The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thank noble Lords who made such excellent contributions and, in particular, I thank the noble Lord, Lord Kirkwood, who brought up this important topic for debate in this House. I welcome the opportunity to set out this Administration’s approach to poverty.
The recently published State of the Nation Report sets out in stark terms the challenge that this Government face in combating poverty. It shows that the UK is a country where worklessness and welfare dependency are much too prevalent. A higher proportion of children live in households where no one works than in any other EU country. In total, more than one in four adults of working age are out of work. That fact underpins the concern expressed by my noble friend Lord Sheikh. Furthermore, around 1.4 million people have been on out-of-work benefit for nine or more of the past 10 years and at least 12 million working-age households receive financial support from the Government each week. This costs no less than £85 billion a year.
I bring noble Lords’ attention to the National Equality Panel’s report that was published in January and found that in England the median total household wealth in the most deprived tenth of areas is £34,000, while in the least deprived tenth of areas it is £481,000. Those statistics emphasise the concern that the right reverend Prelate the Bishop of Blackburn expressed about inequality.
However, poverty is not merely about inequality of income or assets. The previous Government spent £28.5 billion on tax credits in 2009-10, yet child poverty has fallen woefully short of the target of halving it since 1997. It therefore seems that simply increasing incomes will not improve the position that this country finds itself in. I can assure the noble Lord, Lord Kirkwood, that we are maintaining the timetable on the child poverty commission, and that it will be set up, as planned, over the summer. It is equally significant that the health gap between those from high and low socio-economic backgrounds is wider now than in the 1970s and that the gap in educational attainment between children from wealthy and deprived backgrounds remains high.
Neglecting the interconnectedness of the causes that drive poverty is a recipe for failure. It is with this in mind that I welcome the Prime Minister’s announcement of an independent review of poverty in the UK to be led by Frank Field. The review will look at how we measure poverty and how the home environment can influence educational achievement. Crucially, it will also stimulate debate on the nature and extent of poverty in the UK and make recommendations on how we reduce poverty and enhance life chances for the least advantaged. Without wishing to second-guess the outcome of that review, I am glad today to play some part in that broader debate.
I want to outline four of the most important causes of poverty and give a flavour of the measures that this Government will take to combat them. At the same time I will address the concerns that were so well expressed by the noble Lord, Lord Northbourne, about a purely income-driven approach.
First, we know that a stable home life can make a huge difference to the health and well-being of our children, which is why this Government will, among other things, bring forward reforms to the current tax credit system, removing the material penalty for claimants who live together. I can assure the right reverend Prelate the Bishop of Blackburn and the noble Baroness, Lady Howe, of the coalition Government’s plans to take Sure Start back to its original purpose of early intervention, to increase its focus on the neediest families and to better involve organisations with a track record of supporting families.
I should also like to take this opportunity to refer to the early involvement issues raised by the noble Baroness, Lady Howe. At this important point of reform, we should take the opportunity to ask fundamental questions about the care system we want for children. We know how important the early years of a child’s life are to their cognitive and social development. We should be committed to meeting the challenge of giving the best possible start in life particularly to those vulnerable children who come into care.
Secondly, it is clear that addiction to drugs and alcohol is one of the most damaging causes of poverty. Estimates suggest that almost 80 per cent of problem drug users are on benefits, often for many years and with no realistic prospect of either recovering or finding employment under the current system. My department will bring forward proposals for a refreshed substance misuse strategy that will move away from focusing solely on heroin and crack cocaine and include all drugs and alcohol. These proposals will more effectively support addicts to sustain a drug-free recovery and employment.
Thirdly, a lack of education and skills traps many people in poverty. Improvements in skills can help to reduce child poverty and crime, and improve health and job satisfaction and the ability to perform non-work-related tasks such as managing household finances.
Fourthly, the Government’s work strategy needs to be aligned with the job outcomes we want. Let me assure the noble Lord, Lord Kirkwood, on the way in which we are accelerating the work programme, which has been welcomed by the industry. The work programme will offer stronger incentives for providers to work with the harder to help. They will be paid out of the benefit payments that will be saved as a result of placing people in sustainable work. It implies that those providers will look for a holistic approach to tackling the problems of those people and they will bring much higher resources to solving some of those problems.
The concern expressed by the noble Lord, Lord Adebowale, who I am pleased to see in his place, is one of the things that I hope we will see addressed in our approach, which will start to address the complex needs of many people who need support in getting back into the workplace.
Disabled people are at a substantially higher risk of poverty than non-disabled people. Nearly one in four families with a disabled member live in poverty, compared with less than one in six families where no one is disabled. We want to make sure that work is the best route out of poverty for disabled people and non-disabled people alike. Our plans will help more disabled people to find sustainable jobs and thus regain their independence.
We must also ensure that people can enjoy dignity and security in their old age. The legacy we have inherited includes 1.8 million pensioners living in poverty today. As a first step, we will restore the earnings link with a basic state pension from April 2011 with a triple guarantee. In other words, pensions will be raised in line with earnings or prices, or by 2.5 per cent, whichever is the higher. In the long term, this legacy can be remedied only by cultivating a savings culture in which people have access to a good workplace pension scheme backed by employer contributions.
Let me turn to the many questions that have been asked. There were at least 30 of them, so while I will not be able to handle them all, I shall do my best. The noble Lord, Lord Kirkwood, urged me to provide information on the shape of the Budget and where the financial cuts, if any, might fall. I regret to have to tell him that I cannot pre-empt the Statement next week and urge him and the lobbies to which he referred to be a little more patient.
On Frank Field’s review and his approach to child poverty and the recommendations he will make, all I can say is that he is due to report in December. We await his recommendations with great interest and will take them very seriously indeed.
The noble Lord, Lord Kirkwood, also pressed me on benefit reforms. This is another area where I would not wish to pre-empt later Statements. We are looking closely at ways to unlock what has been called the “unemployment trap” or the “poverty trap” in order to try to put in place a more coherent system so that we can have what my noble friend Lord Sheikh referred to: incentives to work. We will also look to make the system much more flexible, as the noble Baroness, Lady Howe, urged us to do. She referred particularly to micro-jobs, those stepping-stone jobs that are so difficult for people to take on under the current system. We want to make that much easier.
I turn to another leading question from the noble Lord, Lord Kirkwood. He asked whether any cuts next week, if there are any, will affect the most disadvantaged and whether we will look at fraud and error costs. We are committed to helping the most disadvantaged and I hope that some of the measures that I have just discussed, such as the pensions triple guarantee, have reassured him that we take this issue seriously.
I have to draw my remarks to a conclusion. As I have said, I will write to noble Lords in response to as many of the other questions that have been put to me as possible.