wholly dependent on benefits and tax credits. It would be odd of the Government to set benefit and tax credit payments below their own poverty line, when they are passing legislation to eradicate child poverty. I do not see how those measures can sit together. That is linked to the minimum income standard argument that we will discuss later.

I have discussed a theoretical situation with a hypothetical lone parent and couple. The actual situation is much worse. Half of the children in poverty are in non-working households; 30 per cent. have non-working lone parents and 19 per cent. are in non-working two-parent households. That means that almost 1.5 million of the 2.9 million children in poverty are wholly dependent on benefits or  tax credits. Even if we could deal with the 1.5 million children from working households who are in poverty by providing better child care, education, training and jobs, we would be left with more than 1.2 million children below the Government’s poverty line and would fail to meet our 2020 target.

No Governments have set benefit and tax credit rates high enough to lift people clear of poverty. I have moved from the hypothetical to the real: 30 per cent. of children in poverty have lone parents. There is no reason why they are in poverty other than the level of benefits and tax credits.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

The hon. Gentleman’s logic is impeccable. What assessment has he made of the effect on incentives to work if benefits were raised to remove those families from poverty? Even if poverty is technically eradicated under our relative definition, will not the culture of worklessness and other problems persist if families do not gain the benefit of being in the workplace?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Gentleman is right. There are many trade-offs in these matters, and he highlights one.

My point is that we can do one of two things. We could say that we are legislating to stop people living in poverty, which we define as being below a certain level. If we are aiming to eradicate poverty, another arm of Government cannot leave people in poverty. The other option is to say that it is a specific aim of Government policy to pay people below the poverty line so that they are driven into work. Under that world view, driving people into work is more important than people having a standard of living above the poverty line. We cannot do both things at the same time, but the Bill tries to do that.

Photo of Jamie Reed Jamie Reed Labour, Copeland

The hon. Gentleman is making a persuasive case. Like the hon. Member for Beverley and Holderness, I have anxieties about this discussion. I have a great deal of sympathy with what the hon. Member for Northavon is saying, but I am concerned about the potential for creating regional ghettos. Parents who have been out of work for a long period are likely to be in areas of profound market failure, where employment is hard to come by. I am not saying that the benefits system is what it should be, but if we provide an even better benefits system to prevent people from being in poverty, we may end up consigning generation after generation to increased dependence on the state. Does he share that concern?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I understand what the hon. Gentleman is saying. One measure of poverty in the Bill is persistent poverty. How can we avoid children living in persistent poverty in such unemployment blackspots? We can and do try to get mum or dad—or both—into work. However, many are dependent on benefits for three years out of four. If we do not give them enough to live on, relative to the thresholds, we will not achieve the target in the Bill. We could set benefits at such a level that we drive people to take jobs, come what may, because they cannot otherwise survive. My worry is that we are saying inconsistent things.

Photo of Jamie Reed Jamie Reed Labour, Copeland

The hon. Gentleman makes a logical and analytical dissection of a real issue. I am not sure what the answer is, and I am not sure that he is either.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I suppose that I am asking the Government to be explicit about what they do. Do the Government set benefit levels to lift people out of poverty? Clearly not. We define poverty in the Bill, and benefits and tax credits are not enough to lift a couple out of poverty. What are the Government doing? Will they state explicitly that when benefit levels are set, they are not trying to lift people out of poverty, but seeking to provide people with short-term relief as a temporary measure for something else? What about long-term sick and disabled people and the argument, “We want them to get a job”? A set of people exists who are not going to get a job. What do we say about those people if we consign them to long-term dependence on a rate of benefit that we have spent the last three weeks defining as poverty? That is my point.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

The hon. Gentleman spoke about the number of two-adult households that live in poverty, which is very striking. Does he agree—he hinted at this point—that often in those families, at least one adult is not capable of working? Often, someone is not able to work because of a disability or a long-term illness. Sometimes, they have been involved in crime and are in and out of prison, or they might be transient and unable to work. Does he agree that there are often explanations of why two-adult households that do not work and live in poverty are in that position? They will sometimes be attracting other benefits.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

Absolutely. That reinforces my point. The glib response to my point is, “Yes, but work is the answer. Work, work, work. Let’s not pay people too much money because it discourages them from working. The real way to get people out of poverty is to get them to work.” I wonder whether there will always be more than 1.2 million children living in households that are wholly dependent on benefit, because their parents are long-term unemployed, sick, temporarily unemployed, or whatever. Unless benefit levels are set at or above the poverty line, is it physically possible to achieve the 2020 goal?

What has frustrated me about our discussions—I did not think about this until I looked at the numbers—is that until we ask ourselves about the right level of benefits relative to the poverty line, we cannot think about whether we will ever achieve these goals. That comes back to our 2017, panicky, pulling-the-levers-of-income-transfers point.

I will give one more example of my point. For a low-income household, it is something even more alarming. The risk of being in poverty changes according to whether someone is on a certain benefit. The national average for the risk of living in poverty is 29 per cent. [Interruption.] I am sorry, there is a 23 per cent. risk. Children whose parents claim jobseeker’s allowance have a 70 per cent. risk of living in poverty. If their parents are on income support, it is a 54 per cent. risk, and if their parents claim working tax credit, it is a 29 per cent. risk—that is the number I read out by mistake.

A child is three times as likely to live in poverty if their parents claim JSA—of course, because they are unemployed. However, the point is that JSA is set by the  Government. Income support and working tax credit are set by the Government. The Government explicitly set benefit rates that inflict three times the risk of living in poverty on those children whose living standards they determine.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

I entirely accept the logic of what the hon. Gentleman says. Regardless of the legislation, does he believe that we should set benefit rates above the poverty line? Is that the right thing to do in the broadest sense, regardless of the Bill? Is that the right policy?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

This is where new clause 4 comes in. I am saying that, if the poverty thresholds and the targets in the Bill mean anything, we should at least think about those thresholds when setting benefit rates. We patently are not doing that. It would cost a lot of money—I do not know how much because the numbers are quite complicated, but it would be billions of pounds, and I am certainly not committing to that—but if we set benefit rates each year without thinking about the thresholds on which we are legislating, we might as well give up as we are not going to achieve our goals. That is my point.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

I remember reading those figures as well, although I might have been looking those for a different year. However, I think that the group that is most likely to be in poverty is families on housing benefit. Being on that benefit is one of the prime indicators of poverty. A measure that allows families on housing benefit to retain more of their child benefit is an effective way of tackling of chid poverty, because it puts more money into exactly families that are at the highest risk of poverty.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 6:00 pm, 3rd November 2009

The hon. Lady is right. There is a 53 per cent. risk for people on housing benefit, which is higher than the average, but still lower than the risk for those on jobseeker’s allowance. I have no problem with helping families on housing benefits—they are, on average, a poor group who should be helped. However, surely the Treasury has worked out internally whether we will ever achieve the goal of the Bill as long as we pay benefits below the poverty line, which is what we are doing. Is it possible to achieve the 2020 target without paying benefits and tax credits at or above the 60 per cent. median? It might not be. Furthermore, a single parent who claims everything should be clear of the poverty line, but 30 per cent. of children in poverty are the children of single parents on benefits. Why are so many of them still below the poverty line?

Finally, let me turn to the issue of minimum income standards, which is addressed by new clause 4—I shall speak to it now to save me from coming back to it. I have suggested setting benefit levels by making them relative to the poverty line under the Bill, but another attractive approach would be to make them relative to what people need to live on—the Joseph Rowntree Foundation used to talk about “subsistence” and “modest but adequate” levels. The measure would enable an intelligent discussion about the adequacy of benefit levels, which I am afraid we do not have in British politics at the moment. We simply set benefit levels on the basis of what they were the previous year, plus a bit more.

Every Government have been terrified of opening a can of worms by asking how much is enough to live on. However, that is done in plenty of other countries, such as Norway, Sweden, Germany and Canada. Minimum income standards are not novel. Unless and until we talk about how much we are paying people who have no other income and how that relates to their need, I am not sure that we can address the issue of child poverty properly. The living standards of adults without children have fallen massively in the past 15 years, as they were the group whose benefits were least prioritised. Benefits for children and pensioners are linked to earnings, but there are groups of people who are highly dependent on benefits whose living standards have fallen and fallen, and who cannot attain the “modest but adequate” benchmark.

I shall conclude my remarks by saying that all I am pleading for is that we cease setting benefit levels arbitrarily. Benefit levels now are essentially what they were post war, when most of the current situation was invented. Benefits have been uprated on a whole variety of ad-hoc bases with no relation to anything outside—that is the key. When we are setting benefit and tax credit levels, let us relate them to something real, whether that is the definition of poverty in the Bill, or a minimum income standard that is needed for someone to have a modest and adequate standard of living, rather than just plucking them out of the air and saying, “How much cash do we have this year? Let’s add inflation, plus a little bit.” We should set benefits objectively, which would be a firmer foundation for tackling child poverty in the future.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

It is my pleasure to have tabled new clause 4, on which the hon. Member for Northavon just commented. The new clause sets out an entirely different approach. Nowhere in the Government’s measurements of poverty is there any estimate of what it costs per week to live healthily in the UK. Low income is a statistic, not a measure of the weekly cost of items in a family budget. The centre for research in social policy at Loughborough university and the family budget unit at the university of York define a minimum income standard as follows:

“A minimum standard of living in Britain today includes, but is more than just, food, clothes and shelter. It is about having what you need in order to have the opportunities and choices necessary to participate in society.”

The Government themselves, in the explanatory notes to the Bill, state:

“Children are materially deprived if they live in households that cannot afford a range of basic activities, such trips for the children, or celebrations on special occasions, or if they cannot afford basic material goods, such as fuel to keep their home warm.”

The targets in the Bill must be credible. It would be offensive to claim credit for meeting a statistical target, or making progress towards it, if the target means nothing to children living in households lacking basic material goods. To avoid that, I suggest that we must take minimum income standards into consideration to ensure that the income distribution calculation of the poverty threshold never falls below the income required to meet basic costs.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

I shall give way to the hon. Lady in a moment, if I may.

My new clause does not prescribe what the Government must do, but it does suggest that they must keep up to date an assessment of what a minimum income standard would look like. That would at least allow policy makers to compare what that looks like with the actual moneys that families receive. This is the right time to demand a proper, evidence-based minimum income standards methodology against which to check the adequacy of the Government’s income thresholds.

A combination of a minimum income standards approach and an income distribution approach is already in use in Britain—in the calculation of the London living wage by the Greater London authority’s living wage unit.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

I will, as I said, give way to the hon. Lady in a moment.

The hon. Member for Northavon refused to commit to, or say that he necessarily supported, raising the benefits threshold, despite having pointed out the logical inconsistency of a Bill that says that it will eradicate child poverty but none the less does not ensure that benefit levels put families above the child poverty level. The right hon. Member for Birkenhead (Mr. Field) always puts the case that a combination is needed. Perhaps we are talking about more generous benefits combined with time limits on the period for which people can access them. I do not blame the hon. Member for Northavon for not taking an intervention on this point, as he had been generous at taking interventions, but if I had been allowed to intervene yet again, I would have asked whether he thought that more generous benefits coupled with time limits might have been an appropriate approach.

New clause 4 would not oblige the Government to change what they do, but it would mean that they would have to provide the information that I described, against which one could then measure actual outcomes, especially if any Government—whichever party was in power—claimed to be serious about eradicating child poverty.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

Given that the Conservative party did not support the minimum wage, which was the basic underpinning—[Interruption.] There is no point Conservative Members groaning about it. The minimum wage represented the basic underpinning of the whole tax credits system—there has to be a minimum wage to be able to have the tax credits. I do not think that that party even supported the minimum income guarantee for pensioners. Given that, how on earth does anyone think that that party will be taken seriously when talking about minimum income standards?

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

Some of my colleagues had anticipated the quality of that intervention. We might as well discuss Disraeli or CND, which doubtless features in the hon. Lady’s past. We have to deal with policy today. If she bothered to read the new clause, she would see that it does not say that these amounts must necessarily be paid out. It says that the Government should publish and maintain the information, which anyone—child  poverty campaigners and so on—could use as a lever with which to engage with the Government and hold them to account on eradicating child poverty. Despite the hon. Lady’s years on the Treasury Committee, I think that she fails to understand the combination of tax credits and the minimum wage. Of course, the minimum wage’s actual impact, given the provision of tax credits, is rather more slight than perhaps she would have us believe.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

In the interests of not ending the harmony that we have enjoyed in Committee, I will support the hon. Gentleman’s new clause. Does he agree that having benchmarks for different sorts of families would allow us, for the first time, to assess whether the benefits structure disadvantages particular families? For example, the benefit levels for families with three children or with one child could be compared with the needs of such families. I do not have a strong feeling on whether the benefits system adequately compensates for the costs of additional children, so the benchmarks would help us to do that. That would give us some useful benchmarks for families with different numbers of children, or for pensioners as opposed to non-pensioners.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

I completely agree; obviously I defer to the hon. Gentleman on data gathering. Those benchmarks would provide another way of looking at benefits and, in the context of the Bill, at child poverty and the reality of what it is like to live in families with such incomes. The hon. Gentleman makes a good point, as that approach would help us to understand better the granularity of poverty and the way in which it impacts differently on families with different make-ups. He has already noted that, under the existing set-up, couples technically appear to be more likely to be in poverty, when claiming benefits, than a lone parent—that is the so-called couples penalty. Although I hope that the Government will consider the new clause, it is probing, and I have spoken to it in that spirit.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

We have had a really important debate, and I am grateful to the hon. Member for Northavon for setting out so clearly and cogently his case for new clause 2. He claimed that the Bill will be fundamentally intellectually incoherent and dishonest unless we have an answer to his question. Notwithstanding the fact that he said he was not committing his party to spending the money required to bring those benefits up to the level that would bring all the groups he talked about out of poverty, the fact remains that he has identified an inconsistency between what the Bill states it will do and the fact that benefits are currently set below the poverty targets in clauses 2 to 5.

There are a couple of bigger questions that underlie the whole debate. The issue of work incentives has been raised—absolutely correctly—by hon. Members on both sides of the Committee. Concern was raised about the fact that one could perversely trap communities—if not in poverty then in the benefits system—by increasing benefits to a level that leads to problems with work incentives. The Treasury monitors that issue closely and looked at it extremely carefully when the issue of income disregards was addressed, so I shall listen with great interest to what the Minster says about work incentives.

The other huge issue that is relevant to the debate is that of the economic and fiscal circumstances within clause 15 and the overall fiscal envelope in which the benefits system exists. It is already large and adding significantly to the debt and deficit problems that the Government face. We need a wider discussion about that and to be absolutely clear on the overall limits before going down that route.

With regard to new clause 4, which was tabled by my hon. Friend the Member for Beverley and Holderness, I noted what he said and was reminded of aspects of our discussions about the adequacy or inadequacy of clause 4, which sets out the absolute low income target within the Bill, when several hon. Members commented that they did not think that that was particularly demanding or even especially useful. My hon. Friend might be on to something there, which suggests that the minimum income standard route could be an alternative for examining that matter.

The hon. Member for Northavon mentioned several European countries with a similar methodology. I picked up in the course of my reading that a minimum income standards approach is used in America. It is based on the cost of a basic but nutritious diet, and then there are dozens of different poverty lines for different types of household, and they are updated each year to take account of general price inflation.

Groups that dislike that way of looking at poverty—I believe that the IFS has at times been among them—have said that that would lead to too small a group being classified as being in poverty, and that might be a reasonable objection. However, it is interesting to note that, despite the use in the United States of minimum income standards-type poverty definitions, the official US poverty rate has fallen by less than 3 per cent. in 40 years, which would tend to suggest that people do not get left behind as economic growth happens, because the figures are updated according to what it costs to feed a family. The standards actually include more than food.

This has been an important and interesting debate. My hon. Friend the Member for Beverley and Holderness said that new clause 4 was a probing amendment. I shall listen with interest to what the Government say about it, but he could well be on to something, and the new clause might give us slightly more useful data than clause 4 would.

Photo of Helen Goodman Helen Goodman Parliamentary Under-Secretary (Department for Work and Pensions) 6:15 pm, 3rd November 2009

The Bill makes a clear and robust commitment to eradicating child poverty. It is clear in clause 8(5), which covers the strategy, that financial support is an important building block of an effective child poverty strategy. We will consider all potential methods of achieving our child poverty targets when we develop our strategies, including assessing the role of support for those who cannot work. I fully appreciate the good intention behind the new clauses, but we do not believe that they are necessary in practice. It could actually be unhelpful to include them in the Bill, for reasons that I shall set out.

We are committed to ensuring that the tax and benefits system provides adequate financial support. Families in the poorest one fifth of the population are £4,750 a year better off—

Sitting suspended for a Division in the House.

On resuming—

Photo of Helen Goodman Helen Goodman Parliamentary Under-Secretary (Department for Work and Pensions)

As I was saying, we are committed to ensuring that the tax and benefits system provides adequate financial support. Families in the poorest one fifth of the population are £4,750 per year better off as a result of personal tax and benefit changes since 1997. I would like to draw hon. Members’ attention to some facts and, picking up on a point made by the hon. Member for Northavon, show that the tax and benefits scene and the way that different families are treated in the situation in which they find themselves, are both complex and not straightforward issues.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I very much welcome the commitment that the Minister just gave to the adequacy of benefit levels. Can she clarify whether, when the benefit rate for, say, an under-25 single person is set at £50.95 a week, that is deemed to be adequate, based on what an under-25 needs to spend money on? Is it set with reference to anything real? Is there reference to what they spend on food, fuel, clothing and so on? Is the figure concrete, or is it just what it was last year plus a bit?

Photo of Helen Goodman Helen Goodman Parliamentary Under-Secretary (Department for Work and Pensions)

If the hon. Gentleman will give me a little time to develop my argument, he might understand our position.

Benefits are linked to various indices. For example, at present, jobseeker’s allowance is linked to the retail prices index, housing benefit is linked to the Rossi index, child benefit has gone up 25 per cent. in real terms since 1979, and child tax credit was increased by £75 above the earnings index in 2009. We have in statute various indices to which benefits are linked in order to achieve various policy objectives. Obviously, one of the key policy objectives since 1999 has been raising the standard of living for families with children.

Consequently, if hon. Members look across the whole period, they will see that we do not stick to the indices. We make subjective judgments to set increases over and beyond the statutory indexation provisions. That means that, for a lone parent with one child aged five, the real terms increase in the period from 1997 to 2009 has been 30 per cent. For a lone parent with two children, it has been 50 per cent. For a couple with two children aged five to nine, the percentage change in real terms has been 27 per cent.

Another factor that we need to take into account is passported benefits. Obviously, the calculations to which the hon. Member for Northavon refers do not take account of the value of passported benefits, such as free school meals. If we were going down his suggested route, we would need to take that into account, too. Finally, when looking at those benefit levels, we need to take account of the new benefits that we introduced to supplement people’s standard of living at particular times. For example, we introduced the health in pregnancy grant and the Sure Start maternity grant.

The situation is complex. I suspect that the hon. Gentleman tabled the new clause before research was done by the Library. He had anticipated that all the  benefit levels were below the relative poverty threshold. He is smiling, so I know that I have hit the point. As the hon. Gentleman said, for a lone parent with one pre-school age child, the threshold is £205. The benefit is £235, so that family are above the threshold. As for the couple with two children, the benefit is £330, as is the relative poverty threshold, so that family is not below the poverty threshold.

I could talk about the additional support for families with disabilities, the implications of housing benefit and the differences between tax credits, but I hope that members of the Committee will accept our record, which is one of not only indexing benefits but, when opportunity allows, raising them and improving the relative position of such families. One of the crucial aspects of the Bill is that it must be based on a growth strategy for the economy. Once the economy is growing, it will, of course, be easier to be more generous with benefits—something that will remain open to us.

New clause 2 would require the Government to pursue the method of guaranteeing that the level of out-of-work benefits would be sufficient to lift children out of poverty. However, placing that guarantee in the Bill would reduce the flexibility that it provides for forthcoming strategies. It would force a focus on a particular approach to tackling child poverty that might not be as effective as other options, but we are not sure that it would be a sustainable approach to tackling poverty. We all know that escaping poverty through work has wider beneficial impacts on families compared with escaping through financial support alone. Entering work has many social benefits. It will reduce stress in the family and provide role models for children. A major problem with the new clause is the impact on financial incentives to enter employment, and we need to consider that negative impact alongside the other perfectly sensible things to which the hon. Gentleman has referred.

We must also recognise that many aspects of the benefits system are designed to provide short-term support in response to changing circumstances, such as short-term unemployment rather than long-term sources of income. The new clause does not take account of that purpose of the benefit system and could have an unintended impact on its effectiveness. As drafted, the new clause requires the changes to be introduced on Royal Assent, and that is not achievable.

Guaranteeing that out-of-work income is sufficient to lift a family out of poverty would be technically difficult to deliver. The poverty line for a year can only be calculated after the year in question has ended and once the median income has been calculated. Therefore, the Government would not know exactly how much benefit would need to be paid to a particular group of households to raise their incomes above the current poverty line.

I shall now deal with new clause 4, even though the hon. Member for Beverley and Holderness, who tabled it, is not here. On 22 October, the Committee heard evidence on the role of minimum income standards in tackling child poverty. New clause 4 proposes that the Secretary of State should have regard to minimum income standards in carrying out his or her duties, and that he or she should commission research into the subject. The Government welcome the Joseph Rowntree  Foundation’s research on minimum income standards, and we continue to follow its research with interest. However, although we recognise and appreciate the intention behind the amendment, we do not agree that the approach should be enshrined in law.

The Government have consulted extensively on the long-term measure of child poverty. Minimum income standards were ruled out because different research methods tend to make different assumptions and it is difficult to get one answer to the simple and single question: how much income is enough? Family circumstances obviously vary considerably. Even if it were possible to define income adequacy on a fully consistent basis, it would be difficult to generate a long-term robust time series, which is essential for measuring progress. In fact, the researchers explicitly say that their minimum income standard should not be treated as a poverty threshold, though they propose that it is relevant to the general discussion of poverty and living standards.

We have consulted extensively on the nature of the targets and there is widespread consensus and support that they accurately reflect the way to tackle poverty in the UK. Taken together, the four income targets in clauses 2 to 5 define a stretching goal. Achieving them will not only mean the lowest poverty rates since records began and in line with the best in Europe, but will tackle material deprivation and mean that the same families are not persistently poor. Although temporary periods of low income, such as that caused by a short spell of unemployment, can create difficulties, the most damaging effects of poverty are caused by long-term and recurrent spells of relative low income. The approach set out in the Bill—using a combination of four targets—is therefore a crucial part of ensuring that poverty does not affect children's life chances over the long term.

Finally, there were also technical difficulties with new clause 4, with adhering to the minimum income standards. With the survey techniques we use to assess household income it is not feasible to ensure that no household falls below a certain income level. That is why other targets have been set at levels of 5 or 10 per cent. rather than zero.

New clause 4 also suggests that the Secretary of State should commission research on minimum income standards. Such research is important. However, as the latest research by the Joseph Rowntree Foundation—published in 2008 and updated this summer—is robust, it would not represent a particularly good use of Government resources to seek to replicate it.

In advising the Government on their strategy, the child poverty commission will be completely free to make a full exploration of the minimum income guarantee. The Government would be perfectly happy for it to do so when it is formulating its advice on the strategy to the Secretary of State. I therefore hope that the hon. Member for Northavon will accept what I have said on these matters, see that the Bill puts in place measures for achieving improvements in the incomes of our poorest families, and withdraw the new clause.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The first half of the Minister’s reply—“We have put benefits up by more than inflation”—was the answer to a different question. I do not dispute the statement, but that was not the point of either amendment. The point was, “Are benefit rates set relative to something  real?” The fact that they are higher than they were last year, plus a bit, still does not make them relative to anything real.

The Minister said that the Government want flexibility, but the only flexibility that my new clause 2 prevents them from having is the flexibility to pay benefits below the poverty line. She made a serious point about the difference between short and long-term support. If the Government were to commit to those who are on long-term benefits—for example, the children of the long-term sick might be guaranteed not to be living on poverty benefits—that might represent progress. She seemed to make two conflicting comments. One was that there would not be minimum income standards because people would disagree on how to set them, and the other was that she did not want to commission research because the Joseph Rowntree Foundation has just published robust research. If we could not have statistics because people disagree on how to obtain them, we would not have the Bill because there are plenty of variations in the figures that we have. That is not a credible argument.

When we heard evidence, it was pointed out that a young woman under 25 is allocated £50.95 a week to live on, but evidence suggests that £43 a week is needed for food for a decent, healthy living standard. Fuel and other bills cannot be paid from the remaining £7-odd, so young women in that age group who are on benefit are, by definition, eating less than is healthy for them. If they then become pregnant, they will at that time have been eating unhealthily.

Budget standards and minimum income standards would enable us to consider what such young women need for a decent standard of living, and to make that the benchmark. Fiscal considerations would determine whether we hit the benchmark, but not knowing what the benchmark is is unacceptable and inexcusable. I know that the hon. Member for Beverley and Holderness will not press his new clause, and that is a shame because it would add something to the Bill.

I accept that new clause 2 would immediately incur a lot of cost, and that there are difficulties when measures are introduced retrospectively, so I will not pursue it, but I hope that it has given Ministers and their officials food for thought. We cannot legislate on child poverty without thinking about benefit rates relative to the very thresholds that we are enshrining in legislation. If we have achieved even that in the debate, we have achieved something. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.


That certain written evidence already reported to the House be appended to the proceedings of the Committee.—(Mr. Timms.)

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Photo of Stephen Timms Stephen Timms Parliamentary Under-Secretary (Department for Business, Innovation and Skills) (Digital Britain) (also HM Treasury), Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills)

May I say a few words of thanks on behalf of the Committee? We have all enjoyed serving under your chairmanship, Mr. Key, and that of Mr. Caton, your co-Chairman. I thank the Clerks for the way in which we have been kept efficiently at our task. We have had a fascinating series of discussions, and we have had a thorough debate on the Bill’s content. The support from members of the Committee of all parties for tackling child poverty is encouraging.

My hon. Friends have followed these matters closely and, in some cases, for a long time. I am grateful for their help, support and arguments. The hon. Member for Northavon has great expertise in the matter, which he deployed to good effect. We have benefited from the contributions of the hon. Members for South-West Bedfordshire and for South-West Hertfordshire, and other Opposition Members.

I was particularly pleased to establish common cause with the hon. Member for Beverley and Holderness on antipathy to split infinitives, if not much else. I thank my hon. Friend the Under-Secretary for Work and Pensions, who has helped to steer her first Bill as Minister through the Committee with such aplomb and gusto.

I also thank our officials, the Hansard writers, the Doorkeepers, the police officers and all who have fulfilled their duties so ably.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

Further to those remarks, may I add my thanks to you, Mr. Key, and to Mr. Caton for chairing our proceedings so efficiently, effectively and good naturedly? May I also add my thanks to the Clerks, the attendants, the police, and the Hansard writers? I also thank the witnesses whom we heard during our first four sittings. Their evidence guided us, and was helpful to the Committee.

I thank the Ministers. The Financial Secretary is absolutely right to say that the Committee has been conducted in a good natured way. I thank him for the steadiness and calm that he brings to such matters, and I thank the Under-Secretary of State for Work and Pensions, who brought her own qualities, which the Committee has thoroughly enjoyed in the past few days, to our proceedings.

I thank the hon. Member for Northavon. It appears that his whole career was but preparation for the last few days. To see someone so in their element was a joy. However, I sympathise because this is probably as good as it gets for him.

I thank the Whips, my hon. Friend the Member for Billericay and the hon. Member for Leeds, East, for keeping things running smoothly and for some Divisions where there was a bit of excitement. The clever use of the conventions of the House by the hon. Member for Leeds, East to ensure that the Bill was unamended never ceased to impress.

I should particularly like to thank my hon. Friend the Member for South-West Bedfordshire for his sterling work. He brings an almost passionate expertise to this issue and is highly regarded by all those who are focused on it.

In comparison with the Finance Bills, of which I have more experience, Back Benchers from all parties have made considerable contributions. I thank my hon. Friend the Member for Henley, whose expertise on local government matters was valuable, and my hon. Friend the Member for Beverley and Holderness, who enlivened the Committee with his forthright views—he was never knowingly understated—and added a great deal to our Committee.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I associate myself with the remarks that have already been made. My hon. Friend the Member for Edinburgh, West graciously allowed me to hog the amendments that we moved. He was champing at the bit and I am grateful to him for allowing me to let rip.

If I were to table an amendment on Report to delete paragraph 19(1) of schedule 1—the disqualification of hon. Members of this House from the chairmanship of the child poverty commission—I hope that that would be approved without Division, just for fun, really.

I associate myself with the comment made about the positive nature of this Committee. During the Committee stage of my first Bill in this House in 1997, Government Back Benchers were literally doing their Christmas cards. This has been quite different. All the Labour Back Benchers are knowledgeable, have a track record  and a lot to contribute. I appreciate their tabling their own amendments and making their own arguments, enriching the quality of our debate.

We have given the Bill a good going over. I am only sad that we cannot get straight on with Report and that we have a few weeks to wait. I thank you for your chairmanship, Mr. Key, and look forward to serving under you again.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Committee rose.