Welfare Reform and Work Bill (Third sitting)
(9 years, 3 months ago)
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The Chair
A warm welcome to our four witnesses. This is an evidence gathering session. It is not a debate about the Bill. You will be asked specific questions and we would like, if possible, concise answers. Please do not feel that you each have to answer every question, although it may be appropriate. If you have something fresh to say, please feel free to catch my eye. We welcome our experts from the National Housing Federation, the Local Government Association, L&Q London Housing Association, and the Royal Mencap Society. Would you kindly read yourselves into the record for Hansard? Mr Orr, perhaps you would like to go first.
David Orr: I am David Orr, chief executive of the National Housing Federation.
Mike Donaldson: I am Mike Donaldson, a director of London &Quadrant Housing Trust.
Gary Porter: I am Gary Porter, chairman of the Local Government Association.
Alastair Graham: I am Alastair Graham, director of Golden Lane Housing, which is part of the Royal Mencap Society group.
The Chair
Thank you very much indeed. We have until five minutes to 11 for this sitting. There will be plenty of questions, starting with Kate Green.
Kate Green (Stretford and Urmston) (Lab)
Q 130130 Good morning. Thank you very much for coming. My first question is probably for all of you. Would you give the Committee your views on the proposal in the Bill to require a yearly 1% reduction in social housing rents?
The Chair
Just before you answer, may I correct a mistake? We have until 10 o’clock, of course, not five to 11.
David Orr: I think the fundamental problem from our point of view is that rents are set, effectively, by the Government, and have been for a period of time. It is 16 or 17 years since Governments first started to be involved in rent setting in the housing association sector. The combined impact of Government intervention over that period of time has been to leave a suite of rents that make no sense at all. There is no consistency. In the evidence that we have provided I have called it a shambles, and I think that that is a fair description of it. You have neighbours living in identical homes, whose financial circumstances are broadly identical, paying vastly different rents. This is not of our making.
The specific proposal to cut rents by 1% per annum for four years, depending on the rate of inflation, means a difference to people’s legitimate business planning expectations of a reduction of around 13% or 14%, or £3.8 billion taken out of housing association business plans. This is because the rate settlement from May 2014 was 10 years at CPI plus 1%. It was a rent settlement agreed with Government and introduced by Government—not by us, but by Government.
As a result of that settlement, designed to give long-term certainty in business planning, a number of associations have organised long-term debt on an assumption of what would happen with rates. Large-scale voluntary transfer organisations entered into contracts to buy the stock, and contracts with the selling local authority, based on rental assumptions signed off by Government. The decision to reduce rents by 1% per annum breaks all of these commitments. Although inevitably sometimes Governments do things we like and sometimes they do things we dislike, we have always been able to rely on commitments made by Government. On this occasion, those commitments have been broken and are causing very considerable difficulty for some housing associations.
I have one further point. This is one of these occasions where a single measure imposed on everyone does not have the same impact on everyone, because of all of those rent changes and that rent thinking. I will give you one example. There is a housing association whose target rent is £86 a week. Their present rent is £48 a week, and this will take them back down to £46 a week. If your rent is already 25% above target rent, it means that you can do less, but it is a manageable proposition. For that housing association it is an existential crisis.
Kate Green
Q 131 Can I just pick up on one thing that Mr Orr said? You said that you had been living in a world where effectively rent has been set by Government, so is it wrong for the Chancellor to have suggested, therefore, that social rents have risen out of control?
David Orr: The extent to which social rents have risen is specifically and precisely because of a series of decisions made by Government. These decisions have been made in consultation and negotiation with the sector, unlike this present proposal, but these decisions are Government decisions, not decisions made by individual housing associations, which is why our evidence proposes that at the end of the four years Government should legislate to withdraw from rent setting altogether and relocate responsibility where it belongs—with the boards of housing associations.
Mike Donaldson: From our point of view, next year we will have £11 million less because of the decision to reduce rents by 1%. By year four that will be a £60 million gap, which we will have to plug to carry on with our plans to build homes. We based our business plans on the deal—it was described as a deal with Government, which was a 10-year deal—and of course, as David said, we have funding lines in place to build homes based upon that income. Now we are going to have to plug the gap, and we have to do that in short order because, obviously, we have building expectations; we have a plan to build 50,000 homes. As a result of this, that will be reduced by 18,000 homes, unless we can plug the gap. Our intention is to plug the gap. We want to get back to 50,000 homes, and the intention is to build as many social homes as possible.
Our concern is also that, although there is an expectation in the Bill that this is a four-year deal, there is no promise going forward. There is uncertainty about what the rent regime will be beyond 2020. For us, and for our funders, need a bit more certainty. We have already had one deal ripped up; we do not know what is going to happen in the future.
Gary Porter: The local government perspective is pretty much the same as David’s. Obviously, we fully support the Government’s aim to drive down the cost of the housing benefit bill. It has grown like Topsy over the last 10 years and is definitely unsustainable. The trouble is, this is probably the least sustainable way of bringing it down. It will cost—as we have heard from other people—a lot of new homes being built.
The only way of sustainably bringing down housing benefit is to build new homes. We do not have a sufficient supply of affordable homes; we are pushing more and more people into the private sector, where rents are considerably higher—about £50 a week more expensive than in the state sector—and we need to be able to build more homes. We think, across local government, that this is probably going to cost us about 19,000 homes, which is 19,000 times £50 extra a week on housing benefit. That will cost the country more money in the long run.
I can understand, in the short term, why it sounds like a good idea. The Treasury is right, rents have gone up considerably in the last few years but, as David said, that is as a direct result of Treasury policy. We were told how much we had to put our rents up, and we did it—most of us. You can’t blame us for it being that. As David said, people’s business plans are built on an assumption that rent will be at a certain level. Councils across the country that still retained their council houses were compelled by the Treasury to buy them back a few years ago, which we did, but that was based on a business model with rents being the way they were. We are now in danger, probably in four or five years, of most of those councils coming in with a big box of all the keys to their houses to give them back to the Treasury, because we will not be able to sustain the mortgage payments that we have on them.
The whole thing is counterproductive to what the aim needs to be. We have a vast disparity in rents. I think the average council rent is £82, registered social landlord rent is £90-something and the private sector is £137. It is no good just attacking one part of the problem; we need to tackle the cause of the problem, which is not enough housing. If I had a magic wand, or at least the ability to get the Treasury to do what we need it to do, I would take council houses off the public sector debt book. Let us borrow against the value of the stock that we have. We can build you more homes, which will bring down your housing benefit bill.
Alastair Graham: From our point of view, there are really two main areas where we are very anxious about this. We provide housing for people with a learning disability, and the fear is in respect of both existing tenants and potential new tenants.
Unless there is an exemption for supported housing, it will mean that for the several hundred of our properties that we currently lease from a head landlord, when those leases come up for renewal and the head landlord wants the same or an increase in the head landlord rent, we simply will not be able to afford to pay that, because our income will be reduced by the amount set out in the Bill unless we get that exemption. It means that these people will face a very uncertain future and may even have to be housed in very inappropriate, and probably much more expensive, accommodation elsewhere.
The second impact is in respect of new tenants. Some MPs will know that we have successfully launched two bonds over the past couple of years; they have raised £21 million, and we have invested all of that in new housing for people with a learning disability. It has not cost a penny of central Government grant. We had exciting proposals to expand and develop that to provide much more housing through private investment. It is going to be practically impossible to get that private investment with these proposals, because people are not going to want to invest in a business plan that shows the rental income going down year on year over the next few years.
What is really needed is an exemption for supported housing, which would not in any way detract from the Bill’s main thrust to reduce the housing benefit bill. In fact, it would almost certainly save money overall to the public sector, because it would enable us to house people in community-based settings, which is where they will typically want to live. It is usually where their parents want them to live—often just round the corner from them—rather than in expensive, remote institutional settings, far away, that cost the public purse more money. So we would really urge an exemption for supported housing.
Kate Green
Q 132 Could I ask for your comments on a suggestion made to me that if this legislation precedes as currently proposed, there should in fact be a choice for some housing associations to accelerate the increase and take it in the first year or two, rather than it being 1% per annum? Have you any comments on the pluses and minuses of that suggestion?
David Orr: That would be even more destabilising for most business plans, because what you do is bring forward the reduction in rent, and once that reduction is in, it is there in perpetuity. That would just add to the amount being taken out of business plans, so it is not a helpful proposal.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr Shailesh Vara)
Q 133 Good morning, gentlemen. I just have a few brief questions. For those who are on low incomes, would you agree that the reduction will be beneficial?
Gary Porter: For those who are on low incomes but above housing benefit level, yes, by about 80p a week. For those who earn money but not enough to take them out of housing benefit, no, it will not make any odds. For council tenants, the biggest savers will save about 84p a week. Obviously, if you do not have a lot of money, that extra £1 a week will be a benefit, but there are better ways of doing it.
Mike Donaldson: In L&Q terms, 54% of our residents will not see any benefit at all, because the benefit is to the Treasury—the taxpayer.
Emily Thornberry (Islington South and Finsbury) (Lab)
Before you go on, can I follow this up?
Mr Vara
Q 136 I note what you say about comparability, but you will be aware that between 2004 and 2014, average social rents rose by more than 60% compared with 23% in the private rented sector. Notwithstanding what you said, would you agree that the reduction in social rents will be able to bring some sort of parity between the private sector and the social sector?
Gary Porter: It is the complete reverse. If you force our rents down and allow private sector rents to go up—
Mr Vara
Q 137 Hang on; you say “allow”, but the private sector operates independently. The disparity at the moment is that one has been going up a lot more and the other less so. As I say, look at the figures: between 2004 and 2014, average social rents rose by more than 60% compared with 23% in the private rented sector. Given that this has gone in a certain direction in the past 10 years, if it were to go in the same direction in the next 10 years, clearly one will go up less than the other.
Gary Porter: Private sector rents will go up as a result of this, because there will be less public sector houses built. That will push up the demand in the private sector, which will allow private sector landlords to push their rents up more. That is the way the market works.
David Orr: Sadly, we don’t live in a world that is that simple and straightforward. Social rents going up by 60% is a specific and direct consequence of Government policy to reduce the amount of capital investment in new supply through housing associations, while still wishing to see the same level of delivery.
In the 2010 comprehensive spending review, when capital investment in new supply through housing associations was reduced by 63%, the coalition Government set us a challenge to deliver the same number of new homes or more, specifically by introducing a new rent regime called the affordable rent regime, with much higher rents. That was a Government proposition; it was not asked for or particularly supported by the sector. Having created affordable rents that are designed to be set at 80% of market rates and therefore responsive to what is happening in the market, rebased every time there is a new letting, the Government now want to reduce the rates on those. It is not consistent; that is the problem.
Housing and housing investment is a long-term business. We borrow money and organise finance on a 30-year basis, and that kind of cavalier approach—up one year, down the next; capital subsidy and then changing it to revenue subsidy—plays havoc with the ability of organisations to make the commitments they have entered into.
Emily Thornberry
Q 138 You have been asked a question about those on low incomes and the impact on them of rent going down, and I wanted to pick that up. I wonder perhaps if Councillor Porter particularly might be able to answer this. If rents go down by 1%, will that have an impact on the amount of money that local authorities have available to do repairs, and can you see that having a long-term impact on the service that is available to council tenants?
Gary Porter: Well, yes. Whatever money is taken out of the system will prevent us either, in some cases, from maintaining the homes in the way that we would like to maintain them, or—more importantly from a Government perspective, I would suggest—from building new homes to reduce the long-term housing benefit bill. It will in a few cases have an impact on the ability to maintain homes properly, but I hope that my members would find a way of prioritising making sure that people still live in fit, decent properties. We have a good track record over the past 10 years of improving the high quality of our housing stock, and I cannot see any council easily going back on that. They will make other decisions, other than reducing maintenance, but that will be investment in their value.
Emily Thornberry
Q 139 I wonder—again, Councillor Porter and perhaps Mr Orr could answer this—to what extent we think that the cut in social rents will have an impact on the overall growth in spending on housing benefit, compared with a similar policy applied to private sector rents. I think, Councillor Porter, you touched on this. We are looking at the differences between social rent and the private sector, and if the Government want to cut back on the housing benefit bill, and therefore cut social housing rents by 1%, that might have one impact, but if a similar policy were to be applied to the private sector, how much more housing benefit would be saved?
Gary Porter: Yes, but you might then end up with people in the private sector deciding that they do not want to be letting to the people you need to house in those properties. Don’t get me wrong, I fully support the idea of not spending £20 billion-plus a year on housing benefit—it is a crazy system. We should not be wasting that money that way, but the only way of sustainably stopping that money being spent is to build more homes. We need, one way or another, to build more affordable homes for people on low incomes to live in. That is the cheapest solution for the country.
Emily Thornberry
Q 140 You are here speaking on behalf of the Local Government Association, which obviously is a cross-party organisation, and I believe that you are Conservative councillor.
Gary Porter indicated assent.
Emily Thornberry
Q 141 I will choose one more question to ask. I think, Mr Orr, you touched on the effect of the cut to social rents—or the Government enforcing a cut—of 1%. You said that housing associations have been pushed into the 80% affordable rent bracket. I wondered what the effect of the 1% cut would be on housing associations’ ability to build, versus pushing your tenants into 80% affordable rent, or 80% rent, instead.
David Orr: Our initial calculation was that in the absence of other mitigating action, the impact of the 1% cut would be a minimum of 27,000 homes lost—
Emily Thornberry
Q 142 So that is 15,000 with local authorities and 27,000 with housing associations per year.
David Orr: Yes. It could be more than that, but what is happening is that the housing associations are looking all the way through their business plans and making decisions, trying to prioritise how they deal with the cut. The truth is that some housing associations have already started the process of making members of staff redundant, and often these are people who are doing the work to support people’s tenancies, such as financial inclusion staff or neighbourhood support staff. So it is difficult at this stage to be absolutely clear, but certainly the options that people are exploring include doing more under the affordable rent regime, with more conversions to affordable rent, or more new homes for shared ownership, rather than for social rent. That will play out over the next year, while people come to terms with the impact and recalibrate their thinking about the future.
Some housing associations in high-value markets are increasingly building for market sale and market rent, partly because that is a useful product in the market and partly to generate profit so that they can create their own cross-subsidy for affordable and social rent, and for shared ownership. But that does not work in low-value markets in the north of England and elsewhere.
Emily Thornberry
Q 143 So they are building for private sale in London and building for social rent outside London.
Paul Scully (Sutton and Cheam) (Con)
Q 144 You have touched on a few areas. In 2014, the housing association sector produced a surplus of £2.4 billion. The Government assessment is that the sector is financially robust. Do you agree with that, and are you well-placed to deliver efficiency savings to manage the reduction? If you agree, could you outline some of the ways you might look at doing that, beyond what you said?
David Orr: I think that, in truth, there is no sector anywhere that is not still capable of making further efficiency savings. That is as true in our sector as it is anywhere else. Specifically, Government direct investment in housing associations is at a very low level. Ten years ago, when the Government put in a pound of public money, housing associations were generating £1.60 of private investment. Now, the Government put in a pound of public money and housing associations generate £6 of private investment; I think that is a pretty impressive efficiency gain. To be able to do that, housing associations have to be financially robust and be able to generate surpluses that give confidence to the investors in our sector.
It is cause and effect. If you create an environment in which you require people to be social enterprises and behave in an entrepreneurial way, you need to be able to generate the surpluses. Most of it is not available cash. In our sector more than anywhere else, surpluses are not paid as dividends to shareholders; they are reinvested in building new homes and providing services. Yes, there is apparently an amount of surplus that could be squeezed, but if you squeeze the surplus you get fewer new homes.
Paul Scully
Q 145 Can I ask Councillor Porter and Mike Donaldson whether there is a way beyond what we have already talked about for the Government, local authorities and housing associations to create further efficiency savings, with all three working together?
Gary Porter: All three working together? There are big tranches of other Government Departments that own land in areas that are controlled by councils that could be building more homes. If you could speak to the Ministry of Defence or the national health service—any of the big landholding Departments—about releasing that land to local authorities to add value by putting planning permission on them, we could use that for pushing out private sector rent and private sector buy to sell. We could put public sector cheaper rents on there; we could do whatever you wanted with it if you freed up the land. Trying to get Government Departments to do it is difficult—that has been the case for the 15 years since I became a councillor. It does not matter which party is in government it is, the one thing that whoever is in charge of a Government Department does not like doing is releasing land that they are sitting on. But we could all work together quite easily.
Paul Scully
Q 146 Obviously, in London you got the London Land Commission to release some of the Greater London Authority land and Transport for London land.
Gary Porter: Yes, but the rate of the One Public Estate stuff is very slow. I still think that there are probably quite a few cases of underreporting of assets and things. There are some imaginative things. We have made a few suggestions to the Treasury, which I will not say in this room because it might scare the horses elsewhere. There are quite a few things we could do to work together to achieve a better outcome. It comes back to the same thing: we need more homes. That is the only way of sustainably bringing down the bill.
Paul Scully
Q 147 The current intention of the legislation is to have in place exemptions that are broadly the same as those already in place in the rent standard. Does the panel believe that the exemptions in the rent standard are the right ones?
The Chair
Shall we hear from the others—Mr Graham and Mr Donaldson?
Alastair Graham: The exemption needs to be couched in the widest terms possible to ensure that people with learning disabilities and other vulnerable groups are properly protected from the impact of the legislation. It is fairly widely recognised that legitimate extra costs are involved in housing people with learning disabilities and other vulnerable groups. However the exemption is phrased, we need to make absolutely sure that we protect those vulnerable groups in the years going forward.
Mike Donaldson: We support the exemption of supported housing or specialised housing, because it operates completely differently from general needs housing. If it is not exempt, it will put very vulnerable people at risk. Given that the objective here is to reduce the housing benefit bill, we also think that housing which has been provided to people who are not in receipt of benefits should be exempt too, particularly intermediate market rent. We credit-check these people to make sure that they can afford the rent from their own means and do not need to be supported by the state. We think that that should be exempt as well. There is a technicality around affordable rent. Affordable rent, which was introduced by the coalition Government, is a gross rent and it includes a large slice of service charge. The Bill talks about rent, not about rent and service charges. That is a confusion, and it needs to be looked at. It is a technicality, but it does need to be sorted out.
David Orr: I think the Bill identifies, broadly speaking, the right areas for considering exemption. The supported housing exemption as presently defined in the Bill is too narrow, and we would argue that it should be what is called specified housing. This is housing which is not covered by the universal credit arrangement. DWP has already accepted that this kind of housing should be exempt from those normal arrangements because of the amount of care and support that is provided.
A separate area that is not mentioned at all in the Bill is relatively recent new large-scale voluntary transfer organisations. Their business plans are very much under pressure, because they entered into 30-year contracts based on a series of assumptions about rent that were formally approved by the Government. They are not going to be able to meet their promises—or, in some cases, meet their contractual obligations—and they are under very, very severe pressure. We think that there should be exemptions there.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Q 148 Thank you all for coming, and for the GSCE economics refresher for the Minister, which was really useful. My question comes straight back to that issue of supported housing. The point was made that in the previous changes of universal credit and the benefit cap, there were specific exemptions for supported housing. Why do you think that the Government have failed to make the same exemptions applicable to this change? Were discussions held with any of you before the Government announced their plans? What impact do you think it would have on the services in the longer term if the full specified accommodation exemptions were not made?
Alastair Graham: No discussions were held with ourselves, and I think that that is the case across the sector more broadly as well. The impact, as I said earlier, will be felt by people who are some of the most vulnerable in our society. Most of them do not work. Only 7% of people with a learning disability currently work, and most of them would still fall within housing benefit. In relation to the answer to a previous question, they will not actually feel any benefit from the reduction of only 1% that would apply to them. Because there is no explicit exemption in the Bill, this is causing a lot of anxiety among individuals with learning disabilities and their families, because they simply do not know what is going to happen.
I understand that the Bill makes provision for the Secretary of State to make further exemptions down the road, but until we know what those exemptions are going to be and how they will be couched, there is an awful lot of uncertainty. This is causing anxiety which I think is largely unnecessary, because I do not really believe that the intention behind the Bill is to embrace supported housing. I urge clarification on this as soon as possible, so that people are not placed in that position. We are here in September, and we are only talking about April. It is not very far away. We will need to send out rent letters in the near future. We need to be able to give some reassurance, both to our existing tenants and their families and to potential investors if we want to carry on trying to get private investment at scale. As I said earlier, that is going to end up saving money for the public purse, not costing money.
David Orr: It feels to us as though there is little clear explanation as to why this more limited category is in the Bill. If the Government have already accepted that specified accommodation is different, then they ought to accept that across all of the arrangements that affect it. I think you would have to ask the Chancellor why this decision has been made, but there is a very strong case for ensuring that all specified accommodation is exempt from this measure.
Neil Coyle
Q 149 We are primarily talking about accommodation for people fleeing domestic violence, people with learning disabilities and mental health problems, and homeless accommodation. They are exempt elsewhere. You are suggesting that this would cause complexity rather than simplification, which is something that the Government are striving for. Do you think that this has come about by design or by accident? Do you think it was a drafting problem? I notice that the Minister was shaking her head, but I hope that there will be clarity that this was an accident rather than a deliberate omission.
Neil Coyle
Well, I am asking it. Do you think it was design or accident?
David Orr: I am not prepared to opine on the thinking of others, but it will not aid simplicity in a very complex rental environment. It is just another level of complexity. The long-term implication is that there will be less housing of this kind if this measure goes through. I think that will be problematic.
Jess Phillips (Birmingham, Yardley) (Lab)
Q 150 I am terrible at parliamentary protocol, but I feel that I have to declare now. If you look in the Register of Members’ Financial Interests, you will see that I worked for Women’s Aid within the past six months; there it is, on the record.
I want to get some further answers on supported accommodation. It is my experience that, with the reduction of funding for Supporting People and other local authority supported housing schemes, housing benefit-plus, as we would call it in supported accommodation terms, has picked up the slack for keeping those places open. There are lots of refuges and lots of places like those you are describing for people with learning difficulties where funding for Supporting People was reduced. Organisations acted well to keep opening new beds for vulnerable people through housing benefit regulation. Will this have an effect on the supply of accommodation for, for example, victims of domestic violence, where there has already been a reduction due to the cuts in Supporting People? I ask you, Mr Graham.
Alastair Graham: I do think that the implication is that it will be more difficult to provide full supported housing and new supported housing for many types of vulnerable groups because—firstly, from a private investment point of view—it is difficult to lever in private investment on its own or in combination with capital grant, if you have to show a business model in which your rental income is reducing year on year for the next four years but there is profound uncertainty beyond year four.
As David mentioned earlier, we thought, in the sector, that we had some certainty on this for 10 years and it was much easier to have those conversations with private lenders on that basis. Any kind of new housing or new proposition that we want to make will be a lot more difficult if we have to have a business model that shows that reducing rental income.
Jess Phillips
Q 151 Will any excess charge that you charge the tenant—in almost all supported accommodation an excess is usually charged directly from the organisation to the tenant—have to increase, thus increasing the cost for vulnerable people?
Alastair Graham: We would need to look at all sources of income coming into the equation to see if we could still do something to make it possible to provide housing for vulnerable people. That is why we are in this business. We want to provide housing. We know that there is a huge, desperate need for this type of housing with the appropriate care and support. Unless there are the kind of exemptions that we have talked about, these reductions will just make it more difficult to provide this kind of housing.
Jess Phillips
Q 152 Finally, to clarify, do you think that this funding reduction could mean that, for example, victims of domestic violence will directly be charged more for their rent by third-party providers of this type of accommodation, because of a reduction in housing benefit?
Alastair Graham: I’m not sure, to be perfectly honest. I cannot say.
Anna Turley (Redcar) (Lab/Co-op)
Q 153 I would like to go back to the points about the financial robustness of housing associations and surpluses and so on. David, could you tell us a bit more about the geographical disparity in that? It is my understanding that, particularly in terms of assets, housing associations in London will be substantially better off than housing associations in, say, Teesside in my area. Could you say something more about what that geographical picture looks like, and the different geographical implications of this policy?
David Orr: Yes, of course, you are quite right that the basic financial strength of organisations varies hugely. If they are in an area where assets are very high value, their business has a greater degree of financial robustness underpinning it than an organisation in an area where the asset value is very low. It is more possible in some parts of the country to trade assets, and therefore maintain financial stability, than it is in others.
The impact goes back to one of the things I was saying earlier. This is a measure that sounds simple, single and straightforward, but it has a profoundly different impact for organisations in different parts of the country. In my introductory remarks I said that for some organisations, not because they are inefficient but because of accidents of history and geography, this decision could mean that they will collapse.
Having an efficiency challenge is one thing, but imposing a new measure that has the direct effect of making it impossible for good, well-run, well-managed, efficient organisations to survive is not helpful.
Kate Green
Q 154 There are other measures in the Bill that will have an impact on housing associations and local authorities in relation to rent. I am thinking particularly of the four-year freeze and the reduction in the household benefit cap. Can I start by asking Councillor Porter your assessment of the overall effect of those measures in the Bill on local authorities and, in particular, pressure on discretionary housing payments?
Gary Porter: For the purposes of what we have been saying today, we have put the freeze and the reduction in the same space. So, all the numbers that we have used have been like the £2.6 billion that we are going to be light because of the freeze and the reduction. They are not different numbers; they are the same numbers.
In terms of the impact of discretionary payments, I am afraid that I cannot answer that at the moment, but I will ensure that one of the members of staff who are supposed to be minding me today has made a note of it, and we will give you that back in writing.
Kate Green
Q 155 What has been your experience of managing the household benefit cap since its introduction in the previous Welfare Reform Act?
Gary Porter: It has been a variable picture across the country. Some areas have been affected more than others, as you would expect. Any national measure applied equally across the whole country is bound to have a different effect, depending on where it lands.
Kate Green
Q 156 Do you think that what is introduced in this Bill, which has a different level of cap for London and for the rest of the country, is a useful measure? Do you feel that these levels are about right?
Gary Porter: I would leave London councils to argue the case for or against issues for London. I am not very well versed in the specific impact on London. Again, our office will give you an answer to that in writing.
Kate Green
It would be very useful if there was additional written evidence.
The Chair
Yes, it would be helpful. Mr Orr, I think you want to come in on this one as well.
David Orr: For me, there are two major challenges with the benefit cap. First, of course it is right that there should be a limit on how much the state is prepared to pay. You cannot have open chequebooks, and we do not argue with that, but the way that the cap is introduced does not reflect the reality of the costs that people have. For most people, the cost of feeding, clothing, transport is broadly similar across the country, but housing costs are hugely different. So a single cap, once again, is a single measure that has very different impacts in different parts of the country. I think I am right in saying that the cap has the biggest impact in the midlands.
The second thing, which we are very concerned about, is that the level of cap now means that for a household with three children or more, dependent on benefit for whatever reason, there is nowhere in the country that the rent will be covered within the cap. Nowhere. So, for any household that has three children or more, this is a particular and specific problem.
Kate Green
Q 157 And that, of course, will be exacerbated for those families by the child tax credit measures.
May I ask one final question on this point? What might be the impact on personal household housing debts? Will we see households going into debt to meet their rent as a result of the freeze and the cap?
David Orr: We already know that there are some households who have had to do that. I was in Cornwall yesterday, which is an area that has been particularly badly hit by the bedroom tax because there are very few alternative places with smaller accommodation for people to move to. We know that some people there have really struggled to pay the rent and some of them have gone into debt to pay the rent.
Emily Thornberry
Q 158 I believe that 70% of households in social housing in some London boroughs are affected by the cap. The benefit cap has particular implications for London councils, so it would be interesting to have some additional evidence on that.
Can we also hear from housing associations about the benefit cap’s effect and what the future for housing associations in London is, given the level of the cap? Are we looking at a future where housing associations will only be able to risk renting out to young professionals without children and will not be able to build accommodation appropriate for families?
Mike Donaldson: We are already seeing the impact of the previous benefit cap in terms of the households we can house in larger accommodation, so it is obviously going to get worse as it reduces to £23,000. The other thing we are concerned about is that there is an assumption that rents drop dramatically once you leave the Greater London area, and that is not true. The area around London has equally high rents, because there is a lot of commuting and so on. So there is a real concern that the £20,000 cap also has a detrimental impact on our residents.
Although we do not know for sure, because obviously we have not got all the information from the DWP, we estimate that another 300 of our residents will be affected by the benefit cap when it is introduced. The history so far has been that we have had to engage heavily with those individuals to ensure that they do not face losing their homes. The extra costs that we incur to employ staff, to get people jobs—we employ staff to give financial advice—is money that we have had to find from elsewhere in the past four years. Going forward, of course we will not have so much money, because we will be facing reduced income from rents, so there is a bind. Most of these people have never worked or have not got an engagement with the jobs market—they are starting from scratch. You have to do an awful lot of work with them to get them into paid employment.
Emily Thornberry
Q 159 Can I talk about another situation? Let’s say a family living in Berkshire might want to move into housing association accommodation. Under the benefit cap, would the housing associations want to take the risk of building accommodation for a family in case the family fell out of work and then needed to depend on benefits, because those benefits would not pay sufficiently high rent even to pay for building the property in the first place? How many housing associations are following the example of Moat, which says that it cannot afford to build two and three-bedroom houses any more because of fear of the benefit cap?
Mike Donaldson: Well, the original benefit cap mainly affected larger families and it was four-beds that were mainly affected, so we have had difficulty letting some of those properties because the people who we would normally house cannot afford the rents. It is not a significant issue, but it has begun to be an issue, and it will just get worse because we are now talking about the smaller bed sizes—not two-bedrooms, but three-bedrooms. In London, they are going to be much more difficult to let at the rents that we are talking about. So it will just get worse, and by year four of this regime I think we will have a substantial issue.
Emily Thornberry
Q 160 I was talking not just about renting, but about housing associations not being prepared to build family accommodation in the south-east because of a fear of their tenants becoming unemployed.
Mike Donaldson: I think you will see people developing smaller homes, because people can afford them. I accept that it may lead to overcrowding down the line, but that is where the pressure is.
The Chair
Q 161 Colleagues, we are approaching the end of this witness session. Does anyone have a final, burning question that they would like to put to our very expert and concise panel? David, would you like to add something for the record?
David Orr: May I say two things? One is a very specific plea on behalf of large-scale voluntary transfer organisations that have rents way below target. Under the existing arrangements, they are allowed to re-let at the target rent, rather than at their existing rent; as currently drafted, the Bill will not allow that to happen. Please could we put that back in? It would make a substantial difference to those organisations and would cost almost nothing.
Secondly, on the previous conversation, housing associations are trying to make sense of that issue. There is a huge commitment to continue to deliver the mission. Housing associations are mission-driven organisations and want to be able to provide good-quality accommodation for people right across the income spectrum. I think we will see some two, three and four-bedroom homes being built, although I also think the incidence will diminish, but we have to think strategically and long-term about the consequences. One of my profound anxieties about the change in the Bill is that it feels short-term and that the long-term consequences have not been properly calculated.
The Chair
Thank you very much, that is extremely helpful to hear and has certainly been noted at this end of the room.
Thank you for giving us your time and expertise, gentlemen. It has been much appreciated.
The Chair
Colleagues, we will make a start. We have one witness yet to arrive, but we hope he is on his way.
It is wonderful to welcome witnesses from the Child Poverty Action Group, the Centre for Research in Social Policy and the Centre for Social Justice. Could you kindly read yourselves into the record?
Dr Callan: I am Samantha Callan, associate director for families and mental health at the Centre for Social Justice.
Alison Garnham: I am Alison Garnham, chief executive of the Child Poverty Action Group.
Matt Padley: I am Matt Padley, senior researcher at the Centre for Research in Social Policy at Loughborough University.
Kate Green
I should put it on the record that I think I am a life member of the Child Poverty Action Group, and I am certainly a former chief executive, but I will not be asking the questions in this session.
The Chair
Thank you, Kate; that is good to know. I know that Stephen Timms has three questions for the panellists.
Stephen Timms (East Ham) (Lab)
Q 162 Welcome to the witnesses.
Obviously, in the background to what this Bill does in relation to the Child Poverty Act is the controversy about how child poverty should be measured. Everyone recognises that it is quite a difficult subject. Indeed, the Prime Minister himself has argued both in favour of and, more recently, against the use of a relative poverty measure.
I wanted to ask each of the three witnesses to comment on three particular points. First, the Bill deletes all the targets around child poverty—there will be no targets left if the Bill is enacted in its current form—and I am interested to know whether each of you thinks that there should be some target around child poverty set by Government, or do you agree that removing every target entirely is appropriate?
Secondly, the Child Poverty Act requires tracking four measures, all of them related to poverty—relative poverty, absolute poverty, persistent child poverty and material deprivation—but this Bill replaces that with a requirement to publish data on children in workless households and educational attainment. I wonder what each of you thinks about the validity of those alternative indicators for assessing and measuring what is happening to children, compared with the measures in the Child Poverty Act. Thirdly—
The Chair
Shall we come to the third one in a moment? Professor Gordon has just arrived. If we ask the first two questions first, then everyone can answer the third one—or are they so linked that they must be taken together?
The Chair
Professor Gordon, welcome.
Professor Gordon: Thank you. Sorry, I went to the wrong Committee Room.
The Chair
Well, you have come to the right place now, and we are very grateful. I think you will catch up on what the questions are, then you can give your answers and we can have the third question. Mr Padley first, please.
Matt Padley: Taking the first question—should there be a target—from my point of view, that relates to whether or not there is a strategy through which to reduce child poverty, and targets related to that. If targets prevent or get in the way of doing things that actually reduce child poverty, then they are not useful. What I am saying is that the targets have to be useful and have to measure the right things.
If I can answer the second question at the same time, the measures of related worklessness and educational attainment as proposed are not necessarily measures of child poverty. It is entirely possible for households to move from worklessness to work, for instance, without necessarily moving out of low income. It is important to stress that they are not necessarily measuring what they purport to measure. I think that that relates to the first question, so my view would be that if there are targets, they need to be part of a plan of how to tackle child poverty. That is missing from the Bill as proposed.
Stephen Timms
Q 163 I think the Government’s argument would be that if you want to measure the life chances of children, you are better looking at measures of worklessness and educational attainment at key stage 4 instead of the poverty indicators in the Child Poverty Act. If you want to get to life chances, do you think that that is the right approach?
Matt Padley: I do not see why it needs to be either/or—I think both in combination. What looking at educational achievement at the end of key stage 4 will tell you or what looking at the proportion of children who have grown up in workless households will tell you is useful information, but still there is so much evidence to suggest that children growing up in low-income households have poorer outcomes that measuring the incidence of low income remains important. I am not saying don’t measure worklessness or educational attainment at the end of key stage 4; I am saying, don’t wholesale abandon income measures, just because of the recent broader economic climate that has meant that relative income measures are showing some very perverse results.
Alison Garnham: What I would like to say is that the basket of measures that we currently have is an attempt to operationalise a definition of child poverty. The most well known one that we have is the one that Peter Townsend came up with back in the 1970s. He said:
“Individuals...in the population can be said to be in poverty when they lack resources to obtain the...diet, participate in the activities and have the living conditions and amenities which are customary, or...widely encouraged and approved, in the societies in which they belong.”
No indicator is perfect, which is why, in order to try and triangulate this problem, there are about five measures in the Child Poverty Act. Some of them relate to low income and some relate to deprivation—things you cannot afford because you lack resources. Some of them relate to the persistence of poverty. If all of those go, we do not know what we are tracking these other life chance events against. If you were to add all those life chance measures to the core set of indicators in the Child Poverty Act, that would be a good thing. In fact, we have always said, why not add more indicators? That is a perfectly sensible thing to do.
The problem with what has been proposed is that by taking away all the income measures, you are no longer really measuring child poverty; you are measuring something else. Also, you are completely missing out on one of the main causes of child poverty today, which is low-paid work. Two thirds of poor children live with working parents, so if all you measure is worklessness and educational attainment, you are completely sweeping aside that group.
Stephen Timms
Q 164 The other question is: do you think there should be a Government target around child poverty?
Alison Garnham: Yes, I do. It keeps the Government honest. I think it is really important. In fact, in 2010 there was a cross-party consensus that we needed to tackle and drive down child poverty, so it is very disappointing that we are now arriving at a point where we are not even going to track it any more. It should continue to be tracked, and there need to be targets, because in that way there is something to aim at. Child poverty was reduced by 1.1 million between the baseline year of 1998 and 2010, so we were on course. We were halfway towards the target of elimination, which was 10%, even though we were not halfway to zero, which was the target the Government had set itself. So we were actually doing rather well. The problem now is that policies are driving us away from reducing child poverty, rather than that the target should go.
Dr Callan: The problem with having income targets is that they will always drive effort towards tackling symptoms and not causes of child poverty, so I would be much more in favour of a more rounded set of measures. Currently, we have only got measures to tackle what we would call two of the five pathways to poverty: poor educational attainment in children and parents, and worklessness. We know that family breakdown drives poverty. We know that serious personal debt and addictions, including gambling addictions, drive poverty, so I think we need more measures. The only thing I would say about income is simply that we need to be measuring the numbers of children who live in households where parents are not earning a living wage, or where parents have not earned a living wage for the last two years. Again, that puts the focus on earnings.
My understanding of the Government’s welfare reforms is that they have a very dynamic approach, which is what the CSJ asked for in 2009, that will help drive people into behaviour that will mean they increase their income through earnings. In international development, our approach for a very long time has been to not just give people money, but to give them the tools to increase their own life chances.
The Chair
Professor Gordon, have you picked up on what the questions are?
Professor Gordon: I think I have.
The Chair
I thought you might have done. Your answers, please.
Professor Gordon: There has been 400 years of research into the measurement of poverty in general, and child poverty in particular. The UK is arguably one of the world’s leading experts in these kinds of measures, which have been developed and have, over the years, spread across the world. They have been adopted by the European Union, by the OECD, and even by the World Bank. So we have a lot of expertise in the measurement of child poverty. The targets are very useful in terms of seeing whether resources are being allocated efficiently and effectively, and in seeing if the policies are working. So targets can be useful from that point of view.
The low income measures were originally introduced by Margaret Thatcher’s Government. The measures proposed in this Bill were originally introduced by the last Labour Government, although they were abandoned in 2007. They are all good measures, but the worklessness and education measures are not direct measures of child poverty. Child poverty is important because it is very expensive; it is not cost-neutral. Conservative econometric models have shown that the long-term consequences of child poverty cost about £25 billion, about 2% of GDP. Eradicating child poverty would be a boost to the economy and would, of course, create a much better society and much better life chances for children.
As I say, the measures of worklessness have been used before. They are part of a package of measures to which I have no objection. I support them and I always have, but they are not very specific measures of child poverty. Approximately two thirds of children in workless households are not poor: they do not live on a low income and the worklessness is temporary.
Stephen Timms
Q 165 I have one more question. You may not all be in a position to comment, but I would be interested to hear any of your opinions. One element of the Child Poverty Act was the requirement on local authorities to work with others in their area to develop a child poverty strategy for that area. There is no similar proposal in the Bill—for example, there is no requirement for a life chances strategy. In practice, were those strategies useful? Or do you think that the fact we are not going to have them in future is not a problem?
Alison Garnham: I think they were incredibly useful. They drove a lot of action and activity locally. Many local authorities set up their own local child poverty commissions and worked out what they could do to address child poverty. One of the biggest losses in losing the Child Poverty Act is that there will no longer be anything driving action at a local level. It would be a big improvement if something like that was introduced into the Bill to require local authorities to have local child poverty or life chances strategies.
Stephen Timms
Q 166 Can you give us any examples of where particularly good work was done in developing a strategy?
Alison Garnham: There were a number of local authorities, such as Leicester, Birmingham, Milton Keynes and so on. They tended to take on different characteristics in different areas. For example, in Liverpool they focused on early years strategies to improve early childhood education and care. In other areas they looked at things such as how they could manage their own benefits authority for discretionary housing payments and ameliorations of the council tax benefit scheme. In other areas, they looked at other kinds of projects and services. There was a wide variety of activity, which was very positive.
Dr Callan: Again, if we had something in the Bill that recognised that, alongside work and education, family breakdown—or boosting family stability, if you want to put it more positively—is such an important area for Government activity, then local authorities would have a lot more to get their teeth into at a local level. The use of children’s centre stock is very important. The opportunity would be created for children’s centres to do far more around a whole-family package of support, which is something the Prime Minister has talked about. The Bill could help to put some teeth on to that.
Stephen Timms
Q 167 Are you suggesting that there ought to be a requirement for local strategies to be in place, albeit perhaps that they would look rather different from the ones we have had in the past?
Dr Callan: Local strategies around life chances. As I say, if it is just education and worklessness, there are not necessarily enough levers at a local level to get local authorities working together more than they are already. Obviously a lot of local authorities already work very closely with the whole school estate in their areas, going right up to further education and universities.
I do not think that family support is a niche issue. It should be universal, in the same way that we have universal health and universal education. That is why it has to be in the Bill. I do not think it is beyond the wit of well intentioned people to come up with a measure for family stability, which would really strengthen the Bill.
The Chair
Eight colleagues have caught my eye, so we will have concise questions and concise answers, please, although it is all good stuff.
Helen Whately (Faversham and Mid Kent) (Con)
Q 168 Will the panel please discuss the mechanisms by which children move out of poverty? I am particularly interested in the connection between work and children moving out of poverty, with reference to the recent Department for Work and Pensions report that showed a strong connection between families moving into employment and children exiting poverty.
Professor Gordon: Child poverty is highly dynamic. Virtually nobody is born in poverty, grows up in poverty, lives in poverty all their life and then has children who live in poverty. That is anecdotal—it does not happen. The welfare state has been very effective in catching people just below the poverty line and giving them a chance to move up above it. The causes of poverty have been known for a long time, and they are largely structural. The reason people do not have jobs is often that there are no jobs, rather than because they are lazy. People get sick and cannot work. Their relationships break up and so on. The reverse happens to get children out of poverty. Poverty is a cycle. Local authorities have often been the first line of defence against poverty, and they are right at the forefront of the battle.
To answer the last question, it would be very helpful if there were some requirement on local authorities, as I suspect there will be in the devolved Assemblies. I do not think Wales is likely to change its legislation, which has a requirement on local authorities. Scotland and Northern Ireland are also unlikely to ignore local authorities in their attempts to reduce child poverty and improve life chances. You have to make sure you do not mistake cause and effect. A lot of family breakdowns are a result of poverty, not necessarily a cause of it.
Alison Garnham: I agree with what David said about the general routes into poverty—unemployment, low pay, becoming sick or disabled, relationship breakdown and so on. Obviously, if you reverse that, people move in the opposite direction.
We also have very good evidence, if we just look straightforwardly at the poverty statistics, for the difference made by people getting a job. Worklessness is a really strong indicator. If everybody in a household is unemployed, the poverty rate is about 70%. If one person gets a job, the poverty rate drops to about 20%. If both do, it drops to about 8%, so the impact of getting paid work is quite significant.
We also know that two thirds of children live in a working family. The issue of low pay is hugely important today in terms of child poverty. We also have very good evidence about the impact on children’s outcomes of living on these kinds of low income. Kitty Stewart did a meta-analysis of all the studies into the causal links between what happens to children and their outcomes, and the most powerful indicator of all is low income. It is most strongly related to children doing less well later in life, which is one of the key reasons why income is such an important indicator.
Dr Callan: Simply, we cannot forget how important a message it is to children when they see their parents really striving—don’t misunderstand the word—to increase their family’s living standards. Previously, there were cliff edges in tax credits. The Government were well intentioned and wanted to get people over a certain line, but it was kind of, “Once you’re in work, we’ll leave you alone. We won’t necessarily give you all that much support.” What is important about what I understand of the Government’s agenda, and which has to go alongside life chances measures, is that they will say, “We’ll hassle you, but helpfully, to make sure you are earning more and upping your skills and that you, as parents, are taking in hand the job of increasing the life chances of your children,” and showing them a really great example.
I do not want to over-simplify the root causes of mental ill health, but feeling powerless and feeling that efforts at self-improvement are not going to be rewarded can make people feel very depressed and anxious if they want to do better for their children. The Government should absolutely push towards saying, “In the efforts you make, we will be alongside you. We will help you,” rather than, “When you get over a certain level, you’re going to lose punishing amounts of tax credits.”
Matt Padley: I would echo the comments of Alison and David. It states explicitly in the Bill that rewarding work is one of the aims of this. That is fundamentally important. The introduction of the national living wage, for instance, may go some way towards that, but it still puts some people in situations where they are not necessarily better off. Certainly, making work pay is fundamentally important.
Helen Whately
Q 169 I have a few follow-up questions. That was very helpful. You described multiple factors and particularly focused on the value of work in helping children out of poverty. Well-paid work and the national living wage are connected to this. Samantha talked about the importance of supporting families’ efforts to improve their living standards. Given that, as I say, there are multiple factors, does the panel agree that measuring the range of factors is helpful in understanding poverty? Is it helpful in measuring the root causes, not just the symptoms, of poverty?
The Chair
Brief answers, please.
Alison Garnham: The root causes include income, and that is the problem: we no longer have an income measure. In fact, you will be looking just as much at effects, if you are looking at things such as educational attainment, as causes. That is why you need a core set of income measures, plus all the other things we are talking about. They are also important things to track, and they would be welcome.
Matt Padley: I agree. In terms of the causes of poverty, income needs to be measured.
The Chair
Q 170 Does anyone disagree?
Professor Gordon: Income is crucial. The last consultation on measuring child poverty received 104 responses, 103 of which wanted to keep all or at least one of the low income measures, because it is a root cause of poverty. Two thirds of children in poverty are in households in which at least someone works. Low pay and poor working conditions are a root cause. The low income is the cause of the poverty, not the workers.
Helen Whately
Q 171 I am hearing a lot of you referring to the income measure, but what are the panel’s thoughts on the way that a relative income measure means that reported child poverty falls during a period of recession, when median income falls, and rises in a period of economic growth, when incomes rise?
Professor Gordon: That is one of the major objections to that one measure. The Child Poverty Act 2010 had a series of tiered measures so you could get an overall picture. If you have just one measure, you get an artefact, but the other measures pick up on that. The relative falls, the absolute rises, the combined low income and material deprivation rises, and probably so does the persistent poverty measure. By looking at all four measures, you get a full picture of what is happening.
Matt Padley: The line is not necessarily always helpful. Just getting people over a line does not solve poverty. The bundle together indicates a direction of travel, which is fundamentally important. Without that, you cannot track the direction of travel. When all those things are moving in the same direction, you know that things are getting worse or better.
Alison Garnham: The fact that we had four measures enabled us to explain what was happening to the headline indicator. Basically, everybody was doing badly, so people at the bottom were not doing so badly in relation to the middle, but the absolute poverty indicator was going up so we knew that people at the bottom were losing income. The group of indicators together gives you a powerful explanatory tool.
Dr Callan: The only thing is that if you have a legally binding income target, we are right back to where we were before. The Government could be subject to judicial review for, frankly, doing the right thing: taking a more effective approach to poverty and tackling life chances.
Hannah Bardell (Livingston) (SNP)
Q 172 I thank the panel for joining us. I would like to pick up on the removal of the targets. It seems to me that the targets are being removed because the Government had no chance of meeting them. That in itself is a very dangerous move. I also want to pick up on some of the observations that have been made about the rise in the national wage, which as we all know is not a living wage, because the living wage has been set independently at £7.85 outside London and £9.20 within London. Even the Institute for Fiscal Studies said that the welfare cuts, coupled with the moderate increase, will lead to only a 13% benefit, and the vast majority will have their income reduced significantly. The Scottish National party believes that we should not remove the targets. Do you agree with that? At the very least, should we delay any removal so we can properly consider and review what impact it will have?
Alison Garnham: Yes, I would support that. I have said that I am in favour of keeping the targets. It is worth pointing out the kind of change that was driven while child poverty was falling. We know that as people’s income was improving and child poverty was falling there was more spending on fruit, vegetables and children’s books, and less spending on tobacco and alcohol. We saw improvements in child wellbeing in 36 out of 48 OECD indicators. It was not just about people simply getting more money; there were big impacts on what was happening to families, too. That is one of the reasons why we need to continue to track it. One of the important things about the indicators we have is that we have an income series that goes back to 1961, so we can compare historically. We can also compare internationally, because these are the measures used in the EU, the OECD and the International Monetary Fund, so we are able to see how we are doing in relation to other countries.
Dr Callan: May I point out some other drawbacks? It has already been mentioned that in the recession it looks like child poverty is falling, which does not make sense. There are other reasons why the targets were unhelpful. There is no sense of how families’ circumstances change when they move in and out of poverty across a certain line, and there is no distinguishing between those a long way from the line and those just below it. Obviously it is nuanced—you do very careful analysis, I appreciate that—but we get into this poverty-plus-a-pound issue, where somebody is just over the line but their life circumstances may not have changed one bit. It is misleading, really—
Hannah Bardell
Q 173 If I might come in, you have some specific things that you are talking about that you think should be measured. Would it not make sense to add those and not remove the other ones? Should it be one in place of the other? To me, it should be additional.
Dr Callan: I could go through more reasons. Compared with other countries I do not think we are doing brilliantly in Britain in terms of life chances yet, but if we compared ourselves Europe-wide, we are not doing too badly. Yet do we want to just say, “Oh, we’re not doing too badly compared with the rest of Europe”? No, not at all. I am just trying to build a picture of how inadequate these are. I have already talked about the Government activity that will be driven by anything, frankly, to do with income.
One more thing on what you were saying about the IFS figures. What tends to be lacking is that, first, you cannot forecast child poverty—the IFS knows that, it has tried and gets it wrong quite a lot of times. The dynamic effects are what very few projections ever really bring into play. I know people who say, “I can see the day when I’m not going to be able to have child tax credits any more, so I am planning for it—I want to up my skills, I want to up my game”. If these are people who can do that, then good, but if people know they need to but need help, that is where we need to put Government effort. We will not put the Government effort into that if we are just thinking about how much income there is in a family and are not even disaggregating that and thinking how much is earned income, which is also very important.
Hannah Bardell
Q 174 On the point about the IFS, I understand that it cannot measure child poverty, but what you are talking about is income and the effect that the cuts, versus the lift in the minimum wage, is going to have on people, which is significant. Surely a measure of income against child poverty is very important in that instance—we recognise that.
Dr Callan: If the Government activity is in raising people’s skills and raising people’s expectations of what they can do and that is where the effort is directed, with people getting help to move up and out of tax credits, it is a completely different way of seeing it.
One final thing. I do not think that we are doing this too quickly. The Centre for Social Justice has been writing about this and provoking a debate since 2007 on whether we should be simply looking at income levels or whether we should be tackling root causes. Eight years have already passed; I think we need to do something about it with the political will that is there.
Professor Gordon: Improving skills and improving the quality of services such as education and health are very important, but the scientific evidence shows that money matters. If you raise the income of children in poor families, child wellbeing increases across the whole range of measures. The targets were not met in 2010, although they were reasonably close—they are on track, possibly. When those targets were first introduced, Britain was ranked at the bottom of the UNICEF league table for child wellbeing. By 2010, as things had improved, there were fewer poor children in terms of low income and Britain had moved up to the middle of the ranking for rich countries. That is across a broad range of measures, in independent research by UNICEF.
There is, of course, also a whole lot of UK research that shows, as Alison said, that there was more money spent on better-quality food, on education equipment for children and a whole range of positive things that improved child wellbeing. Attainment among poor children also increased, in terms of education.
Matt Padley: We looked at research recently that points out that those who are most likely to gain from the national living wage are those without children, which I think adds some context. Increasing wages at the bottom is not necessarily going to have an impact on households with children.
Anna Turley
Q 175 I have been harrumphing all the way through because so many of the questions I was going to ask have basically been answered. I was going to ask the panel a very simple question. Do you think it is possible to measure child poverty and life chances, without taking financial income into account? I think we have heard a very emphatic “No”, “No”, and “No”, although I am not sure about Dr Callan. I was really shocked to hear you say in your introductory comments that financial income is a symptom, but that families and things such as addiction are drivers of poverty. I find that a very simplistic and narrow view. The rest of the panel said quite emphatically that income is a driver of a lot of the other outcomes that we see in life chances.
Dr Callan: If you look at why people have low earnings, it is not—that is why the living wage is so important, that is why doing more hours is important and people upping their skills, so that they can earn more is important, rather than just, “The Government’s going to sort it all out.” That is what I am trying to get at. We do not want to take all agency out of the hands of people and say, “Whatever you do, don’t worry. We’ll look after you; we’ll top you up.”
We should not be subsiding firms. Firms should be paying enough so that people can work their way out of poverty. Just now people have told me that it is laughable to talk about working your way out of poverty. I agree when wages are so low. That is why we need a whole package of things, but not necessarily setting targets around income levels, for all the reasons I have said.
Matt Padley: But if the living wage, for instance, is a way out of poverty, then surely it is important to measure those who have low incomes. Without a low-income measure, knowing who is above or below the living wage—
The Chair
This is not a debate among the panel. Thank you for that. Professor Gordon and then Alison.
Professor Gordon: We have just completed the largest and most comprehensive study of poverty that has ever occurred in the UK.
The Chair
Who is “we” in this context?
Professor Gordon: The University of Bristol and a consortium of eight other universities: about 120 academics were involved, funded by the Economic and Social Research Council. We looked at employment in terms of stress, control, physical conditions, security and satisfaction. We looked at the bottom 20%, the worst conditions of employment, and we found that there were very high rates of child poverty, that the health and wellbeing of children and adults where parents worked in those conditions was no better than for the unemployed.
Although it is often argued that it is a stepping stone to better employment if you go into one of these bad low-paid jobs with bad conditions, about a third of people in those jobs have been stuck there with no prospect of improvement. So it is not just about low pay in those jobs; it is also about regulation to ensure that the physical working environment is safe and that people have some control and flexibility over their jobs, and to ensure that they have some kind of security in those jobs. Those bad working conditions harm the children, as well as the adults, in those households.
Alison Garnham: I just wanted to point out briefly, in answer to what Samantha was saying, that when child poverty was falling, it was not just about raising people’s incomes. Tax credits and child benefit were important, but there were also other things going on. There was the first childcare strategy, there was welfare to work and there was a big increase in lone parent employment. In fact, the increase in lone parent employment from 45% to 57% accounts for a third of the falls in child poverty between 1998 and 2010. All of things that Samantha is talking about are still all of the things that you need to do. It is not just about improving income, but they then have an impact on the poverty figures, and that is what we are looking for.
Victoria Atkins (Louth and Horncastle) (Con)
Q 176 I want to look specifically at the troubled families programme, which is helping to tackle deep-rooted problems in families. What effect is that programme having on child poverty? That question is for all the panel.
Professor Gordon: The troubled families idea came out of some work that was done for the Cabinet Office on multiple social exclusion by ourselves at Bristol, York, the National Centre for Social Research and the Cabinet Office itself. It looked at some families that had multiple difficulties—five or more problems. They were about 2%, on a guesstimate, although there is quite a lot of uncertainty and we had data only for England. It only looks at people who have multiple problems, of which poverty may or may not have been one of those problems. It can only have quite a small effect on poverty overall. Although, for those families, high quality social work, and combined and improving services are obviously very good things, it will not affect child poverty overall.
Victoria Atkins
Q 177 Well, it will for those children.
Professor Gordon: For a small number of children.
Dr Callan: I was in the Isle of Wight recently, looking at the family hubs that I mentioned a bit earlier. They are putting their troubled families programme very much at the heart of how they are helping families right across the Isle of Wight. It does not mean that they are treating all the families as troubled families. The fairly narrow criteria have been broadened. It is enabling that transformation and reorganisation of services, so that you do not have families with multiple problems having multiple professionals trying to help them and further complicating things.
In terms of how the programme is affecting children growing up in poor life circumstances, if it is driving more effective local government working and ensuring that far more people are getting family support than they were, it can be a really a good thing, for all the reasons that I have said. It is about getting underneath the life chances—things such as why children are not going to school, why the parents are not getting into work and so on. Health is also hugely important—the mental health and addiction issues that many families face.
Victoria Atkins
Q 178 Just touching on that—I know that Anna raised this as well, and this is a very specific example—if a parent has an addiction of some sort, it can mean that the family income, sadly, is being spent to support that addiction, rather than to help the child grow up and so on. My broader question to the panel is that we have heard a lot about income, but is it not just as vital to focus on how that income is spent, as Alison said, on fresh fruit and vegetables and so on, rather than—I think you gave this example—on tobacco and alcohol?
Dr Callan: That is really important. CSJ works with several hundred organisations that are working in the community to help tackle these root causes. I have gone and visited a lot. I have talked to a lot of people who have used the services they offer. One thing that people say is, “I feel so bad about how my addiction is affecting my kids that when I get a dollop of cash I just want to treat them.” It is so understandable; it is kind of spending out of guilt. They may be buying them fantastic food, but—I am not saying this is everybody—there is a sense of “If I have money, I will buy them expensive luxuries because I had to make up for the fact that I haven’t been emotionally available as a parent.” You may think that is just an anecdote, but if it is happening in lots of families where there are addictions—that is what we are hearing from people working at the grassroots level—we have to pay attention because there may be money going to that family, but it is not, as you say, necessarily improving the future life chances for the children.
Professor Gordon: Alcohol and drug dependency are devastating for families and obviously a key issue in child protection services, but it has to be remembered that the overwhelming majority of families where someone has an alcohol dependency or even a drug dependency are not poor. They have higher incomes—sometimes very high incomes. It is a very important issue for child wellbeing and life chances, but tackling that will not necessarily reduce child poverty. There are very few households in which alcohol and drug dependency is causing child poverty.
Alison Garnham: I agree with that. Alcohol and drug dependency are not a good indicator of poverty. Troubled families is allowing and funding a lot of local authorities to do a lot of admirable work with very disadvantaged families. Part of the problem is tracking it. We do not actually have much evidence yet about how it is doing, partly because the schemes are different in different areas, so the data is not comparable. It will be a while before we are able to tell what impact it has actually had.
Victoria Atkins
Q 179 Drawing on that, the other indicator the legislation allows for focuses on children’s attainment at key stage 4. How important is that key stage to helping us to understand a child’s life chances?
Professor Gordon: The indicator will be only for England; it will not be for the whole of the UK. Also, I would have thought that was an indicator that the Education Minister should report rather than the DWP Minister. It will also change, because the grading system will change, so it will be reported and then the next set of reports will not be comparable with the previous set, so you will not know whether things have got worse or better for either of the two indicators suggested. So although it is important, it has not been very well thought through as an indicator, because it will not mean anything for at least a few years. There is also no target attached, as there is in Wales, for example.
Victoria Atkins
Q 180 You have been talking about income a lot, and the point I am trying to make is that there is an holistic approach in this Bill and the Finance Bill. We have discussed the national living wage, the higher personal allowance in tax, free childcare and so on, which are factors against which the Government will be judged on child poverty and how the low-paid are faring generally. Do you accept that these factors in the Bill are part of a general package?
Professor Gordon: The indicator will not be meaningful. It will be only for England and it will not be comparable. Because of the grading changes from A to E to 1 to 9 and because the boundaries are changing, you will not know whether it has got better or worse.
Dr Callan: I think we absolutely have to look at educational attainment. Children doing well, perhaps against all the odds, boosts their self-esteem. A really quick point: if we are saying that we are not interested in the kids of people who have addictions or high incomes, actually that high income can be drained away completely almost overnight by addictions. That is exactly the reason why we need to look at the lives of all children across our country rather than just the ones that seem to be under those financial circumstances.
The Chair
A quick response from the next two panel members.
Alison Garnham: Everybody wants a multidimensional approach to child poverty. Everybody wants to look at housing, health, education. All of these things are relevant factors and they should all be tracked, but you will not know whether you have made any progress unless you have got some indicators that show if that has improved the family’s circumstances.
Matt Padley: Many of the things you are talking about may indeed have an impact on child poverty levels and may have an impact on income. Generally, what we have all been saying is that you need something that is multidimensional, not something that just measures income.
Hannah Bardell
Q 181 Just a brief question. Alison, you touched on OECD targets. I am concerned more fundamentally that we will not be able to measure impact, but from an international perspective, will how we report our poverty levels damage the world’s view of us? Will the international bodies still be able to measure us as they do at the moment, given that we will not report in the same way?
Alison Garnham: Well, they will have to continue to do it, because of course the data still exists and the Government will continue to produce it, so they will still be able to make those comparisons.
Hannah Bardell
Q 182 Will those figures be skewed?
Alison Garnham: Not as long as we continue to conduct the family resources survey and get data from that. That should not be a problem.
The Chair
Professor Gordon, are those figures going to be skewed? We need to know.
Professor Gordon: As I said, the UK has been a world leader and the OECD and European Union have adopted our measures. So, if we abandon our measures, there is a danger that we become an international laughing stock. They will still report those measures if the HBAI—households below average income—is still collected and reported. I suspect it will be, because, as we are a part of the European Union at the moment, it is a requirement to report. So, at least for the time being, it will be reported. If it stops being reported, Britain will go from being a leader in the world to being—
Corri Wilson (Ayr, Carrick and Cumnock) (SNP)
Q 183 Much of the proposed legislation is born out of the assumption that those on benefits face the same choices as those in work. Does the panel agree?
Matt Padley: No. There is lots of evidence to suggest that people living on benefits, or with very low incomes, have very restricted choices across the board. Some of the language in the Bill does nothing to encourage integration across society; a lot of it is divisive.
Alison Garnham: I did not quite understand the question. What is the thing you think will be affected?
Corri Wilson
Q 184 Much of the proposed legislation is based on an assumption that people in work and people out of work are able to make the same choices.
Alison Garnham: Right. So you are thinking in terms of cutting different benefits? Is that what you are thinking?
Corri Wilson
Q 185 Is somebody who is out of work and relying on benefits able to make the same choices as someone who is in work and who has all the trimmings of being in work?
Alison Garnham: There are big differences between people in work and people out of work in terms of the choices they can make; that is absolutely evident. We know that children living in poverty, including those in working families—part of the problem we are talking about today is that two thirds of poor children live in working families—face constraints on what their families are able to afford. Children are not able to take gifts to birthday parties, they do not have adequate clothing and so on. That affects all low-income families.
Dr Callan: My understanding is that what the Bill is trying to achieve is to equivalise the choices—not to say, “You already have them,” but to say, “We need to make the benefit system work in such a way that you have the same choices around things like the numbers of children you have and being able to afford the number of children you have.” So I read it in a slightly different way.
In terms of us leading the world, our UNICEF reports on child wellbeing, very sadly, do not tell a good story about how well Britain has been doing, despite having leading child poverty indicators. I think we need to be very realistic about how our children are faring.
Professor Gordon: People do not choose to go on to benefits. The DWP’s own research shows that. They go on to benefits because they have little or no choice. Most people—the overwhelming majority—would choose not to be on benefits if they were able to get off them. So the idea that people on benefits have the same choices as people in work is just not supported by any evidence.
Corri Wilson
Q 186 Following on from that, Dr Callan, you talked about helping and supporting people to get off benefits. Surely that works only when there are decent work opportunities out there, and not things like zero-hours contracts. Does the cap on child tax credit not cause a bigger disconnect, making it even harder to get off benefits?
Dr Callan: There are more jobs out there than people realise, often not at the skill level they currently have. We have a massive skill shortage in this country. You are absolutely right: people have been stuck in very poor jobs, very poor working conditions. If the Government is doing what it said it would, and helping people at every stage to go through the income levels and to up their skills, and there is a culture that says, “That’s what’s expected,” that is where we will begin to see similar choices. A lot of people in work—certain professional people—think, “I want to improve myself.” Well, everybody in this country wants to improve themselves, and that is why we need to create a benefits culture to encourage, rather than dampen, people’s feeling that they can change their life circumstances.
The Chair
We have 12 minutes left for this session, colleagues. Three colleagues wish to ask questions, so can I ask, please, for brief questions and brief answers? I will call Peter Heaton-Jones, followed by Neil Coyle, followed by Emily Thornberry, who will ask the final questions.
Peter Heaton-Jones (North Devon) (Con)
Q 187 I will be very brief. I seek just one point of clarification from Professor Gordon. In your opening answer, you made a reference I want to clarify. You said certain measures in the Bill had previously been proposed in 2007, I think—
Professor Gordon: Between 1999 and 2007, under the last Labour Government.
Peter Heaton-Jones
Q 188 And what were the measures that that Government proposed?
Professor Gordon: They were part of the opportunities rule, which had a whole suite of measures of child wellbeing. There were effectively identical to the measures proposed in the Bill.
Neil Coyle
Q 189 Alison, you mentioned your disappointment at the abandonment of the consensus on tackling child poverty. What does the panel think is behind the Government’s poverty of ambition on measuring in-work poverty? Is it about the costs of measuring, or is it about a lack of faith in the living wage to tackle in-work poverty? Is it perhaps that the impact of changes to tax credits or other benefits will undermine the national living wage? In the context of the discussion about tackling the symptoms and the cause, what are the costs of getting this measurement wrong?
Matt Padley: We have already heard that the estimated cost to the country of child poverty is between £25 billion and £29 billion a year. If you are not tackling and addressing child poverty, there is a significant cost to the country. There are also costs to those children who grow up in households without access to lots of the things that the rest of society see as providing a minimum standard of living, so there are individual costs as well as national costs. Is there a poverty of ambition? Given the broader economic context and, as I said earlier, the perverse results you get from a relative income measure, it has become easier over the past few years to dismiss that measure as not telling you anything particularly useful. However, I think that in combination with all the other measures that are currently in the Child Poverty Act 2010, it does tell us something useful and it does enable us to track low income. We know that money matters.
Professor Gordon: On the subject of costs, I emphasise that we know from good evidence that growing up in poverty has long-term health consequences in terms of type 2 diabetes and coronary heart disease, which are then expensive to treat. Poor children tend to have worse educational outcomes and get worse jobs, and therefore pay less tax. So the economic costs of child poverty are quite high, particularly in the long term. Getting it wrong means that you have a worse society and less money to spend.
Alison Garnham: I agree with that. It leads to a health divide. Children who are far behind are more likely to have lifelong limiting illnesses, to die younger or even to die on the road, to be nine months behind in education and to have low self-esteem. In terms of poverty of ambition, one of the problems is that many of the current policies fall most heavily on low-income working families. For example, 60% of the cuts to benefits and tax credits have affected low-income working families. So that is definitely something that needs to be tracked to see what its impact is.
Rather than get rid of the targets, another approach would have been to say, “Well, let’s lengthen the target. We have gone through a recession and it has been particularly difficult to reach the target, so let’s lengthen the period of time that we have to actually achieve it”. As David said earlier, child poverty is very expensive. Donald Hirsch modelled this for us. The impact of high child poverty in terms of the cost of services and the cost of benefits is now about £29 billion. If child poverty rises by nearly another million, as predicted, that cost rises to about £35 billion a year.
Dr Callan: I am not convinced that there was a great political consensus about this issue before 2010. In the debates on the Child Poverty Bill, serious people— Lord Freud in the House of Lords and Andrew Selous in the Commons—raised issues such as the £170 billion that we poured into tax credits over a six-year period.
Neil Coyle
Q 190 So what was the parliamentary vote? There might have been individual voices, but what was the parliamentary vote?
Dr Callan: It was very difficult. There was no developed alternative strategy, and I think that there is now a life-chance strategy.
Damian Hinds (East Hampshire) (Con)
Q 191 All the panel have talked about low income as a driver of poverty, and that is for obvious reasons. It is almost a truism. First, could you confirm whether it is your understanding that those measures of income will of course still be measured? Secondly and more importantly, when trying to tackle child poverty, should the Government have not just a target but a relentless focus on maximising employment, supporting parents as they increase their hours, particularly through childcare, and making a very significant increase in the legal minimum that people can be paid, ultimately tied perhaps to 40% below median income?
Professor Gordon: The Minister has said that they will still publish the HBAI, and that the Family Resources Survey on which it is based will still go ahead. I do not know whether that will change in the future. Alternative survey data that the UK has to collect as part of the national accounts on expenditure and income have been used in the past. So you will be able to cobble together something, even if the Minister changes his mind about the HBAI, but the UK would become an international joke if it stopped measuring income and low income.
Damian Hinds
Q 192 And what else should the Government be doing?
Dr Callan: We have to hit this in every way, not just education and worklessness, terribly important though they are. I have already mentioned addressing family breakdown, addiction, serious personal debt, mental health and poor housing— anything that is driving children’s poor life chances. So, more.
Alison Garnham: It is a no-brainer. As you said, it is a no-brainer; we need to look at low income, because that is everyone’s common understanding of what poverty is. It is also a no-brainer that we need to look at maximising employment, supporting parents and so on. We used to have to write strategies, and that is what we will lose with the Child Poverty Act—
The Chair
I am sorry. You’re nodding, you’re happy, I have to conclude this in five minutes’ time under Standing Orders and I must give Emily Thornberry the last couple of questions.
Emily Thornberry
Q 193 I only have one question. In my opinion, we cannot have the chief executive of the Child Poverty Action Group and others in front of us on such major changes to the welfare Bill without asking not only about measuring child poverty but about whether the Bill will increase child poverty. If it does increase child poverty, how will we know and how will we hold the Government to account if they stop measuring it?
Professor Gordon: Since two thirds of children who are poor are in working families, and a lot of those families are dependent on child tax credits, if there is a large cut to that and other tax credits, other things being equal it will inevitably increase child poverty. I do not think that there is the slightest doubt about that.
Dr Callan: If we are talking about “ambition”—someone mentioned it earlier, but I think they have walked out—if we have an ambition to do all that we can to tackle the root causes of poverty, my hope is that the Bill would lay the foundations for reducing the number of children growing up in poor circumstances, which includes low income.
Alison Garnham: The Institute for Fiscal Studies has projected what existing policies will mean for child poverty. It projected that child poverty would rise by 700,000 by 2020. That did not take into account the recent announcements, so obviously that is an underestimate, and there will be more. We do not know the extent yet, but we know that some of the proposals modelled by the IFS would increase child poverty by 300,000, for example. So we are looking at something over 1 million.
Matt Padley: As David has said, there is little doubt that much in the Bill will increase child poverty. Going back to the importance of measuring it, it is really important that we know what is happening, so that we can hold the Government to account and ensure that we do not have such a high proportion of children growing up in income poverty, which has damaging consequences on their lives.
The Chair
Thank you very much indeed. I am so sorry, we could have gone on longer; it has been a fascinating session. Thank you for your helpful expertise. Professor Gordon, Dr Callan, Alison Garnham and Matt Padley, thank you so much for coming and being with us this morning.
Examination of Witnesses
Dr Kristian Niemietz and Julia Unwin gave evidence.
The Chair
We now welcome colleagues from the Institute of Economic Affairs and the Joseph Rowntree Foundation. Will you kindly read yourselves into the record, so that we know who you are for Hansard? Then Mr Stephen Timms will ask a series of questions.
Julia Unwin: I am Julia Unwin, chief executive of the Joseph Rowntree Foundation.
Dr Niemietz: I am Kristian Niemietz, head of health and welfare at the Institute of Economic Affairs.
Stephen Timms
Q 194 First of all, may I ask you both whether you think that the Government ought to have some target on child poverty, or whether that is not an appropriate thing for the Government to have?
Julia Unwin: I run an evidence-based organisation. I find it very hard to understand how you can receive evidence, measure things and then not establish some sort of target. Across government, we have stretch targets for a whole range of issues. Given the importance of this for our growing economy, I do not understand how the Government can receive the information without having at least a stretch target in mind.
Dr Niemietz: I think there should be a target. There is a problem if you use a bundle of measures that can move in opposite directions. That undermines the idea of using a target to strengthen accountability. With the four measures that we had, that did happen for a while—one indicator showed that poverty was rising, another showed that poverty was falling, and another showed that poverty was flatlining. So I think there should be a single measure and a single target, and that should be a sensible one, maybe close to the Joseph Rowntree Foundation’s minimum income standard. You can debate the technicalities—how exactly this basket is assembled—but a target can be built around a measure that reflects the living standards of people on low incomes .
Stephen Timms
Q 195 Can you develop that idea a little bit further? The thinking in the Child Poverty Act was that you had four different indicators. As you say, sometimes they move in different directions, but that means that you end up with a rounded understanding of what is going on. You are suggesting that one could devise a single figure that told you everything you needed. Can you tell us a little bit more about how you think that should look?
Dr Niemietz: Well, I wrote a paper a while ago in which the poverty line was based on the poverty and social exclusion survey. People were asked to identify what they thought were the necessities of life in a modern developed country, and it turned out there was a fairly stable consensus on that. If you convert that list into a consumption basket, and collect the prices of those goods at a regional level, then you have a poverty line that reflects a consensual understanding of what poverty means. You can still use complementary measures—say plus or minus a few items for sensitivity analysis—but you have one central measure that is internally consistent, and you do not get these contradictions.
If you use a bundle of measures, and if they can give you contradictory information, you have to have a way of trading them off against each other. It would not be a problem if you could say, “I don’t mind an increase in relative poverty as long as it is accompanied by an x% reduction in absolute poverty, or something else”, but we did not have that kind of trade-off with the four measures that were previously used.
Julia Unwin: I am very pleased to hear Kristian talk about the minimum income standard, on which we have done some joint work in the past. I would still argue for a number of different measures, because of the complexity of what we are dealing with; and I think in our modern, more complicated, world we are dealing with poverty that looks rather different from the way it looked in the past. Clearly the disposable income of any household is a very important measure, and how we understand that and determine what that is matters; but so, too, do the other measures, and I believe that the old income measure mattered alongside the others. The fact that they are contradictory, I think, does not give you a binary response; it amplifies what the Government need to do, because the tools are not all with Government. They are with local authorities; they are within the market; they are with employers, and actually we need a public discourse about that. That is what a complex target allowed us to have.
Stephen Timms
Q 196 May I ask one more question? This is really to Julia. In your written evidence to us you have commented on and welcomed both the full employment report that is proposed in the Bill and the apprenticeships reporting obligation; but you have argued for some more detailed information to be provided. Could you just tell us a little bit about what you think should be in those reports?
Julia Unwin: I think we have to understand that the world of employment has changed in the last decade. Since the global financial crisis, employment at the bottom end of the labour market, which is what we are talking about, is more precarious than it was when some of the legislation was drafted in previous decades. People are in and out of work and rarely out of poverty, and our indicators are that four out of five people who get into work are still in low-paid work 10 years on. There is very little progression; so an employment report needs to look at progression, certainty, security. Those are the measures that really matter when you are looking at the nature of employment. It is no longer simply a good thing in itself to be in work, although that may be right for all sorts of other reasons.
Stephen Timms
Q 197 You had some comments, I think, about what the apprenticeships report should tell us. Could you say a few words about that?
Julia Unwin: Apprenticeships clearly matter. We can learn from other countries about how to do them so much better, but we need to understand in fairly fine-grained detail the impact of apprenticeships and what they do for people’s life chances, as opposed to thinking that they are a process through which people go and that there are automatically positive outcomes.
Peter Heaton-Jones
Q 198 I want to move on to discuss clauses 9 and 10, which put in place measures to freeze certain elements of benefits and tax credits over a four-year period. I am keen to get your knowledge and experience on how, since roughly 2008, average earnings have risen by about 11% while average benefits have risen by—depending slightly on how it is measured; I agree that there is a grey area—about 21%. Do you think that the measures in the Bill to freeze certain elements are welcome in that they would get a bit of equalisation in the system? We should bear in mind the Government’s stated intention that they are trying to bring more people closer to work, and to make work pay—to use the slogan.
Dr Niemietz: The problem with an across-the-board freeze is that you do not really incentivise work, because you freeze out-of-work incomes and also in-work incomes, or at least that part of the transfer that is supposed to top up low incomes and thereby incentivise people to enter the workforce. If you freeze both, you lose that effect because the gap remains the same. It would have made more sense to freeze only out-of-work benefits, or even to uprate them at a rate below inflation, but not to touch the work-related top-ups, especially the 30-hours element of working tax credit, which was meant to give people an incentive not only to move into some work but, once they were in work, to move further—to move from minor employment towards something closer to full-time employment.
Julia Unwin: The benefits freeze is a huge risk for the Government to be taking, and to have taken in advance in this way. The basket of goods on which poorer households spend their income has been subject to more inflation than the rest because the cost of essentials has gone up. We are currently in a period of lower inflation, but we cannot predict what will happen. I would recommend, as we did in our submission, that the Government review the rate of inflation annually. The outcome might well be a freeze, but actually, what the Government are doing is removing the one buffer that the poorest households, both in and out of work, have against inflation. That is hugely risky.
Peter Heaton-Jones
Q 199 What is the panel’s view on taking the measures in the Bill alongside the wider approach of some of the measures proposed in the Finance Bill—for example, the national living wage and the uprating of income tax thresholds? If you take them all as a bundle, is there not—well, I do not want to lead you. What is your view on whether that package of measures would be welcome in moving people closer to work and making work more attractive?
Julia Unwin: There is no question but that we need to move people closer to work or that people’s best route out of poverty is work—that is, work that gives them security, confidence and some progression. We have done some analysis of the package of measures, as you described it, and some are welcome. All the measures are welcome in their own right, but their impact is different on different groups of people. As you heard in the previous session, the better impact is on couples without children who are both working. That is welcome, but for child poverty, particularly for single parents, there are some very real losses. This freeze only compounds those losses.
Dr Niemietz: I would have started from a very different angle. One of the transfers that most undermines work incentives is housing benefit, because in a lot of areas—particularly London, but other cities as well—a lot of low earners could not realistically earn an income that gets them off the housing benefit taper. That means they will always have this taper rate of 65% of net income, which is a huge disincentive against work. That cannot be addressed within the remit of the Bill, but it is always worth bearing in mind that the only reason why housing benefit dependency has risen so much is that rents have increased at a faster rate than incomes for a very long time. The reason for that is simply that we are not building enough houses to keep up with demand. Once you get that right—once you allow the construction of sufficient numbers of homes—rents will fall and housing benefit dependency will automatically fall with it, meaning that far fewer people are exposed to that 65% taper rate. You would massively increase work incentives while saving a lot of public money.
The UK has a higher proportion of its population depending on housing benefit than any other developed country. It is about one in five households. That is the highest proportion in the developed world. I would have started from that angle.
Corri Wilson
Q 200 Julia, your recent report suggested that the Bill will have a major impact on lone parents. What protections should be included in the Bill to ensure that children of lone-parent families are not unfairly impacted?
Julia Unwin: All the evidence we have gathered over many decades makes it very clear that lone parents suffer a huge penalty for being widowed, divorced or single in the first place. That creates a very high incidence of women in poverty and therefore their children being raised in poverty.
Legislation argues or recommends that all parents—lone parents or two parents—go to work when their child is three. That takes you directly to the quality and quantum of childcare available. While the childcare allowance is hugely welcome, if it is also captured in the freeze, childcare in London will remain unaffordable. Investment in childcare—both the provision and purchase of it—matters enormously, but I believe there will always be a need for tax credits for people at the bottom end of the income distribution while they are raising their children, because raising children is such an important aspect of the next generation’s wellbeing.
Corri Wilson
Q 201 I would like to ask you the same question that I asked the last panel. Much of the proposed legislation is borne out of an assumption that those on benefits face the same choices as those in work. Do you agree with that?
Julia Unwin: I do not agree that there is a huge distinction between those on benefits and those in work, because we know that a significant proportion of people in work are on benefits and tax credits—there was an earlier discussion about housing benefits, for example. People are moving around the labour market in a very dynamic and frequently very damaging way, but once you are on benefits and out of work, it is very hard to make the sorts of choice that better-off people are able to make. We ask people on benefits to take enormous personal risks, and I think that point is very well made.
Dr Niemietz: Ideally, they should be in a situation where they broadly make the same choices and the same trade-off. That is not the way the benefits system is currently structured, because you have ring-fenced elements for particular expenses—you get an amount for childcare, an amount for housing and an amount for something else. If that were somehow wrapped up in a single payment and it was then left to people to make their choices, their everyday lives and the trade-offs they make would become more similar to those of working people.
Anna Turley
Q 202 What are your views on—this is one of the most controversial aspects of the Bill—limiting tax credits to two children? What do you think the impact of that will be, particularly for the most disadvantaged and larger families?
Julia Unwin: One thing we know is that tax credits do not influence behaviour in the linear way that many people expect. Given my description of people coming in and out of dependency on benefits and tax credits, there is no way of knowing at what stage in someone’s life they will require those tax credits. I simply do not believe that people choose to have more children in the sure and certain knowledge that tax credits will bail them out. That is not how decision making works in most households that I have come across.
I think the impact could be very damaging for larger households. I would go back to the even more substantive issue, which is the concern about where families on benefits with more than three children will live and how they will afford to live. That strikes me as deeply problematic for families who have been on benefits for some time, and particularly those who find themselves on benefits.
Dr Niemietz: This links back to the earlier question about whether people on benefits make the same choices in the same way as people who are not on benefits. If you do not qualify for child tax credits, your income does not automatically go up because you have a third child. I do not see anything wrong with replicating that situation for people whose income mostly consists of state transfers.
Hannah Bardell
Q 203 Thank you both for coming today. Julia, in your recent report you said that the new legislation is, at best, a sideways step. I would argue that it is a retrograde step. In the light of what you said, which is very interesting, do you welcome the fact that Scotland and Wales will retain their own targets and will try their best under the current framework to do things in their own way? I would welcome comments from both of you on conditionality. In particular, you mentioned the years of research that you have done on parents with young children, who are not required to work not until their children are three. We know that the new legislation will suggest that parents of one-year-old children are going to have to start looking for work. What kind of impact will that have on children and, in particular, single parents with very young children, who will have to go back into the workplace?
Julia Unwin: We said it is a sideways move, and I think it is, although we debated long and hard about whether it is a sideways or backwards move. It takes away the real opportunity that the Bill presented to have a life chances strategy and look at all the different drivers across the Government. The Government do not hold the levers. For too many years we have assumed that the Government can fix the issue of poverty. Welfare and credits really matter, but so too do the nature of the labour market and what happens at a local and regional level. They are all different drivers. What matters is that we work together to improve life chances. Nobody can look at the UK at the moment without recognising that the different parts of the UK will be going in very different ways on this. As a member of a research organisation, I welcome it because it is interesting. From the point of view of children in Scotland, it is welcome that the Scottish Government have decided to keep the target and the focus on this issue. I hope the rest of the UK will take note that this is an opportunity to look at life chances and to protect something for the next generation.
Dr Niemietz: I am very much in favour of the conditionality of benefits. We have seen in places such as Wisconsin in the US that making welfare more conditional can work and can help get people back into work. It also helps to restore public confidence in the benefit system. Increasing conditionality is an alternative to simply cutting benefits. It is not about saying, “We are taking money away from you,” but saying, “We are attaching strings to those payments.” That is a way to increase public confidence. The perception that it is being overused largely comes from the fact that, so far, conditionality has not played the role that it could play.
Hannah Bardell
Q 204 Do you really, truly believe that if we have more people and children in poverty —let us not forget that the research suggests that we are going to have 200,000 children in poverty, versus 80,000 adults—the public are going to welcome that?
Dr Niemietz: Not if conditionality works properly. If it gives incentives—a carrot and stick approach—to getting back into work, why would it increase poverty? It has not done that in Wisconsin.
Julia Unwin: The evidence shows that conditionality can work for some people and the global evidence suggests that, for some people, it provides the spur back into work, but far more often it drives people into making the wrong work choice, accepting a job they cannot possibly fulfil and therefore falling back into benefits. In Wisconsin and other parts of the United States, there is clear evidence that people are coming off benefits completely but not going into work. We are concerned about what the implications of that will be, because you end up with people making short-term choices that keep them going in the short term but can cost the state very much more in the longer term. Conditionality applies to all public services and all people. There is a contract in place, and we need to understand how it works. But if the current method of sanctioning creates destitution by design, we have created a real, expensive problem for the long term.
Emily Thornberry
Q 205 The four-year freeze on working-age benefits, the limit of tax credits to two children and, in particular, the lowering of the benefit cap continue the disconnect between the amount of benefit that is paid to people because of their need and the simple sum they are given. It is not done on the basis of needing more; it seems to be that people will be given an absolute sum, and that is that. Clearly, that will have an impact on poverty and on particular groups—I wonder which groups. Is it right that the group affected most might be single parents, when it comes to child poverty?
Julia Unwin: Is it correct? Yes. Is it right? No. Single parents and disabled people in different categories will be particularly affected, but in terms of this Committee’s concerns, single parents will be affected most.
Emily Thornberry
Q 206 So, in your view, is the Bill likely to increase child poverty or help tackle it?
Julia Unwin: We were talking earlier today, and certainly earlier in this session, about looking at the package changes together. I agree with the Institute for Fiscal Studies, with which we work closely, as we do with the IEA. The IFS has predicted an increase in child poverty as a result of this suite of measures, not just the ones in this Bill.
Dr Niemietz: On relative poverty, probably yes. On the others, it remains to be seen how other factors, especially wage rates at the lower end of the distribution, will work out over the coming years.
Julia Unwin: That is why I describe it as a risk and a gamble. Clearly, the health of the economy and what that does to the labour market will make an enormous difference to the outcomes that we could predict.
Emily Thornberry
Q 207 But employment within the Bill is defined as 20 minutes every three weeks, as far as I can see. That is not necessarily going to help tackle child poverty.
Julia Unwin: High levels of underemployment, which is what we witness now at this end of the labour market, will do nothing to help child poverty or to reduce the benefits bill in the way that the Government intend.
Emily Thornberry
Q 208 Could you also address your comments particularly to what impact the benefit cap is likely to have on child poverty?
Julia Unwin: The benefit cap, in the way that I described earlier?
Emily Thornberry
In the way that it is being introduced.
Julia Unwin: The way that the benefit cap is being introduced has huge implications for childcare costs, and we know that reliable childcare is the only way for parents to get back into sustainable work. It also has huge implications for housing costs, which will make some parts of the country uninhabitable for people on benefits.
Dr Niemietz: This links back to what I said earlier. It seems to me that the benefit cap is really just a clumsy way of capping housing benefit. There is actually no way in which someone could substantially exceed that cap unless they are in receipt of housing benefit, and probably in receipt of fairly large sums. This is a roundabout way of capping housing benefit, whereas, as I said before, I would have started at the other end. Build enough houses, and you will not need a cap of that kind any more, because rents will fall automatically and housing benefit rates will fall with them.
Damian Hinds
Q 209 I want to ask Julia a quick question for clarification. We were talking earlier about single parents, and we have talked about the importance to tackling poverty of being in work and having access to enough hours. Obviously, a big part of that is ensuring that childcare support is there. You talked about the childcare allowance in tax credits. Can you talk us through your understanding of the full set of childcare changes to come?
Julia Unwin: As I understand it, by introducing a childcare allowance, the Government made big steps to enable people to go back into work. However, by making that part of the cap, we have reduced its value. In some parts of the country, and in London specifically, the costs of childcare have gone way above what can be covered by that allowance.
Damian Hinds
Q 210 Sorry, I was asking about the full set of childcare changes to come: the 30 hours offer in universal credit and so on.
Julia Unwin: The 30 hours offer, on its own, does not provide enough time to enable a parent to work full-time, and the evidence is that that is what you are required to do.
Damian Hinds
Q 211 I am not trying to put words in your mouth, but it is clearly 15 hours more than 15 hours. The subsidised 70% can therefore come on top of that. Is there also a change coming, to the best of your knowledge, in terms of the proportion of reimbursement under universal credit?
Julia Unwin: I am showing my ignorance on the third part of your question. On the first two bits, yes, absolutely. We see those as steps in the right direction and a serious intent about childcare. I am posing a warning about what it might mean in practice.
Damian Hinds
For the record, Chair, under universal credit, the 70% rises to 85%.
The Chair
I am sure we will be hearing more about that over the next few weeks. Dr Niemietz, did you want to comment on that?
Dr Niemietz: That is an issue where I would have started from a different angle by asking why childcare is so expensive in the first place. For a long time the argument has been that we have to raise childcare subsidies to Swedish or Danish levels and the problem will go away but, in terms of total tax spending on childcare subsidies, we are already at Swedish and Danish levels. The difference is in unit costs. Here, it is not just the taxpayer who spends a lot on childcare. It is also the actual user. People pay twice: first in their role as taxpayers and then again in their role as childcare consumers. I would start by looking at the structural drivers of costs in that sector—which those are, I cannot tell in detail, but there has to be something. There has to be a reason that the UK spends more on childcare subsidies than almost all of continental Europe and without having higher usage rates.
Julia Unwin: Part of the reason is that ours is a purchase system, not a provided system. We have a patchwork of childcare benefits and a patchwork of childcare provision. That has turned out to be expensive. To drive high quality will cost in different ways.
Hannah Bardell
Q 212 I think you were both in the room when I asked this to the previous panel. How will these changes and the removal of reporting affect us from an international perspective? Will it potentially do any damage if we are not reporting in the same way and we are not able to tell the world whether we are doing better or worse in terms of child poverty?
Julia Unwin: I only know from my own organisation that JRF research is received, viewed and analysed across the world and we get an enormous amount of international interest in that. Part of that has been because the UK Government have set the path in indicating how serious leadership and serious focus can make a difference. I believe that there is still a focus but we need to retain that international leadership because, over decades, we have learnt things that we need to be able to transmit. I fear that not having that clarity will make that more difficult.
Dr Niemietz: That has been the problem with most of those child poverty measures—they were not internationally comparable. That is not just because they set the poverty lines at different levels but because you have big differences between countries in terms of relative prices and the structure of prices. You cannot compare a country where the basics of life are very much inflated, as they are here—housing costs, childcare costs and other things are unnecessarily expensive—with countries where that is not the case, because the same amount of money can stretch a lot further in the second set of countries.
The one indicator that was fairly robust for international comparisons was the material deprivation measure because that is an outcome-based measure where you simply give people a list of goods and services, and ask them how much of that they can afford and not afford. You do not have to know exactly why that is—you are just looking at the outcome. Do people have everything on that list or most of the things on the list? If they do not, you do not have to know exactly why that is. That is what made it internationally comparable.
The Chair
Thank you very much indeed. Our time has flown by. Thank you for your expertise and wisdom. We deeply appreciate it. Thank you for coming today. Committee, we will meet again at 4.30 pm this afternoon in Committee Room 12 to begin our line-by-line consideration of the Bill. I know that we are all looking forward to that.
Ordered, That further consideration be now adjourned. —(Guy Opperman.)
Welfare Reform and Work Bill (Fourth sitting)
(9 years, 3 months ago)
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The Committee divided: - Ayes: 2 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 2 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 2 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 10 - Question accordingly negatived.
The Chair
Before we begin our line-by-line consideration of the Bill, there are a number of things I would like to say, particularly to younger, newer Members. I can remember from 20-odd years ago that it is quite daunting.
I have a little bit of housekeeping. Feel free to remove jackets but please ensure that all electronic devices are turned off or switched to silent mode, especially you, Mr Timms. The selection list for today’s sitting is available and shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or similar issue. The Member who has put his or her name to the lead amendment in the group is called first. Other Members are then free to catch my eye to speak on any or all of the amendments within that group. A Member may speak more than once in a single debate, although that is relatively unusual.
Please note that decisions on amendments do not take place in the order that they are debated, but in the order that they appear on the amendment paper. In other words, the debate occurs according to the selection and grouping list, and decisions are taken when we come to the clause affected by the amendments. It is important that speeches relate to the amendment or new clause we are discussing. We do not want Second Reading speeches on every amendment. I will be watching out for that quite carefully.
Sedentary interventions are never helpful and responding to them is even less so. If you have an intervention to make, the usual thing is to ask the person speaking to give way. Let us not call that out to each other from the Floor, thank you. I hope all that is helpful. It is my discretion whether to allow a separate stand part debate on individual clauses and schedules following debates on the relevant amendments. Let us see how we go on clause by clause.
Clause 1
Full employment: reporting obligation
Hannah Bardell (Livingston) (SNP)
I beg to move amendment 22, in clause 1, page 1, line 3, leave out “Parliament” and insert
“the House of Commons, the Scottish Parliament, the Northern Ireland Assembly and the National Assembly for Wales”.
This would require the Secretary of State to report to the elected chambers across the UK with a responsibility for policies that can contribute to full employment.
The Chair
With this it will be convenient to discuss the following:
Amendment 23, in clause 1, page 1, line 6, at end insert—
‘(1A) The Secretary of State will appear before a Committee in each of the Scottish Parliament, Northern Ireland Assembly and the National Assembly for Wales to answer questions about the report.”.
This would require the Secretary of State to appear before a committee in Scotland, Wales and Northern Ireland to answer questions about the full employment report.
Amendment 24, in clause 1, page 1, line 7, leave out subsection (2).
This would remove the provision that repeals the full employment reporting obligation at the end of the current Parliament.
Hannah Bardell
We seek support on the amendments because they are intended to increase the powers of the devolved institutions to ensure that the people whom we represent in Scotland, Wales and Northern Ireland in this Parliament are not overlooked by the UK Government. The amendments would increase the scrutiny functions of the devolved institutions on the reporting of the Secretary of State in relation to full employment and its definition. We in Scotland know the implications Government reports can have for policy decisions, and often the impact on devolved areas can be overlooked. May I speak on amendment 23 as well at this point?
Hannah Bardell
Amendment 23 is about the Secretary of State appearing before a Committee in the Scottish Parliament, the Northern Ireland Assembly and the National Assembly for Wales to answer questions about the report. The amendments in this group would ensure that Scotland, as well as Northern Ireland and Wales, was fully briefed on the full employment report, as they have a responsibility for policies that can contribute to full employment.
Finally, amendment 24 would leave out subsection (2) because we want to remove the provision that repeals the full employment reporting obligation at the end of the current Parliament. We feel strongly that clause 1 places a new duty on the Secretary of State to produce an annual report on progress towards full employment during the Parliament.
Amendment 22 is simply to ensure that the Secretary of State lays the report before the House of Commons, the Scottish Parliament, the Northern Ireland Assembly and the National Assembly for Wales. We welcome the reporting obligations in clause 1, as they ensure that the Government are progressing full employment and that the definition made by the Department is brought before all the devolved Administrations.
As we well know, unemployment is a UK-wide problem and employment challenges facing different parts of the UK can be different. It is vital that the Secretary of State represents the devolved institutions and recognises the challenges that the Bill will have for devolved areas dealing with unemployment.
Amendment 23 adds extra scrutiny function to the Bill to ensure that the Secretary of State will appear before a Committee to answer questions on the report within each devolved institution. As the definition of full employment is not clear, the amendment would ensure that, whatever definition is decided on, the devolved institutions will be able to hold the Secretary of State to account. We are concerned that the Secretary of State could use the term to mask under-employment by defining full employment in narrow terms. Office for National Statistics figures for 2014 put the number of zero-hours contracts at approximately 700,000. People in those positions worked an average of 25 hours a week, and one third of them would prefer more hours. It is vital that the devolved institutions can scrutinise the Secretary of State’s report in order to deal with unemployment effectively.
Amendment 24 would remove the provision that repeals the full employment reporting obligation at the end of the current Parliament. If the Government are serious about reporting unemployment in order to address it, they would not dissolve the reporting duty after one Parliament. We really cannot understand that. In the current uncertain economic times, the Government cannot predict what employment opportunities lie ahead for people across the UK. It is imperative that full employment reporting continues, as it will be a useful indicator for the Government and the devolved institutions to formulate policies that respond to the demands of unemployment. Finally, the continuation of a reporting duty means that the definition will be tested and refined. Oxfam has supported the retention of the obligation to report.
Kate Green (Stretford and Urmston) (Lab)
I listened with considerable interest to the hon. Lady propose amendments 22 to 24, which are interesting. Although she did not talk about this, I read the amendments in the context of the wider constitutional debate being played out in the passage of the Scotland Bill, which is also before the House and covers a number of matters relating to welfare reform. While I fully understand why she wants to promote the amendments—to expose more clearly the effectiveness of the Government’s strategies and to increase scrutiny of them—I think we are stepping into quite new territory in terms of some of the reporting arrangements and the obligation of Westminster Ministers to report to the devolved Parliaments and Assemblies, and to appear before their Committees.
We know that devolved matters are wholly the responsibility of devolved Parliaments. I expect them to be scrutinised there and for Ministers in those Parliaments to be held to account for them. However, reserved matters are rightly scrutinised in this Parliament by Members of Parliament from all parties. Indeed, I venture to suggest that if we pursue this argument too far, we may start to give succour to the English votes for English laws argument, which some of us are very unenthusiastic about.
While I understand the hon. Lady’s wish to shed more light on the Government’s policies, I question some of the implications of her amendments. That is not to say that I do not understand what she seeks to achieve, but I am keen to understand the constitutional consequences of proceeding with amendment 22.
Amendment 23 is also very interesting. I read it with real interest when the hon. Lady and her colleagues tabled it, and I went off to dig a little bit into the history of what it might be about. I am sure she knows this, but other Committee members may not: the Government have some form in relation to appearing before Committees in the Scottish Parliament. Attempts were made by the Scottish Parliament’s Welfare Reform Committee—perhaps the hon. Lady can confirm this—to bring Ministers from the Department for Work and Pensions before it between 2012 and 2014, in order for Members of the Scottish Parliament to quiz them about some of the provisions of what became the Welfare Reform Act 2012.
When the Convenor of the Scottish Welfare Reform Committee sought to invite the Secretary of State to the Committee, I am afraid to say that he received a rather dusty reply. On 12 December 2012, in a letter to the Convenor of that Committee, the Secretary of State said that he would not be coming, that as a Westminster Minister he was accountable first and foremost to the UK Parliament and, slightly tongue in cheek, he strongly encouraged the Scottish Committee to scrutinise the Scottish Government’s implementation of the UK legislation. I will not get into the private grief between the Department for Work and Pensions and the Scottish National party on that, but it was clear that the Secretary of State was alert to some of the constitutional questions I alluded to a few moments ago.
In defence of the Scottish Committee, I have to say that it did not take that lying down—indeed, I would not have expected it to. The saga ran and ran—there was a series of letters, which are fun to read if anyone has a few spare minutes. In 2012, 2013 and 2014, the Committee noted that UK Ministers from other Departments had been prepared to appear before Scottish parliamentary committees, so the matter rumbled on.
In the event, no willingness was shown on the part of Ministers from the immediate past Government to appear before the Scottish Welfare Reform Committee. Since then, we have moved into another set of changes to the constitutional arrangements on reserved matters with the ongoing proceedings of the Scotland Bill.
In this Bill, we have a complex patchwork of devolved and non-devolved matters. Indeed, this is probably the Bill to exemplify the difficulties that Mr Speaker will face in certifying whether a Bill or parts of a Bill will be subject to the provisions of English votes for English laws—we might use it as a case study as we proceed through each clause, Mr Streeter, if you will indulge us.
The Scotland Bill will create further complexity. We are in a period of some uncertainty about which welfare reform provisions will be devolved and which will obviously depend on Parliament’s will, and that legislation is far from completing its parliamentary passage. Labour has tabled several amendments to the Scotland Bill that I confidently expect us to consider on Report that propose further devolution of several welfare and employment matters to the Scottish Parliament. For example, it has long been our intention—my right hon. Friend the Member for East Ham talked a great deal about this in the previous Parliament—to devolve employment programmes such as the Work programme to the Scottish Parliament. We have developed our thinking in that field so that we now have amendments to the Scotland Bill that would also devolve the Access to Work programme, jobs guarantees programmes and employment programmes of less than one year’s duration.
There are question marks around amendments 22 and 23. They are interesting and I am delighted that the hon. Member for Livingston moved them for debate, but I would prefer to await developments on the Scotland Bill before arriving at a firm conclusion about what my party’s position might be on them. However, the hon. Lady is really on to something with amendment 24, which deals with what is effectively a sunset clause on the Secretary of State’s obligation to report on the full employment targets. Since I saw the SNP amendment and my mind became focused on that provision, I wondered why the Government drafted it. Will the Minister tell us in a few minutes that the Government are confident that, on full employment, by the end of this Parliament, “Job will be done”? As the hon. Lady said, we are keen to understand what the Minister means by full employment. That debate will be developed by my right hon. Friend the Member for East Ham and I know we are all very much looking forward to his erudite speech.
Kate Green
It is good to have your endorsement, Mr Streeter.
We also know that progress on tackling unemployment is not necessarily linear. Even if the Government’s programmes are entirely commendable, effective and produce very positive results—hon. Members will not be surprised to learn that we may have some questions about the efficacy of some of them—as we famously heard from our political forebears, events happen that can blow the finest ministerial plans off course. Looking at the recent history of employment figures, if we are prepared to accept that the definition of full unemployment is, let us say, an employment rate of 80%, we were nearly at full employment in 2008. Then, of course, there was a significant rise in unemployment as a result of the world financial crash.
Although we have begun to see the very preliminary shoots of recovery—it is notable that people tended to stay in work after the 2008 recession, compared with previous recessions—the progress has not been constant since the economy began to recover after the recession. The last two sets of unemployment figures we have seen—we expect some more tomorrow—show unemployment rising again, and there are particularly worrying trends in relation to youth unemployment, which has proven to be a particularly stubborn nut for the Government to crack.
Amendment 24, tabled by the hon. Member for Livingston, is really interesting. I hope the Minister will tell us why she thinks it is right to have a sunset clause. Is she trying to protect future Governments? It is very kind of her to think about protecting future Labour Governments, but we are ambitious about full employment. We were the first to speak about it 10 years ago.
Kate Green
Twenty, my right hon. Friend says; I am too young to remember.
We would be happy for an incoming Labour Government to be held to account for full employment. It is an ambition that goes to the heart of my party; indeed, it is embedded in our name. This is an interesting amendment. I want the Minister to explain to the Committee why the Government want to put a sunset clause in the Bill. I very much look forward to the debate we are going to have.
The Minister for Employment (Priti Patel)
It is a pleasure to serve under your chairmanship, Mr Streeter, as we begin line-by-line scrutiny.
The Bill introduces a statutory duty to report on the progress towards full employment. It is the right moment, as we start our scrutiny, to debate full employment. I am pleased that the statutory duty to report on progress has been welcomed by both Opposition parties in the Committee. The clause extends to England, Wales, Scotland and Northern Ireland. All right hon. and hon. Members in the Committee will have heard in the run-up to the general election and in subsequent debates that the Government want everyone, regardless of where they live, to fulfil their ambitions relating to work if they can do so.
As the Government set out in our manifesto, we aspire for the country to be the best place in the world to start a business and we want to achieve the highest level of employment. Therefore, producing an annual report illustrating progress towards full employment across the UK demonstrates the Government’s clear and transparent intention to continue to commit to those aspirations. We want the UK to be the best place in the world to create a job, get a job, keep a job, have long-term, sustained employment and be helped to look for another job if one’s circumstances change. Over the next five years, we want to move from a low-wage, high-tax, high-welfare economy to a higher-wage, lower-tax, lower-welfare economy.
It is worth pausing to put this in context. The hon. Member for Stretford and Urmston mentioned a raft of measures, including employment programmes, that have enabled more people to be in work than previously. The labour market has improved since 2010. Employment is up at 31 million, and there have been steady increases. The employment rate is now 73.4%. We recognise that there is more to do; hence the commitment to full employment.
Kate Green
That is interesting information. I know that informal meetings have taken place and have been referred to in some of the correspondence that I mentioned between DWP Ministers and the Scottish Parliament. Would the Minister welcome a legislative requirement upon her to attend?
Priti Patel
We are in constant discussions, quite rightly, on how we approach the implementation of the Smith commission recommendations through the Bill and so on. That dialogue is important, as is establishing good and sustained ways of working. The statutory duty to report on progress towards full employment extends across the whole United Kingdom, so it is right that the responsibility to report sits with the UK Parliament. It would therefore be inappropriate to lay reports in each of the other Parliaments and for the Secretary of State to attend various Committees in each of the devolved Administrations.
The clause is not about requiring the devolved Administrations to create new policies or take actions. Previous Governments have talked of achieving full employment, but this Government are the first to set out in legislation a clear commitment to report on progress made to achieving that aim. As it is a commitment made by this Government, it is right that we hesitate before binding the hands of future Governments to report on progress made towards that goal.
Hannah Bardell
I welcome the fact that the Minister is coming to Scotland. That is good news, but does she not recognise that, as the hon. Member for Stretford and Urmston illustrated, it is very much down to individual Ministers whether they attend or not? A statutory obligation is extremely important, so that we can ensure consistency. I am glad that the Minister is attending but, unfortunately, we have a history of Ministers not willing to attend or co-operate. We talk about a respect agenda, and we feel that it is important to have a statutory obligation in legislation. The decisions made in Westminster on issues such as this affect people in the devolved Administrations, so it is only right and proper that the Government of the day report to the devolved Administrations on those issues.
Priti Patel
I thank the hon. Lady for her remarks. There is a clear commitment from this Government to work with the devolved Administrations, particularly with regard to the implementation of the Smith commission. Therefore it is not appropriate to put into legislation the statutory need for a Minister to respond and to come to meetings.
It is fair to say—certainly in my role, and regarding the Scotland Bill and the devolution of welfare—that there has been a clear and transparent way of working between the Department and the Scottish Administration. In particular, there has been support where support has been required and requested. That is a clear illustration of the mutual respect agenda and of how we are working together and supporting each other on the delivery of the Smith commission.
Full employment cannot be created by an Act of Parliament or by the Government alone. Achieving that objective depends on a range of factors, predominantly a strong economy and a strong partnership and working relationship with business, employers, communities and those that invest in skills, people and innovation. On that point, it is worth my reiterating that there was a clear manifesto commitment to achieve the aspiration of full employment and, particularly, to report on that over the lifetime of this Parliament. The Government are committed to doing that, so I urge the hon. Member for Livingston to withdraw the amendment.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Governments bind their successors in a lot of different ways. For example, when the Work programme is renewed, in whatever form it takes, it is assumed that the programmes will run over into the next Parliament. Why, if the Government are burdening a future Government with the programmes that they have put in place, do they not consider the reporting that we are discussing to be less onerous on a future Government? It would also be quite useful in indicating where the next Government were on securing full employment.
Priti Patel
I thank the hon. Gentleman for his intervention. This is a clear manifesto commitment that the Government outlined at the time of the general election, and we feel that we can work hard in this Parliament to achieve it. Of course, future Governments will address it and make their own commitments.
Neil Coyle
This is a bit of a cheeky intervention, but is the Minister saying either that she does not expect to be in the next Government or that the next Conservative manifesto will not include a commitment to full employment?
Priti Patel
I think the hon. Gentleman has missed the point of my remarks. This is about producing an annual report that outlines the progress made towards full employment, which we feel is appropriate in this Parliament. It is for future Governments to choose their approach to reporting. Our first annual report will set out how we will interpret full employment, which will be based on existing data sources for the UK and could include a variety of measures. We are looking to outline that.
The Chair
It now falls to the mover of the amendment to say a few words, if she wishes, in response to what the Minister has said, and then to inform the Committee whether she wishes to withdraw the amendment or put it to a Division.
Hannah Bardell
Thank you, Mr Streeter. This has been an interesting debate. I heard some encouraging remarks from Labour Members, and I hear what the hon. Member for Stretford and Urmston says about waiting for the Scotland Bill. However, I would say that, disappointingly, we have not seen any movement or support from the Government on the Scotland Bill. It is important that we have reporting mechanisms and commitments put down in legislation.
Kate Green
The hon. Lady is right that we have not yet seen a great deal of progress on the Scotland Bill, and it is difficult to predict whether that Bill will be overtaken by this one. It seems to have become stuck somewhere in the long grass. Does the hon. Lady agree, having rightly exposed this question this afternoon, that we might hope that Ministers will take note and accelerate the progress of the Scotland Bill? Does she also agree that if they fail to address the points that she has raised today, it would be a good idea to bring the issue back when we discuss this Bill on Report?
Hannah Bardell
I hear what the hon. Lady says, but I feel strongly that the two are not necessarily mutually exclusive. I do not see any reason why we cannot have these reporting mechanisms in this Bill and still make progress on the Scotland Bill—I feel strongly about that.
I hear what the Minister says about mutual working, but I do not necessarily agree with everything that she says. Although the discussions between the devolved Administration in Scotland and the UK Government have been helpful, they have not been as productive as we would have liked.
It would be fair to say that the Smith commission fell short of the vow that was made just after the referendum, which was a cross-party effort under the banner of the Better Together campaign. We feel strongly that the Scotland Bill falls short of Smith. We did our best to bring the Scotland Bill up to the level of Smith with our amendments, but sadly we did not get the support that we sought from both sides of the House, although to be fair Labour did support us on some amendments.
For us, the amendments cover matters that are important to include in the Bill, and we will press them to Divisions.
Stephen Timms
I beg to move amendment 1, in clause 1, page 1, line 4, leave out from ‘and’ to end of subsection and insert
‘for the purposes of this report “full employment” is defined as 80% of the working age population.’
To specify that the purpose of reporting on progress toward full employment, full employment is defined as 80% of the working population.
The Chair
With this it will be convenient to discuss the following:
Amendment 106, in clause 1, page 1, line 6, at end insert—
“(1A) The report in subsection (1) must include information about:
(a) the job quality of new jobs created, as set out in section [Definition of job quality] of this Act;
(b) the distribution of the quality of jobs by occupation, industry, sector and region; and
(c) the distribution of the quality of jobs by sex, race, disability and age.’
To require the report on progress towards full employment to also report on progress on quality of jobs, the distribution of those jobs and a breakdown of the employees in those jobs.
New clause 11—Definition of job quality—
‘(1) Within six months of section 1 of this Act coming into force, the Secretary of State must, by regulation, provide a definition of job quality.
(2) Before issuing regulations under this section the Secretary of State must carry out a public consultation.’
To require the Secretary of State to bring forward a definition of job quality and to ensure there is a consultation on defining job quality.
Stephen Timms
I welcome you to the Chair, Mr Streeter. We know that you will guide our deliberations with a firm but fair hand, and we look forward to benefiting from that.
Some 18 months ago, the Chancellor of the Exchequer explicitly repudiated a notorious statement made by one of his Conservative predecessors that unemployment was a price “well worth paying” to bring down inflation. I suspect that all members of the Committee would support the Chancellor in repudiating that remark, which was made in 1991 or 1992 by the then Conservative Chancellor, now Lord Lamont. By contrast, today’s Chancellor affirmed the goal set out in modern times, first by Gordon Brown.
My hon. Friend the Member for Stretford and Urmston said that 10 years ago—I persuaded her to say that it was 20 years ago; I think it was in 1993—Gordon Brown set out what was, at the time, a radical aspiration to achieve full employment. The Labour Government who were elected a few years later formally signed up to that goal and went on to explain what full employment meant to them. That is the point on which I want to press the Minister, through amendment 1.
I welcome the fact that the Chancellor has said he wants us to achieve full employment, but we need to know what the Government mean by that. The amendment would make that clear. The last Labour Government, of which I was a member, was committed to full employment and said that that meant a rate of employment of 80%, which is why that figure is included in the amendment.
I accept that other definitions of full employment could be used. The Chancellor has given the impression, from time to time, that the definition he would like to see would be that of the highest rate of employment in the G7. That is a reasonable alternative definition; it is not as good a definition, but one could run with it. The central point is that we need to know what definition of full employment the Government are using in setting out their goal. Otherwise the target, and the purpose of the report required under the clause, is meaningless.
G7 employment rates in July were 74% in Germany, 73% in Japan, 72.6% in Canada and the UK, 68.7% in the US, 63.8% in France and 56% in Italy, so on the most recent figures the UK’s employment rate is squarely in the middle. I think we would all agree we should be doing significantly better than that. I think Bill Clinton said:
“I do not believe we can repair the basic fabric of society until people who are willing to work have work.”
All of us would sign up to that sentiment, but what exactly are the Government setting out to achieve in clause 1 and the required report?
A couple of years ago, the TUC carried out research on employment rates across the OECD—so beyond the G7. At that point the highest rates of employment were 84.1% in Iceland and 80.4% in Switzerland, so if the definition used was to be the highest rate of employment in the OECD aside from very small countries such as Iceland, that would also get us to a figure close to the one of 80% that we use in the amendment. I hope the Minister will agree that that is where we should aim.
Of course, that is a challenging goal. There is no question about it. I am not for a moment suggesting that an 80% rate of employment will be delivered readily or in a short time. I suspect that it will take some time, and I think that strengthens the case for the proposal in amendment 24 that there should not be a sunset clause. We are going to have to go some to reach an 80% employment rate by 2020. It would mean an extra 2.5 million jobs—an additional 9% on the UK jobs total—but aiming for anything less would be short-changing Britain’s jobseekers.
My hon. Friend the Member for Stretford and Urmston will move an amendment later relating to the Government’s equally welcome commitment to halve the currently very large disability employment gap. The fact is, it will not be possible to achieve an 80% overall employment rate without making significant progress in reducing the current disadvantage that people with disabilities, and other disadvantaged jobseekers, face—or indeed without making progress in localities where the employment rate is exceptionally low. We need the full employment target to deliver improvements for disadvantaged groups, as well as to others, so that everyone benefits from the achievement of that aspiration and large numbers of people are not left behind.
Of course, others have argued for other definitions of full employment, and I entirely accept that the Minister might want to do that, although I suspect that if she signs up to a definition it will be one of those that I have suggested. For 25 years after the second world war, everyone agreed that we should have full employment and, by and large, we did. Between 1950 and 1973 the average rate of unemployment was 2%. It was always less than 1 million. In 1955 the unemployment rate actually fell to 1%.
Of course, full employment never meant zero unemployment. William Beveridge, the architect of the post-war welfare state, said that full employment meant an unemployment rate of less than 3%. Milton Friedman referred to a natural rate of unemployment, whereby no one stays out of work for very long; unemployment would fluctuate, he suggested, between 5% and 6%. On top of that, of course, there will always be some people who are prevented from working by ill health—a number that seems to be rising quite significantly in the UK.
I entirely accept that different definitions of full employment can reasonably be adopted. I think that the best definition is an 80% rate of employment. I accept that the case could be made for others, but we need to know what the Government’s definition is. Otherwise, the aspiration that has been set out is a pretty meaningless one. I hope that this afternoon the Minister will tell us what the Chancellor means by full employment, because there is not much point in having a commitment to it—indeed, there is an obligation in this clause on Ministers to report on progress towards it—if we have no idea what Ministers actually mean by the term, as is currently the case.
I am looking forward to hearing in a moment the case for the SNP amendments that have been grouped with amendment 1. Of course, they raise an entirely reasonable point about the quality of the work being undertaken, and I will say a couple of words about them. A number of our witnesses commented on that issue, and what Julia Unwin from the Joseph Rowntree Foundation said about it this morning was interesting. Her written evidence to us makes the point that
“work also now offers less of a guarantee of a decent living standard than it did in the past. This suggests a need to look more closely at both the amount and type of work available to each household, as both these will influence whether people can reach an acceptable living standard through earned income. Specifically, one of the significant trends underneath the long term picture of jobs growth over the past five years has been the increase in self-employment, especially part-time self-employment.”
We know—we discussed this with our witnesses as well—that a significant majority of almost two thirds of children living in poverty are now living in a household where somebody is in employment. Julia Unwin suggested today that the report that clause 1 requires ought to say something about progression in work as well as the actual proportion of people in employment. I would be interested to know what the Minister thinks about that idea.
We used to think that being in work was the way to get out of poverty. Today, that on its own is clearly not enough. Low pay, low hours, insecure work and the proliferation of zero-hours contracts over the past few years have all undermined the reliability of work as a way out of poverty. Oxfam’s evidence to the Committee makes the point that
“people place high value on satisfying, secure and suitable work as well as jobs which provide a sufficient income”.
The concept of decent work has been debated in recent years. It has been defined by the International Labour Organisation, the Adam Smith Institute and others as including
“fair pay, job security, mental health, recognition of overtime, work-life balance, job satisfaction and autonomy, safety, achievable work, skills development, and effective management”.
What I am unsure about is the practical potential for measuring those things across the economy in the way that SNP Members suggest in amendment 106. I will be interested to hear the arguments they make about that. Certainly, that was precisely what some of our witnesses called for, such as Oxfam in its written evidence, but I am not sure how practical it is. Of course, we could also look at issues of equality in work such as whether opportunities are open equally to all and why all too often they are not. Those issues would come under the amendment as well.
Coming back to my amendment 1, I hope that the Minister will be able to satisfy us on this question of the definition of full employment that the Government are using. It is time for people who have seen the commitment to full employment in the Conservative party manifesto, and heard the Chancellor’s commitments over the past 18 months, to know what Ministers mean by that term. I hope the Minister will accept amendment 1, which would finally make the position clear.
Hannah Bardell
I thank the right hon. Gentleman for his remarks. We have no problem with supporting the definition in the Opposition’s amendment, which supports the ambitious target for the UK of achieving the highest rate of employment in the G7—Oxfam made that comment just this month.
Amendment 106 requires the report on full employment to report on the quality of jobs—as the right hon. Gentleman said, we heard a lot about that in evidence to the Committee, both oral and written—and their distribution, and to give a breakdown of statistics for employees in those jobs. New clause 11 would put a duty on the Secretary of State to define job quality within six months of carrying out a public consultation on it—a public consultation is very important.
The intention behind our two measures is to ensure the quality of jobs created, so that they amount to decent work. According to Oxfam, the quality of work is central to alleviating poverty, particularly through the concept of decent work:
“‘Decent work’ includes fair pay, job security, mental health, recognition of overtime, work-life balance, job satisfaction and autonomy, safety, achievable work, skills development, and effective management.”
My apologies; that is not Oxfam but Unison—I would not want to misquote anyone.
It is deeply troubling that, increasingly, available jobs are not always reliable and therefore are not a long-lasting route out of poverty. As I mentioned earlier, the number and rise of zero-hours contracts, low-paid jobs with insufficient working hours, insecure contracts and often poor job progression can mean many working people are still trapped in poverty. Disabled people are more likely to be unemployed or in low-paid positions regardless of their qualifications. It is therefore vital that we measure where jobs are going and their quality to ensure we can identify gaps in employment and work to create quality full employment for everyone, to echo recent comments by the Joseph Rowntree Foundation.
It is of further concern to us that in a 2014 report, “Pay progression: Understanding the Barriers for the Lowest Paid”, the Chartered Institute of Personnel and Development reported that, as many who have contributed to our evidence sessions have said, women in particular are estimated to comprise up to 64% of low-paid workers. The measures we have tabled would help us bring forward decent work measures to identify where the Government should really direct their policy efforts to achieve full employment, deliver equality and challenge barriers at work, in order to lift the poorest out of poverty.
Unison has called for
“a commitment from the Government to encourage employers to provide decent jobs, wages and work practices”,
and has stated that that should be measured. The amendment and new clause would bring forward that vision and ensure that the Government defined their duty within six months of the Bill’s enactment. We feel strongly that having a commission to look at this issue will give us the opportunity to provide a definition. Without one, it will be hard to measure job quality. We will press the measures to a Division.
Emily Thornberry (Islington South and Finsbury) (Lab)
I found the evidence on this clause very interesting. It speaks to our modern times. In the ’70s, everyone knew what full employment was. It meant five-day-a-week of nine-to-five jobs in which it was clear what someone’s role was and they had security, with a pension and a family wage. We have moved a very long way from that.
We heard earlier from the chief executive of the Child Poverty Action Group that it is important to have child poverty figures that make sense in order to keep Government honest. I am concerned about the honesty behind the clause—what it really says and what it is really doing about making matters clear to the public. In 2015, we as a society want full employment, but what we see that as is not the vision of the 1940s or 1950s. It is a different type of full employment.
The reality is that a large number of people work flexibly. Many of them work flexibly out of choice, because it helps them to balance their work and family life, but many more work flexibly out of the choice of their employer. The increasing and unfair demand for people—particularly the young—to work on zero-hours contracts undermines our sense of security, of wellbeing and of having a place. Part of being in employment is that we feel we have a role. If someone is employed on a zero-hours contract, they are a beggar; they are there at the sufferance of their employer. They could be called to work any hours or no hours, and yet they have been bought.
Someone in “full employment” could be working a ridiculous amount. If the Government are talking about full employment as being people in jobs, and those jobs are employment as defined by the Office for National Statistics, I imagine that someone could be working 20 hours or 20 minutes a month and still be in employment. The Minister would then happily get up and tell the country that there was full employment, when many people were working hardly any hours, did not know how many hours they would work, were working with great insecurity and were bouncing along at the bottom of the employment ladder. They might work for a few hours in an ice cream van if the sun shines. If it rains, they will not work for two weeks. They will not work in the winter, and yet in some respects they would be in full employment, at least for part of it. That is not what people imagine as full employment.
I do not know who thought of this, but let us say it was George Osborne, just to pick a name off the top of my head. Let us say he was wanting to—I don’t know—manipulate things, make political points and try to fool the public. I may be wrong, and I will listen with interest to what the Minister says about this, but it might be part of the red Tories agenda to appeal to the working class. They want to have someone getting up and saying, “Do you know what, guys? We’re in full employment.”
The fact is that people will be sitting at home, looking at this and knowing that their friends and family are not in what they believe to be full employment. They are not in employment that brings home a wage with which they can support themselves, let alone their families. We know that because of the rise of zero-hours contracts. We know from friends and family that there are people in employment who certainly do not earn enough money to live. We also know that because of the rise in tax credits. The Government are dealing with the cost of tax credits not by ensuring that people no longer need to rely on them because they are in what I define as full employment, but by starving the third child. That does not seem to be entirely straightforward.
For the Bill to begin with the Secretary of State getting up and telling us all that people are in full employment when we know that they are not at all seems to lay the grounds of what the Bill is really about—it is about political posturing. It is a heartless and nasty piece of legislation. It undermines the very support of the poorest and most vulnerable, and it begins by having a laugh: it says that they are going to be in full employment, when we know they will not be.
Neil Coyle
I appreciate my hon. Friend’s hyperbole about starving the third child. There were some frowns from Government Members. Does she share my concern that there are 700 people in Southwark who are in work and using local food banks to feed their families? For those who are frowning, having those kinds of figures put in front of them will hopefully demonstrate the case and help them to understand why there is concern about the adequate measurement of income and full employment.
Emily Thornberry
My hon. Friend makes an important point. It should be written on the shaving mirror or beauty mirror of every Tory MP, so that they see it every morning, that two thirds of children who live in poverty have parents who are in work. Those parents are in full employment, and yet they are in poverty. That brings us to all sorts of ideas about what the hyperbole behind the Bill is. We are told that the best way out of poverty is to get into work, but then we ask: what work? Is 20 minutes or a couple of hours a week that someone might get working in an ice cream van work that will take their family out of poverty? No, it is not.
We all know the truth: at a time when employment is fractured, insecure and unfair, for us to be able to talk properly through statistics to the public, we should be talking about whether people in work are getting the hours they want and working sufficiently so that they do not have to depend on benefits. When I heard some of the questions asked of some witnesses in the evidence sessions, I was surprised to hear that some members of the Committee did not understand that there are people in full-time work living in central London who have to rely on benefits to make ends meet and that someone on an average wage would not be able to afford to live in central London without getting help with their rent from tax credits. Those people are not in full employment in my definition. My definition is, “You work, and you can support yourself and your family.” Anything else, frankly, is a lie.
When we talk about full employment, we should also talk about those who are inactive, as Marcus Mason from the British Chambers of Commerce rightly said. Of course, some may have been on benefits and had their lives made so difficult that either they are currently being sanctioned or, because they kept being sanctioned, they have given up and are living on their wits, their relatives or food banks. However, according to the Government, they are not unemployed because they are not claiming jobseeker’s allowance any more. That may well be because they are also suffering from mental illness and find it very difficult to cope with their situation.
People like that come into my surgery and I know that other Members see them, too. That is the reality of life. For a welfare Bill such as this to begin with a complacent statement that the Minister will get up and tell us about the fantastic employment rates we have in this country strikes me as the first of many cruel cuts made by the Government in the Bill.
Priti Patel
I take the completely opposite view to the hon. Lady. Achieving full employment is a bold ambition, which I think all right hon. and hon. Members would support, and, quite frankly, it should be a great aspiration for our nation.
It is right that everyone who can work should work and it is worth touching on the fact that many of the welfare reforms not just in this Bill but in the previous Parliament have been put in place to support people to get closer to the labour market, into work and, in particular, to sustain long-term employment. It is right that everyone who can work should work and, through measures such as universal credit, we are ensuring that work always pays.
It is a mission of this one nation Government not just to help working people to achieve security and have a long and fulfilling career, but to support and assist them in getting closer to the labour market. That is exactly what the Department for Work and Pensions is doing through many of our employment programmes. If we look at the number of vacancies in the labour market, which stands at more than 700,000, and the fact that employment has been increasing—full-time employment is up since 2010—and youth unemployment has been going down, we see that more and more people are in work and sustained employment. That should be welcomed.
Emily Thornberry
Of course, to avoid the benefit cap, people have to work 16 hours a week. As I understand it, there is an incentive, therefore, for people to get into work for 16 hours a week. Might that give us an inkling about how the Government define full employment? To work less than that meant that someone was not fully employed, so there was a need for a benefit cap to give them the incentive to work 16 hours. Does that help with the definition of full employment?
Priti Patel
With regards to the benefit cap, I remind hon. Members about the fundamental principle behind why it was brought in: there was to be a maximum level to the amount of out-of-work benefit that the Government would pay to households. The cap is a simple matter of fairness to families who make difficult choices every day about going out to work, taking up employment, where they live and how they will support themselves.
It is exactly right that that principle applies to households in receipt of benefits so that there is a strong incentive to take up sustained work and reduce long-term welfare dependency. That is absolutely our focus through universal credit, and progress towards full employment means that the UK needs to be the best place in the world to create a job—[Interruption.]
Priti Patel
We were about to discuss the progress towards full employment. As I said on the previous clause, the Government set out in our manifesto our aspirations for the UK to be the best place in the world to start a business and to achieve the highest level of employment in the G7. The right hon. Member for East Ham pointed out that landing on a single definition is difficult, as many definitions are used around the world. Our pursuit of full employment is important, because sustained economic growth depends on having a flexible work force. Some Opposition Members commented on changes to the labour market. The fact that our employment market has evolved benefits individuals and changes lives, which means that sustained employment gives people new opportunities. In addition to the overall benefit of driving down welfare spending, we are enabling people to aspire to live different lives and have sustained employment.
We now have one of the highest employment rates in the developed world and the second-lowest unemployment rate in the EU. We have already exceeded the full employment goal set out in the Europe 2020 strategy of securing a 75% employment rate for men and women aged 20 to 64 by 2020. As I said earlier, that was achieved by supporting people who require help and assistance in accessing the labour market.
Stephen Timms
To be clear, is the Minister saying that the aim for full employment is to achieve the highest employment rate in the G7? Is that what the aspiration means?
Priti Patel
I thank the right hon. Gentleman for that question. We set out in our manifesto our aspirations for the UK to be the best place in the world to start a business and, in particular, to achieve the highest level of employment in the G7. We are focusing on putting measures in place. It will not happen through one target or one measure; it is about having a combination of policies across Government.
Stephen Timms
The Minister has clarified the point. Just so it is absolutely clear, can she confirm that the report required in clause 1(1) will be about progress towards the highest rate of employment in the G7?
Priti Patel
The report, which, as clause 1 outlines, must be produced annually, is to illustrate progress towards full employment across the UK. It demonstrates the Government’s clear aspirations and ambition to achieve the highest level of employment in the G7.
Priti Patel
I am going to carry on where I left off.
There are many ways to support full employment and sustain people in employment. I touched on our work across Government. The Department for Work and Pensions has a big network of 700 Jobcentre Plus offices and work coaches who work with claimants to prepare them to look for work.
Priti Patel
I will not. I am going to continue.
The Department for Work and Pensions provides sustained support ranging from skills training, referrals to apprenticeships, which we will discuss in later parts of the Bill, work experience, referrals to sector-based work academies, the Work programme, help to work for those who are long-term unemployed and various other schemes. That is all about working across Government in a holistic way to support our ambition to achieve full employment. Through the delivery of universal credit, we have the opportunity to support and engage people who are on low incomes and live in low-income households. We will help them progress into work and increase their earnings so they become more independent and self-sufficient. That also happens through engaging with our work coaches at jobcentres.
Interestingly, outside the evidence sessions, the Department is constantly engaging with businesses and external stakeholders. We will be trialling the effectiveness of providing more support to universal credit claimants who are in work but would like to do more and have more hours to work and more employment opportunities. It is also about providing a safety net for those who need it and how we continue to support those who need it. At the same time, this is about the whole principle of work, achieving full employment and, for those who have been trapped on welfare for a variety of reasons, how we can move them into work and long-term sustained employment. That has to be done by encouraging businesses to invest in creating a modern and highly skilled workforce. We are committed to achieving 3 million apprenticeship starts over the next five years and we will continue to increase the relevance of apprenticeships through employer-led apprenticeships reforms.
Priti Patel
If the hon. Lady is patient and lets me make my remarks, I will give way to her. Producing an annual report illustrating progress towards full employment across the UK demonstrates the Government’s clear intention and commitment to building a strong economy, working with businesses and ensuring that the labour market has opportunities for all, regardless of geography and where in the United Kingdom someone lives.
We will use the first annual report to set out the conceptual framework for full employment and the measures that will be used to monitor progress against that aim. We believe that the best route to full employment is through extending the opportunity to work, supporting people so that they are able to work and supporting them in accessing the labour market. I will give way and then I will come back to some points I made earlier.
Emily Thornberry
I am most terribly grateful to the Minister. Might she be able to assist us with an important point? There is a phrase that she has used many times, and many other Ministers use it too, but I have never really quite understood it and I wonder what the Government mean by it. What do the Government mean by “work”? Do they mean 20 minutes a week? Does that mean that someone works? The Minister also talks about sustained employment. Again, I would be grateful if she could give us a definition of that. I do not mind if she does not answer immediately if she needs some further guidance but I would like an answer.
Priti Patel
When it comes to the principle of work, it is about having long-term employment opportunities. It is not about being based on hours. We all know that work has great value for individual health and wellbeing. The hon. Lady made points about quality jobs. There is no universal definition of quality jobs.
Hannah Bardell
Does the Minister therefore agree that our proposals to have a commission to find a reasonable definition of “decent work” is sensible so that we have a benchmark that we can all be proud of? Without that, it is clear that the Government will hide behind the very basic figures of 20 minutes’ or an hour’s work a week and mask the real issue.
Priti Patel
No, I do not agree with the hon. Lady. In addition to having work, being in a job and being in employment, it is about the quality of life that that job gives. That means different things to different people. For some, it could be about salaries but it is also about self-confidence, self-worth and self-esteem. It may be the opportunity to work for the first time if they have not had the opportunity to do so and have now had skills training, or for a variety of reasons.
We will consider what further analysis can be included in the annual report including how the level, distribution and composition of employment have evolved over time. We feel that that is a more transparent approach, rather than trying to summarise a varied and complex picture into a simple measure of a definition of job, work or job quality.
Since 2010, two thirds of the increase in employment has been across a range of sectors, in particular managerial, professional and associate professional occupations, which command greater salaries. The growth in employment has been dominated by full-time employment, accounting for nearly all of the annual rise in the number of people in work. There are a variety of factors, which we will consider through further analysis in the annual report so that we have a better picture, rather than just one measure. The UK has one of the lowest proportions of temporary workers in the EU. The proportion is less than half the EU average and is lower than that of Germany, France and Denmark. We are talking about employment and how we work across Government to achieve full employment, but we are also working with employers, schools and colleges. Employers communicate with Members of Parliament on a regular basis, and they all tell us that it is about individuals having a range of soft skills and how we work to support individuals in enhancing their skills, be they soft skills, technical skills or vocational skills. That particularly applies in the case of younger workers. My Department, as I have highlighted many times, is working across Government, not just with the Department for Business, Innovation and Skills on apprenticeships but with the Department for Education, to focus on training and engaging young people in particular so that we can all work collectively to achieve the objective of full employment.
I urge the right hon. Member for East Ham to withdraw his amendment.
Stephen Timms
I am grateful to the Minister for her response, because at least we now have a definition. She is clearly saying that the Government’s definition of full employment is the highest rate of employment in the G7, and it is helpful to have that on the record. I do not think it is a very good definition of full employment. As I said in my earlier remarks, the highest rate of employment in the OECD, even if we miss out Iceland, which is perhaps an exceptional case, is that of Switzerland, at 80%. We ought to be aiming for better than 74%, which is currently the highest rate of employment in the G7—it is the rate of employment in Germany.
I will press amendment 1 to a vote, which I hope the Committee will support.
Neil Coyle
The Minister, who unfortunately did not give way, referred to two things during her speech—one was Jobcentre Plus and the other was universal credit. Should the Government provide more information and documentation on the role Jobcentre Plus will have during this Parliament and on how many people are expected to be receiving universal credit by the end of this Parliament? We need those answers if the measurements are to have any validity, particularly in the context of the changes to Jobcentre Plus. If that support is meant to be available, hopefully the Government will ensure that it is available throughout the course of this Parliament.
Stephen Timms
My hon. Friend is absolutely right. We need to know more about what is proposed for Jobcentre Plus. We certainly need to know more about what is going on with universal credit. As far as I can tell, universal credit is running about four years late. We were told initially that 1 million people would be receiving universal credit by April 2014, and the last figure I saw was about 60,000.
Stephen Timms
Indeed. The Minister referred to universal credit as a tool for getting people into employment and for delivering full employment. We certainly hope it will be one day, but there will be a rather large period before we are anywhere near that stage. I hope the Committee supports amendment 1.
Question put, That the amendment be made.
Kate Green
I beg to move amendment 2, in clause 1, page 1, line 6, at end insert—
“(1A) In this report the Secretary of State must also set out the progress that has been made toward halving the disability employment gap.”
To require the report on progress towards full employment to also report on progress towards the Government’s stated aim to halve the disability employment gap.
The amendment is in my name and in that of my right hon. Friend the Member for East Ham. In it, we make the case for a requirement to report on disability employment. I believe all hon. and right hon. Members share our concern about the substantial gap in employment rate between disabled and non-disabled people. Despite efforts over many years and some progress, the gap still stands at an unacceptable 30%. That has to be a worry for everybody.
It is, however, quite unclear from the Bill how Ministers intend to narrow the disability employment gap, how doing so will contribute to the overall full employment target that we have discussed, and what timescale they have in mind for reducing that gap. We warmly welcome the ambition of, as I understand it, halving the disability employment gap, but our amendment is designed to explore the fact that that is an ambitious target, unsupported by either targets or plans.
Not only does the employment gap between disabled people and the rest of the working age population stand at an alarmingly high 30%—only around 48% of disabled people are in work—but different groups within that very low level of employment experience different employment outcomes. The employment rate for people with learning disabilities, for example, is a shockingly low 8%. For people with autism, I believe it is around 15%, and for people with mental health difficulties it is relatively high. Around one in four people in the workplace will experience a mental health problem at some point in their working life, but despite the prevalence of mental health problems, employers remain suspicious, and they are often reluctant to employ people with mental health problems. As I often say, however, in reality they probably already do, but they just do not know it. We think the Government’s aim of halving the disability employment gap is ambitious, but we think it is right. We support that aim, and we want to discuss with the Minister this afternoon the steps she can take to ensure that it is achieved.
Emily Thornberry
I have been listening with great interest to what my hon. Friend has been saying, but I might have missed something. When did the Government make that promise to halve unemployment among people with disabilities?
Kate Green
I cannot recall exactly, but perhaps the Minister will be able to enlighten us. She may even wish to intervene on me to do so. I believe that that aim was announced very recently. My impression is that that has happened since the general election, and possibly over the summer. Perhaps her officials will be able to advise her if she, like me, cannot recall the exact date.
We agree that it is important to have that ambition for the level of employment among disabled people. It is important for our economy. We are massively wasting the talents and contribution of many disabled people. In written evidence from Leonard Cheshire, the Committee was informed that the achievement of the Government’s ambition could make an immense contribution to the economy of between £13 billion and £68 billion a year. That, by any measure, is a substantial difference. Of course, it would also make a tremendous difference to disabled individuals, many of whom would love to be working but cannot obtain the work they would like. For a whole range of reasons, they experience significant barriers to labour market participation. It is, of course, absolutely right that we should work systematically through dismantling those barriers. In my opinion, disabled people should have the right to work. They should have the right to good work, and to the dignity of good work, which I think all of us in the House value. I commend Ministers on their ambition, but we will want to test them on the substance that sits behind it.
As I said, many disabled people who would like to work are not working, although they certainly have no lack of ambition to work. Indeed, their ambition to work is substantially higher than among non-disabled people who are not working. For example, among those with qualifications at level 3, 14% of disabled people who are not working would like to be working, compared with 6% of non-disabled people. That shows in just one set of statistics—many more could be pulled out—that disabled people are keen to work where that can be made possible.
However, we have many significant concerns about how the Government are approaching the delivery and achievement of their ambition. We have concerns that Government policies are playing out in a way that is not helping at all. For example, the Work programme has failed to deliver specialist employment support that meets the particular circumstances and needs of disabled people. Today it delivers employment outcomes—jobs, in other words—for only about one in 10 of those on the Work programme and on employment and support allowance. That is not good enough. At that rate of progress, it will take us a very long time to achieve Ministers’ ambition of halving the disability employment gap.
Many disabled people are not even receiving the support that they need while on ESA to take the steps that they need to enter or to facilitate their entry into the workplace. Later in our debates, the Committee can look forward to extensive discussions of the Government’s proposals on those in the work-related activity group. We know that the Government are making a case to cut the benefits of people in that group, which my colleagues and I will firmly oppose. We do not believe that taking money away from disabled people is the way to facilitate their return to work. We also know that the Government have made a broad-brush case that it will be part of a process of offering additional employment-related support to disabled people in the WRAG, but we have heard no details at all yet about what that additional support will look like.
If we cannot debate that at this point in the Committee’s deliberations, I give notice to the Minister that we will be very keen to have a full discussion of what is intended and what is in Ministers’ minds in relation to that additional support when we debate the relevant provisions in the Bill, which are very worrying with regard to the work-related activity group. They worry me, but they are causing huge anxiety to many of the 500,000 or so people in the work-related activity group.
Neil Coyle
Does my hon. Friend not think that disabled people’s confidence in the Government’s ability to support them with this commendable target has been somewhat undermined by the reduction in the number of disabled people supported by Access to Work, the number of disability employment advisers and the amount of employment for disabled people in Remploy factories? However in context or out of context they were, the comments made by a Department for Work and Pensions Minister were unfortunate. Does my hon. Friend think that that has affected disabled people’s confidence in the Government’s ability and commitment to ensure that decent employment opportunities are available?
Kate Green
My hon. Friend is absolutely right; there is real scepticism about what the Government really intend. I think the Minister is incredibly well intentioned in her ambitions for good-quality, sustainable job outcomes for disabled people. However, wishing for the ends is not the same as achieving them. We need the right steps and the right measures to provide support for disabled people and crucially, as my hon. Friend says, to give them the sense of confidence they need to take advantage of the support on offer. If they feel that the Government’s motivations are, in fact, to make it harder for them to survive while preparing for work, or to push them into unsuitable work—work that may actually make those with serious health conditions even less well—that is naturally not a frame of mind in which we would wish anybody to enter an employment support programme.
The barriers faced by disabled people to an equal chance and an equal right to participate in the labour market are myriad, and many were referred to in the written and oral evidence received by the Committee. For example, we heard from Mind, which I thought gave some interesting and illuminating evidence to us last week, that there is a particular concern for people with mental health problems who are looking for work. It needs to be the right sort of work and the right sort of support to get people back to work.
According to Mind, just 8% of people with mental health problems who have gone through the Work programme have achieved a sustained job outcome. Furthermore, 83% said that their experience of being on the Work programme had made their health worse, and 76% said it made them feel less able to work. Those are really depressing statistics. I know the Minister will share my huge concern about those figures and the experiences of people with mental health problems. It is not a good sign for halving the disability employment gap given that, as I said earlier, so many of us will experience a mental health problem at some point in our lives.
We all share a real concern about young people’s employment prospects. We all know the scarring effects on a young person at the beginning of their working life of not being able to get into the labour market in order to build up their experience of work and ultimately progress and develop their career. I am absolutely passionate about that. I am of the generation that experienced a collapse in employment for young people at the beginning of the 1980s, and I remember the fear and anxiety we lived with at the time. We have seen it happen to subsequent generations, and I know that there is real concern about ensuring our young people have the very best chances to start their careers and get into the world of work.
The anxiety we rightly have about our young people’s employment prospects is massively amplified for disabled young people. Their employment chances, and the educational experiences many of them have that lead to their employment chances, are so much worse. We must all be concerned about that. We know that disabled young people are four times more likely to be unemployed at the age of 26 than non-disabled young people. They are twice as likely to be not in education, employment or training. To the extent that the Minister’s ambition to halve the disability employment gap can bear down on those shocking statistics and improve on the very poor performance we are achieving for our young people, she will have the wholehearted support of the Labour party.
There is widespread support for significant and radical reform of the employment support being delivered to disabled people. We heard it from our witnesses, we saw it in the written evidence and it is widely debated around the House. It is therefore a huge disappointment to us that nothing in the Bill gives any sense of what the Government are actually going to do about the disability employment gap. There is not even any specific reference to it in the Bill, with its full employment reporting obligation. That must call into question the seriousness with which the Government are prepared to put their money where their mouth is. A reporting obligation would really put a spotlight on what the Government are doing and what their programmes and initiatives are achieving to halve the disability employment gap.
Hannah Bardell
I commend the hon. Lady on a great speech. I agree with much of what she says. Remploy was one of the organisations that gave evidence. Although it is now successful, it previously had funding pulled by the Government, who took away vital opportunities. In Scotland, hundreds of disabled people lost the opportunity to work. The Scottish Government intervened and have now developed an organisation called Haven PTS, which I have visited personally. Does the hon. Lady agree that we need investment in such organisations so that employment opportunities are out there for people with disabilities?
Kate Green
I have never been a purist on Remploy. It seems there is a place for such employment support for some people; it helps with their sense of dignity and pride. That has in many cases been taken away from those who lost their jobs on the closure of the factories. Their chances of returning to work have been pretty poor.
Even more concerning is what happened when the Government closed the Remploy factories on the back of the independent report that they had commissioned from Liz Sayce. It was said that the money could be better applied to giving disabled people a chance in the mainstream labour market, and we expected that that money would go into, for example, the Access to Work programme, which my hon. Friend the Member for Bermondsey and Old Southwark mentioned. In the previous Parliament, the Select Committee on Work and Pensions found that it appeared no such thing had occurred. Indeed, it seemed impossible to find out what had happened to money released from the closure of the Remploy factories. That is hugely regrettable. It does not seem to have done much to benefit those who had lost their jobs as a result of the closure. I very much share the hon. Lady’s concerns.
We heard from many of our witnesses about the need for personalised specialist support designed and delivered more locally. Kirsty McHugh told us about that last week, and she highlighted the importance of the adviser relationship and building confidence. We heard a lot about the need for a better payment mechanism for providers. For example, Matt Oakley said in his evidence that he thought the Government might need to look again at the attachment fee for providers who were supporting disabled people with programmes to get them back to work.
Will the Minister say something about what has happened with Work Choice, a specialist programme for disabled people that witnesses in our evidence session last week were positive about? We know that the proportion of people who go into work having been on Work Choice is 10 times the proportion of disabled people who go into work having been on the Work programme, but it is underused. I have been told that in my constituency the payment structures are being changed to make it less likely that providers will work with those with the highest barriers to labour market participation, who are the group that we understood Work Choice was intended to help.
We also heard, and have had written evidence, about the importance of joining up the health and social care agendas with the employment agenda to facilitate a return to work. For example, people need flexible health provision so that they can get an appointment with a doctor or a specialist at a time that does not clash with when they wants to go to work, and they need social care that helps them go to work. Perhaps somebody can arrive to help them get up that bit earlier in the morning, so that they have time to prepare themselves and go out to work. Although the integration of health and social care is welcome, I suggest to the Government that the missing bit of the jigsaw, if I may suggest this to the Government, is employment. Joining them up would facilitate and maximise the chances of people moving into work. We can also question whether the criteria by which local authorities are required to provide social care should include access to employment.
Routes to work are important. Later we will debate participation in apprenticeships, internships and traineeships, and we also heard that it would be very important for the Government to act as an exemplar and a good commissioner. Self-employment has been raised.
The Chair
Order. This is a very powerful speech, but if the hon. Lady could relate it more to the reporting of the employment gap, that would be helpful.
Kate Green
I understand, Mr Streeter; you are quite correct.
It is important that the Government come forward with a report on how things are progressing and on what measures we can have to understand the nature of the progress, but I think Parliament would also welcome a report that described the steps the Government were taking, the different labour market approaches that were being used and how each of those was more or less effective for people with different health conditions or disabled people with different impairments. I am particularly interested in any report that might be prepared that properly analyses the use of self-employment for disabled people. We heard some interesting and, I think, ambivalent views from our witnesses last week, who said that it could be good and give disabled people more freedom, autonomy and choice, but that it could also be quite isolating, which would be a concern.
We heard a great deal about employer engagement. Public reporting might be one way to enthuse employers and drive up employer engagement, because it would be very much in the public domain and visible, and that would facilitate public debate.
I hope that the Minister welcomes amendment 2. I understand that, if she feels unable to accept it in full today, she may wish to reflect on it and come back with some of her own suggestions. I am open to hearing from her, but we must all agree that a focus on this issue is really important to every single one of us, and that a proper statutory report of progress would be extremely helpful in achieving the ambition that Ministers have.
Emily Thornberry
It has come to my attention that the first time we were aware that the Conservatives said that they wanted to halve the disability employment gap was in a brochure snappily entitled “Strong Leadership. A Clear Economic Plan. A Brighter, More Secure Future.” On page 17 of this book of fiction, there is the title “Jobs for all”, and following that, it is stated:
“We will fight for equal opportunity”,
and that
“the jobless rate for this group”—
people with disabilities—
“remains too high and, as part of our objective to achieve full employment, we will aim to halve the disability employment gap: we will transform policy, practice and public attitudes, so that hundreds of thousands more disabled people who can and want to be in work find employment.”
What is interesting is the context within which the Government made that promise—that solemn vow—to the country about what they would provide. They said that they would provide full employment and, if I can repeat it for emphasis,
“as part of our objective to achieve full employment, we will aim to halve the disability employment gap”.
If the Government have decided to put into legislation the solemn vow to have full employment—clause 1 states that they are going to report to Parliament to tell us how well they are doing on that—it makes complete sense, as part of that, for them to have an obligation to tell us how they are doing with halving the disability employment gap.
That is the only point I wanted to make.
Priti Patel
I welcome the debate and the points made by the hon. Member for Stretford and Urmston, because this is an important area for discussion.
The amendment’s purpose is to require the annual report to Parliament to include progress on the measures that have been made towards halving the disability employment gap. To put that into context, as she touched on, the Government are absolutely committed to the ambition to halve the disability employment gap. It is a challenging one—there is no doubt about it, which is why I welcome her contribution—because it requires us all, in my view, to transform policy, practice and public attitudes, and the Government are committed to doing all that they can to ensure that disabled people who can and want to work are supported and able to move into work as well.
The hon. Lady will know—we have discussed this in previous debates—that there has been an increase of more than 200,000 in the number of disabled people in work in the last year. That is why it is important to bring together—again, I touched on this issue in the previous discussion—other aspects of Government to work together to achieve the objective in the right way, so that the right kind of support and provision can be made.
As progress against the disability employment gap commitment is, of course, a key factor in achieving the wider commitment of full employment, that is why we take the view that it is not necessary for progress on that commitment to be reported on in the annual report. We believe that that is consistent with the Government’s manifesto commitment, which we said was part of our objective to achieve full employment, in addition to the aim of halving the disability employment gap. We will be able to achieve full employment only by achieving progress towards halving the disability employment gap.
I will touch on some of the points that the hon. Lady mentioned, particularly with regard to support for groups and with regard to how we will do more to halve the disability employment gap. She will know there are a range of Government programmes and initiatives. She mentioned Access to Work. Indeed, we have extended Access to Work to provide more support to disabled people in pre-employment, through work experience and obviously through employment-based training, internships and traineeships.
The hon. Lady touched on the Work programme as well. With regard to both the Work programme and the Work Choice programme, we take the view that they are not directly comparable, but of course the contracts for both programmes will end in 2017 and we are already working with the providers to get a better understanding of how we can develop them, including the support that is required, and so we can invest in the right way. She mentioned payment models. We are having those discussions right now, and it is right and proper that we work with those providers. We have also launched a specialist employment support programme, which is an innovative new programme that again provides extensive specialist support to those disabled people who need help and support.
Those are just illustrative examples of the work that is taking place in this area. However, in relation to the amendment, I will just restate that we will be able to achieve full employment only by achieving progress towards halving the disability employment gap. The annual report will include an update on the Government’s progress in achieving that ambition. That is why in our view the amendment is unnecessary, and I therefore urge the hon. Members who tabled it to withdraw it.
Kate Green
I welcome what the Minister has said about recognising the importance of halving the disability employment gap, and what she has said about its being a prerequisite for achieving the ambition of full employment, which I think is right. However, it always drives purposeful and effective policy when the spotlight of reporting and monitoring is put into the public domain, and therefore I wish to divide the Committee on the amendment.
Question put, That the amendment be made.
The Chair
It is my opinion that we have had a good old debate about the clause, so I do not propose to allow a stand part debate.
Clause 1 ordered to stand part of the Bill.
Clause 2
Apprenticeships reporting obligation
Stephen Timms
I beg to move amendment 75, in clause 2, page 1, line 16, at end insert—
‘(aa) information about the uptake of apprenticeships broken down by region, gender, age, ethnicity, disability, sector, qualification and level,
(ab) a report by the UK Commission on Employment and Skills on the quality of apprenticeship being provided, and’.
To specify additional information that must be included in the Secretary of State’s report progress towards meeting the apprenticeship target.
The Chair
With this it will be convenient to discuss amendment 102, in clause 2, page 1, line 16, at end insert—
‘(aa) information about the number of people with special educational needs and disabilities entering into apprenticeships; and
(ab) information about the number of people with Education Health and Care plans entering into apprenticeships.’
To require the Secretary of State to report on the number of people with special educational needs and disabilities entering into apprenticeships.
Stephen Timms
We come to the part of the Bill that deals with apprenticeships, and we are keen to get on to the second group of amendments on the clause, so I will get a move on.
We welcome the target set out for England in the Bill. I think it is rather unusual that there should be 3 million apprenticeship starts in the period 2015 to 2020—the target is ambitious and one that we support and welcome.
However, we heard in our evidence sessions that there is a danger. Rebecca Plant, the head of apprentices and graduates for Capp, told us on Thursday that she thinks the only way the target can be achieved is by sacrificing quality. She told us of
“myriad examples, such as apprenticeship barman and of apprenticeships in really low skills.”
She asked:
“How is that an apprenticeship?”,
and went on to say,
“people are just turning a job role into an apprenticeship…That is not right.”
She argued that the 3 million target
“should be broken down into levels of skills, so that higher level—level 4—degree apprenticeships should be broken out and there should be clarity.”
She continued:
“I would break it down and give transparency. What is a level 2 apprenticeship? What are people signing up to? Badging level 2 programmes as an apprenticeship is fundamentally wrong.”
She gave an impressive account of her thinking. In the middle she said,
“I am sorry…I am not very good at this”,
but actually she gave us valuable evidence. She also said that
“traineeships should not count towards that 3 million at all.”––[Official Report, Welfare Reform and Work Public Bill Committee, 10 September 2015; c.8-9, Q8-9.]
I do not imagine that traineeships will count towards the 3 million target, but I would be grateful if the Minister could confirm that.
The concerns raised by Rebecca Plant were echoed and amplified by Marcus Mason, our witness from the British Chambers of Commerce, who said:
“I would like to echo Rebecca’s comments and the worries about the 3 million figure…the apprenticeship starts from the previous Parliament—just over 2 million—included a lot of rebadging of Train to Gain programmes, and we do not want to see that again. We do not want to see a decline in quality because we are just chasing an arbitrary figure.”––[Official Report, Welfare Reform and Work Public Bill Committee, 10 September 2015; c.9, Q10.]
I am confident that every member of the Committee will agree with his sentiment.
Amendment 75 addresses those concerns about apprenticeship quality, which are widely expressed by businesses and others, in two ways. First, it requires the report produced each year to split the apprenticeship starts in that year by sector, qualification and level, which is exactly the split Rebecca Plant called for in her evidence on Thursday. Secondly, the amendment requires the Secretary of State to publish each year a report from the UK Commission for Employment and Skills specifically addressing and describing the quality of the apprenticeships on which participants have embarked in the previous year.
Is the UK Commission for Employment and Skills the right body to produce that report? Clearly, what we want is an independent, reliable report on quality, which might be achieved in a number of ways, but the UKCES is in a good position to fulfil the task. It is, of course, a Government-appointed commission, so I hope the Government feel that they can have confidence in its conclusions. The commission’s chair, Sir Charlie Mayfield, is also chairman of the John Lewis Partnership, and the commission includes such distinguished business people as the director general of the CBI and the general secretary of the TUC. It includes representatives of large and small businesses, including Will Butler-Adams, the managing director of Brompton; Julie Kenny, the chairman of Pyronix, with whom I worked when I was a Minister; Grahame Smith from the Scottish TUC; and Liz Sayce of Disability Rights UK.
The commission has a broad range of experience and perspectives, and it has done a lot of relevant work in this area. It has published reports on understanding skills and performance challenges in a range of sectors, and those reports address apprenticeship issues. It has produced a series of reports called “Working Futures”, “Careers of the Future”, and “The Future of Work: Jobs and Skills in 2030”. It also has the capacity to give independent advice. It does not simply say what the Government want to hear. I do not know whether the commission is subject to the same sort of pressure as the Office for Budget Responsibility—we have discovered over the past couple of days that the Treasury leans on the OBR to prevent it saying things that will embarrass the Government—but we do know that the commission is able to make independent remarks.
On the persistent problem of stubbornly high unemployment among young people, to which my hon. Friend the Member for Stretford and Urmston has referred, the commission has said:
“High quality apprenticeships should be a normal career pathway for many more young people, and a normal way for businesses to recruit and develop…talent”.
The commission has the necessary independence, as well as the expertise, to provide the independent review of quality that, from the evidence we have heard in Committee and from what everyone in the field says, is needed.
The amendment also specifies a number of breakdowns of apprenticeship numbers that could be useful for informing policy and understanding of how the apprenticeships programme is working in practice. We should know the number of apprenticeships taken up each year by people with disabilities—my hon. Friend will move a separate amendment on that in a moment—and we need information by region and by gender. The importance of those breakdowns will be apparent to everyone.
I want to say a little more about the other two breakdowns the amendment calls for. The first is the breakdown of apprenticeships by age. As we heard from the witness from the British Chambers of Commerce, a lot of things that are called apprenticeships are really just rebadged Train to Gain programmes. Train to Gain was a programme under the last Labour Government wherein existing employees would take often quite short training courses to increase their skill levels. There is nothing wrong with that, of course, but it is not what most of us think of when we hear the term “apprenticeship”. One consequence of that emphasis in the apprenticeship programme is that only quite a small proportion of apprenticeships are undertaken by young people. Worse still, the number of young apprentices fell last year—a pretty disastrous development that is contrary to what we all want—so it is important to get a breakdown of apprenticeships by age each year.
Secondly, it is important that we see a breakdown of apprentices by ethnic origin. I pay tribute to the work of the Black Training and Enterprise Group and its chief executive, Jeremy Crook. Ethnic minorities are seriously under-represented among apprentices: 20.2% of the population are from an ethnic minority and 25.4% of apprenticeship applications are from ethnic minorities—a larger proportion than in the population as a whole—but the proportion of people from ethnic minorities who start an apprenticeship is only 13.8%, which is way less than the proportion in the population and around only half the proportion of those who applied.
The problem of under-representation of ethnic minority citizens among apprentices is not new. I first asked a written question on the subject three years ago, when I was told that 9.8% of starts were from ethnic minorities, so the current proportion, 13.8%, has gone up, of which I am glad. In fairness to the Government, the problem is not repeated throughout their employment support measures. For example, of sustained job outcomes in the Work programme, 19.9% are secured by ethnic minorities, which is almost up to the full 20.2% in the population. Nevertheless, there seems to be a particular problem in the apprenticeship programme that must be addressed. I know that efforts are being made to do so, but so far they have fallen well short of what we would want to see.
It is vital that the problem is fixed. Amendment 75 specifically requires a breakdown by ethnic origin, so that we can track what is happening. I hope that the Minister accepts that the amendment would build constructively on clause 2, and so will accept our proposals for strengthening the report.
Amanda Milling (Cannock Chase) (Con)
I welcome the target set out in clause 2 of creating 3 million apprenticeships this Parliament. It will give more people, including young people, the skills to get on in life, and will build on the 2 million apprenticeships created in the previous Parliament, 5,000 of which, I am pleased to say, were created in my constituency, Cannock Chase, in companies such as the Pertemps People Development Group, Gestamp, and Fuel Conservation Services. The target and the mandatory reporting of progress set out in the Bill show that the Government are not only serious about increasing the prominence of apprenticeships but committed to achieving that goal and holding themselves to account.
To demonstrate why it is important that we are setting the target, I want to talk about Scott, an apprentice I met in my constituency last year. He had been stabbed sometime before I met him—
The Chair
Order. The hon. Lady must of course link her remarks to not only the clause but the amendments. That is important. Now, let us hear more about Scott.
Amanda Milling
I will come to the amendment in a moment, but I would like to talk about Scott briefly. Because he had been stabbed, he would barely leave home. With a lot of persuasion, he decided to take part in the National Citizen Service, which was the gateway to his becoming an apprentice. I met him again roughly 12 months later, when he joined me at a meeting with the Leader of the House. He was incredibly impressive. He was professional, relaxed and confident, and he made an excellent contribution to the discussion. Now he is a coach for NCS at Coachright. It was his dream, and he achieved it. That is an example of the opportunities apprenticeships can give people. They can genuinely transform people’s lives, which is why I believe we should focus on the overall target set out in the Bill, rather than on amendments 75 and 102. The overall target ensures that we give more people the skills that are valuable to them, to businesses and to our economy.
Clause 2 sets out the need to publish progress during the term of the Parliament. I hope it will go beyond the term of the Parliament, because creating apprenticeships is an aspiration for the long term, not just for the next five years. The monitoring will help us to establish our success in engaging businesses and apprentices; I know from personal experience that that has been a challenge in the past. That was outlined in last week’s evidence sessions. This is an opportunity to overcome some of the challenges to getting people into apprenticeships, regardless of their demographic background. I point out that demographic information is available through other sources.
We need to focus on driving awareness of apprenticeships in the various groups and ensuring that they understand the different apprenticeships. We also need to look at how apprentices and businesses see value. I will not go into each of those points in detail because we have a lot to cover. In short, there are many areas in which we need to identify solutions to address the challenges for all audiences and demographic groups, and achieve the target of 3 million. I look forward to playing my part in creating a marked increase that will transform the lives of more people like Scott.
Neil Coyle
I rise to speak to amendment 102, which would require the Secretary of State to report on the number of people with special educational needs and disabilities and the number of people with education, health and care plans entering into apprenticeships.
Before I start, I want to make three quick points. First, I thank the Chair and Clerks for their help and advice so far. Secondly, I again commend, as I did in last week’s witness sessions, the very welcome target for narrowing the disability employment gap in this country. It really is brilliant that the Government have made that commitment. Thirdly, I am grateful, especially as a new Member of Parliament, for all the briefings and notes from organisations including the Federation of Small Businesses, Disability Rights UK, and especially Mencap and my own council, Southwark. I am still a councillor in Southwark, but I do not take an allowance as a councillor; I do not know whether I have in the past six months. If that needs declaring, there it is.
The disability employment statistics are shocking. Only about 48% of disabled people of working age, and fewer than 10% of people with learning disabilities, are in work. That figure falls to about 5% for people with mental health conditions, including schizophrenia. There is widespread acceptance that more needs to be done, which is why the Government target is so welcome. One route is, via this amendment and information on apprenticeships, to give disabled people the skills and experience that benefit longer-term employment.
We heard widespread concern from witnesses that the Work programme has not worked for disabled people—the success rate is only about 10%. Disabled people’s organisations suggested that that demonstrates a further need for the apprenticeship route to be better utilised, although they noted their concerns about income levels in evidence submitted to the Committee.
Last week we heard the British Chambers of Commerce raise concerns about simply applying the raw target. The headline 3 million must be broken down to ensure that it works for all and is effective. The Federation of Small Businesses provided me with a briefing—I hope that something went to other Committee members—which showed that 60% of small businesses took on an apprentice in the past two years. Its concern is that the new target will undermine the existing system. It estimates that about 400,000 new starts will be needed a year. That is a big jump, and I suggest that its concerns need assuaging. If the new target generates a revolving door of people re-entering different apprenticeships, it is less useful than an adequately prioritised target, which amendment 102 focuses on. I think that the witnesses accepted the need for a better focus on areas of work and groups of people who need more support and for geographical prioritisation. Amendment 102 goes some way to meet that concern.
The Minister mentioned, in voting down a previous amendment, that there would be some reporting on targets, which would be welcome. If there was a bit more detail on that, perhaps amendment 102 would be withdrawn. Accepting the suggestions of witnesses and prioritising the proposed target group would go down well with business, better meet needs and, I hope, avoid the fear and risk that a new target will undermine the quality of apprenticeships.
I want to touch on the existing scheme. The hon. Member for Cannock Chase mentioned the existing scheme and the target of 2 million. The Government have highlighted the fact that 2.3 million young people went into apprenticeships over the previous Parliament. They obviously plan to expand that number further, but the 2012 report “Creating an Inclusive Apprenticeship Offer”, commissioned by the Government and written by Peter Little OBE—no less—showed a worrying decline in the proportion of apprentices declaring a learning difficulty and/or disability overall.
Since 2007-08, the proportion of that group accessing apprenticeships fell from 11.5% to 9.1%, and the picture for people with moderate learning disabilities is even bleaker. In 2008-09, just 2.5% of apprentices declared a moderate learning difficulty. By 2012-13, that had fallen to 1%, which is of concern to Mencap, to which I am grateful for providing those statistics.
Although the total number of apprenticeships has risen in recent years, those with special educational needs and disabilities are being left behind and are already significantly disadvantaged in employment opportunities. Amendment 102 would help refocus attention and ensure, through the need to report, that opportunities are open to all in a way that helps the Government with that commendable broader target to reduce the rate of unemployment among disabled people.
We have had some discussion about context. There are significant concerns about what will happen to people in the employment support allowance work-related activity group. Some 248,000 people in that group have mental and behavioural disorders, as recorded by the Department for Work and Pensions. That figure includes many people with learning difficulties, who are the focus of Mencap’s concerns. Using an information system to ensure that apprenticeships are open to that group would be a bit more carrot if we are going to whack with a particularly nasty stick. There are many different reasons for the low level of reporting of disabled people on apprenticeships, including the demand for apprenticeship places, which, in turn, has led to higher entry requirements, excluding some disabled young people who, although perfectly capable of doing the job, do not have the academic qualifications needed. Amendment 102 would help to tackle that.
Disability organisations believe that better routes into apprenticeships for young people with special educational needs must be established. There is a need to increase the number of supported internships or traineeships that work well for people with learning disabilities. Reporting would also help, as the amendment suggests.
Disabled people face barriers in terms of the attitudes of employers and apprenticeship providers, and there is a lack of knowledge that support such as Access to Work is available for disabled apprenticeships. It has been disappointing to witness the decline in disability employment advisers over the past five years, which I mentioned and witnesses to the Committee, including Remploy’s spokesperson last week, referred to. Will the Minister provide clarification on the role of disability employment advisers and Access to Work when it comes to apprenticeships?
Does the Minister plan to reflect the concerns of the business community, demonstrated by the British Chambers of Commerce and other witnesses, about signposting and a one-stop shop for advice and support for businesses seeking to use the apprenticeship programme? The amendment could help to shape that approach as, without the information on reporting, it is difficult to deliver a system that gives businesses access to the information needed.
While many young disabled people with special educational needs can complete the on-the-job vocational part of the apprenticeship framework, they struggle with the English and maths assessment. Support and reasonable adjustments must be available for those apprentices and the level of qualification set at an appropriate level. I hope that the Government are able to demonstrate how the new plans will meet their Equality Act 2010 obligations to ensure that disabled people are not disadvantaged further. Reporting on the number of disabled people able to access the scheme would help towards that equity. It is incumbent on the Government to take the lead in ensuring that access to apprenticeships is as equitable as possible, as well as reporting on progress to boost the numbers of people with special educational needs and disabilities on the programme. Within that reporting target, it also seems prudent to report on the number of apprentices with the new education, health and care plans, which replaced statements in September last year.
Returning to the issue of businesses and to concerns expressed in writing and in the evidence sessions, reporting is crucial in ensuring the efficacy of the extended apprenticeships scheme. To include a requirement to report on the number of disabled people who receive support in the form of apprenticeships among the other reporting requirements might reassure businesses and disability organisations that the plans will not just result in low-quality, revolving door schemes that meet the number but not the longer-term goals of the Government, employers and disabled people. I look forward to the Minister’s response, and I thank the Committee for its consideration of the amendment.
Priti Patel
I commend and thank all hon. Members for their contributions. There is a lot to cover, but all the points are highly relevant. I will cut to the chase and go straight into the amendments.
First, I reassure the Committee that the first part of amendment 75 is unnecessary in view of the level of reporting that already takes place. My Government reports on almost half of the criteria as part of the Government’s quarterly first statistical release and will continue to do so as part of the annual reporting requirement set out in the Bill. Those statistics include a variety of figures broken down by region, age, gender, ethnicity, disability, level and sector. On breaking the figures down by qualification, we also publish information on the courses that apprentices are enrolled on in each academic year as part of the national aims report. The reporting process is there, and it is detailed.
The first part of amendment 102 is also not required, as the Secretary of State already reports on the number of people with learning difficulties and disabilities entering into apprenticeships. As for the amendment’s second requirement, the Government do not publish data on the number of people entering into apprenticeships with education, health and care plans. We are already helping to make apprenticeships more accessible for people with such plans by providing the full funding for apprenticeship training under existing frameworks to entitled 19 to 23-year-old care leavers. We will work with Barnardo’s to continue to ensure that apprenticeships are accessible for care leavers.
The second part of amendment 75 would require the Secretary of State to provide a report by the UK Commission for Employment and Skills on the quality of apprenticeships. That is unnecessary, as we are already committed to a range of measures to ensure the quality of apprenticeships. That has been subject to much discussion, not just in this Committee but in government, particularly with the Department for Business, Innovation and Skills, which is taking the lead. We have already ensured that all apprenticeships are real paid jobs, with a minimum duration of a year and minimum hours of employment. They have to include off-the-job training, which must include English and maths when those have not already been achieved. We are already working to ensure that the quality of apprenticeships is high and, importantly, continues to improve.
The best indicator of quality is that apprenticeships help people to progress into employment. Government data already show clearly that that is the case across the programme. On average, level 2 and level 3 apprenticeships increase earnings by 11% and 16% respectively. We have seen the significant returns that they bring to the economy. Latest research indicates that adult apprenticeships at level 2 and level 3 deliver £26 and £28 of economic benefit respectively for each pound that the Government invest.
I reassure the Committee that we can never stand still on this issue, and we are certainly not complacent. The Government have introduced a number of additional measures to ensure that apprenticeships offer the best opportunities to apprentices and the businesses that employ them. That includes giving employers the responsibility to develop new apprenticeship standards.
The right hon. Member for East Ham referred to some of the points that came out in the evidence sessions. Having a dialogue with employers is crucial, but they have to be responsible in helping us to develop the standards and the quality that ensure that their business and sector needs are met, while we focus on introducing rigorous assessment of end-point competence to ensure that apprentices can do the jobs that employers want. Ofsted and Ofqual will of course continue to play an essential role in the quality of apprenticeships. Ofqual will help to ensure that regulated qualifications meet the standard. Ofsted will inspect and report on the quality of apprenticeships, including observations in the workplace as part of the wider provider regime. We judge that the measures will give confidence that apprenticeships are high- quality jobs with training.
Stephen Timms
I am grateful to the Minister for what she has told us about the data that will be published, which does pick up on the points in the first part of amendment 75. I am disappointed, however, that she was unable to confirm to my hon. Friend that we will be able to find out the number of people with education, health and care plans entering into apprenticeships, but I hope that the Minister will have another look to see whether that can be provided.
The Minister is a bit complacent on the quality point. I accept that it is not really a matter for her—it is for her colleagues in BIS—but we heard during our evidence from the British Chambers of Commerce, no less, that the only way the 3 million target will be achieved is by watering down quality. The mechanism that we proposed would have dealt with that. I will not press the amendment now, but I hope that she might commend our idea to her colleagues. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Jess Phillips (Birmingham, Yardley) (Lab)
I beg to move amendment 99, in clause 2, page 2, line 5, at end insert
“and that 20,000 of these apprenticeships are taken up by children and young persons leaving care.”
To amend the apprenticeships target to require that 20,000 of the three million apprenticeships are taken up by children and young people leaving care.
The Chair
With this it will be convenient to discuss the following:
Amendment 103, in clause 2, page 2, line 5, at end insert
“and that a specified proportion of the three million apprenticeships are entered into by people with special educational needs or disabilities.
‘(2A) For the purpose of subsection (2) the Secretary of State shall, by regulation, specify the proportion of apprenticeships that must be entered into by people with special educational needs or disabilities for the target to be met.
(2B) The Secretary of State must lay before Parliament in each reporting period a report setting out how they plan to meet the apprenticeship target as it relates to people with special educational needs or disabilities.”
To require the Government to ensure that a specific proportion of apprenticeships are taken up by persons with special educational needs or disabilities for its apprenticeship target to be met and to require the Secretary of State to report on how they intend to meet that target.
Amendment 100, in clause 2, page 2, line 29, at end insert—
‘(5) In this section “children and young persons leaving care” has the same meaning as in the Children (Leaving Care) Act 2000.”
This amendment is consequential on amendment 99, to define the term “children and young persons leaving care”.
Jess Phillips
As I have not been feeling very well, I beg the Committee’s indulgence if I have to run out at any point. Actually, the Committee has made me feel a little better, so thanks everyone.
As my hon. Friends have said, we welcome the Government’s commitment to create 3 million apprenticeships by March 2020. I like the idea that the Prime Minister has 2020 vision, as stated by the Minister, but I am unsure that I have it right now. When done well, apprenticeships have huge potential to transform the lives of vulnerable young people through a combination of college and work.
I want to lay out why the amendment matters by describing a case study that fell into my lap this week—I promise the Committee that it is real. Since I have been on this Committee, I keep asking everybody I meet what benefits they are on and what is happening to them, and a woman came into my surgery on Friday with a housing problem. She had a private landlord who was a bit rogue, and she needed help getting on to the council housing list. She was my age and had seven children. If anyone thinks that that is not a hard-working family, I advise them to stay at home with any number of children. She had already been hit by the benefits cap, and was no longer receiving any help to pay her family’s rent.
As I am a member of this Committee, I thought that I would ask her some questions about the effect that the benefits cap had had on her life and do a bit of evidence gathering, but she was absolutely not interested in talking to me about her benefits and how they had been reduced. All she wanted to talk to me about was how she wanted to work when her youngest started school the following year. She told me how she had had a tough life. She grew up in the care system and had 32 placements. She wanted to be a teacher, or at least a teaching assistant. She had literally no idea how to start, so I simply talked her through what I might do if I were in her situation.
This woman is my peer. She is a mum the same age as me, but the gulf between us is enormous. Like her, I went to primary school for seven years and then secondary school. I have a nice, stable life. I was afforded the chance to spend my early adult years studying, living off my parents, working in all sorts of jobs, building experience, building me as an adult, making my chances and finding my path. She has had absolutely none of that—not because she is idle or lazy, but because she did not have the same chance that all of us in this room have had or the chance we would ever want to give our children.
The importance of the amendment is clear. Where the state has loco parentis for a child or young person, it must mean just that. We must treat the children in our care exactly as we would treat our own children and as we expected our parents to treat us.
I welcome the policy on apprenticeships. However, in its current form it is unlikely to benefit young people such as the woman I described in my surgery who are facing the greatest challenges, including those who have been in the care system. I contacted Barnardo’s, which is the national leader in working with care leavers, for information. It told me that the young people it supports struggle to obtain apprenticeships, often due to the entry requirements, which may include five A to C grades at GCSE.
As in the case study I outlined, school education is often disrupted for care leavers due to multiple placements. Combined with the impact of traumatic early experiences, that means that they are much less likely to achieve academically at the same rate as their peers—any of us in this room. One consequence of that is that 34% of all care leavers are not in education, employment or training at the age of 19, compared with 15.5% of 18-year-olds in the general population. That is nearly double—in fact, it is more than double; I will be good at maths one day. We are calling on the Government to amend the Bill to change the definition of the apprenticeship target by specifying that 20,000 apprenticeships will be reserved for young people who have been in the care system.
This cannot just be about numbers; we must also recognise the difficulties faced and act as any parent would—as my parents did, and as I act. These special apprenticeships should come with appropriate support to assist young people who have been in the care system overcome any barriers to the workplace, and employers should receive larger reimbursements to cover additional costs. There are many innovative schemes. As we heard in the evidence session on the very first day, the level of support given to people in these environments is so important. We must not exclude young people who struggled at school but who have the potential to achieve qualifications with the right support. That is crucial if we are going to give these young people a chance.
I also call on the Government to amend the Bill to specify additional information that must be included in the Secretary of State’s progress report on meeting the apprenticeship target. That information should include not just the uptake but the outcomes of apprenticeships for young people who have been in the care system.
Anybody who has ever worked with young, vulnerable people, as I have for many years, will know that there is a problem when they start work and begin to lose their housing benefit. How the Government allocate housing benefit and whom they protect in the cuts will make a big difference to those young people. When a vulnerable young person begins work, they start to lose their benefits. Vulnerable young people’s work is often unstable, chaotic and not well paid, so there is a balancing act for care leavers between wages and stable tenancies. Remember they have no mum and dad to fall back on; we are relying on the Government to be their mum and dad.
A really good example in my constituency of how to do that well is something special that a youth homelessness organisation called St Basils is doing. It has the live and work partnership with the Sandwell and West Birmingham Hospitals NHS Trust in a community response to youth homelessness, which is an innovative scheme providing 27 apprenticeships for young people, including care leavers, who are homeless or at risk of homelessness throughout Birmingham and Sandwell. The trust has provided a block of apartments that were previously used as staff accommodation but are no longer in use. St Basils, with the help of partner Keepmoat Regeneration and an empty homes capital grant, has completed the refurbishment of the accommodation to provide on-site shared accommodation for the apprentices.
St Basils is managing the accommodation and supporting the young people in their homes—that support, as I have outlined, is so important—and the trust is providing a range of apprenticeship opportunities. A pre-apprenticeship programme is being funded by Health Education West Midlands, delivered by University Hospitals Birmingham. That particular innovation is a scheme in which the young people live benefit-free, as I am sure the Minister is delighted to hear. It is something we all want. The funding and the support structure have been developed to ensure that young people can have an opportunity to live and work without recourse to welfare benefits.
To meet concerns about housing benefit for under-21s, people getting on to apprenticeships and ensuring that we are doing our best for care leavers, there are innovative schemes to give care leavers—the most vulnerable people in our society—a real chance. The scheme that I have described recognises exactly what I am asking the Government for in my amendment. It takes a community to bring up a child or young person. That is exactly the sort of brilliant and innovative scheme that the Government should consider when looking at care leavers and apprenticeships. The amendment would give that vulnerable group impetus and show them commitment. The Government should do that, because it is exactly what a mum and dad would do.
Neil Coyle
I rise to speak to amendment 103, which specifies that the apprenticeship target of 3 million apprenticeships should include a specific target related to the number of apprenticeships undertaken by people with special educational needs and disabilities. The amendment is a probing one and links to some earlier discussions, so I will try not to repeat anything.
I have three quick points to make. The Government have an ambitious target of 3 million apprenticeships, but disabled people and their organisations think that a sub-target ought to be set for that under-represented group of young people. The Minister has already answered that some of the information is available, so no burden arises from the amendment. I will be intrigued to hear why specifically the situation could not be reported on or monitored, or a target provided. If the information is known, please report on it.
In addition, as has been mentioned, that reporting could help the Government meet the broader and commendable target to reduce the employment gap for disabled people. We have already talked about the statistics for disabled people and employment overall: disabled people are a third less likely to be in employment, and the employment gap represents some 2.2 million disabled people. My hon. Friend the Member for Stretford and Urmston referred to disabled people being four times more likely to be unemployed at the age of 26, which is evidence of the need for such targeting. Overall, disabled young people are twice as likely to be NEET.
The Minister mentioned that the number of disabled people in work had risen in the past couple of years—I think that was the time period—but in the past five years the percentage of working-age disabled people has fallen from 53% to 48%. Again, some additional emphasis and focus on ensuring that disabled people have opportunities would be welcome.
Neil Coyle
Brilliant. Well, there we are. It is nothing to be timid about. Jaguar Land Rover also has a scheme, which took on Daryl Jones. I am sure the Minister has heard of that scheme. IBM also has a fantastic scheme. I will not go through the specific examples, but those businesses are out there and have shown the way. I hope the Government learn from those business examples and deliver the measures in the amendment. Both the Federation of Small Businesses and the British Chambers of Commerce have indicated that they are willing to help in that regard. The amendment would drive that focus and help meet that target.
My final point is this. Crisis has provided an excellent briefing for members of the Committee. The youth obligation announced in the recent Budget requires young people aged 18 to 21 to apply for apprenticeships or traineeships, gain workplace skills or go on mandated work placements after six months. It is even more essential that apprenticeships are open to disabled people. Amendment 102 would support the Government in delivering the new requirement they are placing on young people.
Priti Patel
It is fair to say that during this debate we have covered a wide range of points. However, I will bring our debate back to the amendments, which seek to impose targets on the Government for the number of apprenticeships taken up by people leaving care and by people with special education needs or disabilities.
On amendments 99 and 103, apprenticeships are real jobs with training. As is the case for all other jobs, employers make the final decision as to who they hire for any apprenticeships they have advertised. As apprenticeships are employer-led we are not able to ring-fence apprenticeships for particular groups, as that would mean we would require employers to hire particular people for vacancies. The 3 million target will provide more opportunities for everyone, including those leaving care and those with special educational needs or disabilities. In an earlier discussion I touched on some of the existing schemes, which we are of course extending. A lot of investment is going on in this area already. When we have more time I will be happy to elaborate on that and talk about the programmes, so as to share more information with the Committee. Much work is ongoing in the Department.
To respond to amendments 99 and 100, we already provide full funding for apprenticeship training under the existing frameworks for entitled 19 to 23-year-old care leavers. The hon. Member for Birmingham, Yardley spoke with great passion. To answer her point, this is not about excluding people but about supporting them, especially those with challenging backgrounds. The circumstances she highlighted are poignant—she spoke about a real individual who, as she pointed out, is the same age as her and her peer, and who wants to work and to have the opportunity to progress. It is incumbent on the Government to support that individual to find the right routes and access so that she can get the support she is looking for.
The hon. Lady mentioned Barnardo’s, which I know has called for an additional target of 20,000 apprenticeships taken up by children or young people leaving care. We will work with Barnardo’s to continue to make apprenticeships accessible for care leavers. The hon. Member for Bermondsey and Old Southwark mentioned that responsibility for this area is not solely DWP’s but goes across Government. There is an apprenticeship advisory group that helps the Government to understand and address any apprenticeship issues connected to diversity and equality, so as to address barriers and make apprenticeships as inclusive as possible.
As for reporting, in a previous discussion I touched on the fact that a lot of the data are published as part of our quarterly statistical first release. We will continue to publish those data as part of the annual reporting requirement set out in the Bill. The Government want all apprenticeships to be as inclusive as possible. Thousands of disabled people have already benefited from apprenticeships. There are many schemes, such as the Disability Confident campaign, and Barclays, Marks and Spencer, Sainsbury’s and many other employers are doing great work in this space. As a Department, along with the Department for Business, Innovation and Skills, we are encouraging businesses to do more—that is part of our ongoing work and dialogue with them.
For a start, we want in this Parliament to build on the success of the work that has taken place with employers on apprenticeships. We judge that the measures in the Bill will give confidence that the Government are ensuring that apprenticeships are accessible to people of all backgrounds, including care leavers and those with special educational needs and disabilities. I urge the right hon. Member to withdraw the amendment.
The Chair
It is Ms Phillips’ amendment; she is not yet a right hon., but it will not be long.
Jess Phillips
It is a matter of time, isn’t it, Chair?
I will come back on some of the things that the Minister has said. I welcome her concerns. I will send my constituent to her, as she is keen to get her into work. Although I understand what she says about targets and the policy being employer-led, there are a lot of things that other Government Departments, as well as hers, could potentially do to try to reach targets in both areas. I welcome that, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 ordered to stand part of the Bill.
Clause 3
Support for troubled families: reporting obligation
Stephen Timms
I beg to move amendment 4, in clause 3, page 2, line 46, at end insert—
‘(2A) The matters by which the progress made by a household that receives relevant support shall be measured under subsection (1)(b) include whether a member of the household is in employment.”
This requires one of the factors which is used to measure whether a household receive support is making progress is whether or a not a member of the household is employed.
The Chair
With this it will be convenient to discuss amendment 5, in clause 3, page 3, line 6, at end insert—
‘(4A) A report prepared under this section must include information about the number of households receiving support where a member of the household, who had not previously been in employment during the last 12 month, has entered employment.”
To require the report on support for troubled households to specify the number of households receiving support where a member of the household has become employed.
Stephen Timms
We now deal with the troubled families programme, for which there is widespread support. As Ministers have acknowledged, it has its roots in the family intervention projects introduced by the previous Labour Government. The pioneering Dundee families project, established in 1995, has been particularly influential. The approach has all-party support, and we welcome the proposal in the clause to introduce a new and more formalised reporting obligation.
The troubled families programme as it currently stands was given a big push by the riots in summer 2011 and was launched by the Prime Minister later that year. Louise Casey was appointed director general in November 2011. The troubled families programme is in touch with a lot of agencies: with housing departments because of rent arrears; with social services about the wellbeing of children; with police and youth offending teams; sometimes with drug and alcohol services; with education departments over school non-attendance and exclusion; and with the health service. All of that means that the families we are talking about impose a high cost on the taxpayer. They are also often high-harm to themselves and to others. Outcomes for children in those families tend to be poor, and many are on the borderline of being taken into care. A solution has to involve all family members and a multiplicity of agencies, so inter-agency planning delivery is the key to the effectiveness of the programme.
The goal announced in 2011 was to turn around 120,000 troubled families in England by this year, aiming to turn around the patterns repeated in generations of poor parenting—abuse, violence, drug misuse, antisocial behaviour and crime—with the Government investing some £4,000 per family over three years on a payment by results basis. The key element of the programme—this was distinctive to the family intervention projects as well—is that each family has an assigned caseworker responsible for turning their fortunes around and bringing together the efforts of all the agencies working with that family to maximise the chances of success.
The official evaluation, published last July, gave us some detailed information. Some 49% of all families in scope are lone-parent families. The under-18 conception rate is only 2%—rather contrary to the stereotypes we sometimes hear. Some 90% of the adults in the families involved have committed no criminal offence. Only 3% have been treated for alcohol dependency, and it is the same proportion for drug dependency. But 46% of households have an adult or adults suffering a mental health problem, and 33% of the children have mental health problems—that is a particularly troubling figure. Some 32% of the adults and 20% of the children have a long-standing physical illness or disability. Some 74% are workless households. For 83%, at least one person receives out-of-work benefits; 27%are in rent arrears; and 21% are at risk of eviction from their homes.
Priti Patel
I thank the right hon. Gentleman for his contribution and for the focus on the troubled families programme, because it has been designed to turn around the lives of families with challenges. In fact, the first troubled families programme turned around the lives of more than 116,000 families. That is not to say that those hardest-to-help families’ complex needs and multiple problems can be resolved overnight.
Amendment 5 would require information to be included in the Secretary of State’s report on the number of households receiving support where a member of that household progresses into employment following a period of 12 months out of work prior to engagement with the troubled families programme. Getting parents and young people into work is at the heart of the troubled families programme. To reflect that, there are specific progress measures on continuous employment, as set out in the programme’s operating framework.
As with the original programme, we expect the majority of families in the new troubled families programme to be claiming out-of-work benefits. Due to the complexity of the problems they face, they will also be a long way from the labour market. We know that getting a parent into work can have a transformative effect on the whole family. Any Committee member who has any engagement with constituents who have been involved in the programme will recognise the impact on families of the measures and interventions, which can really be transformative. That is what such programmes are about.
In recognition of that, the programme aims to support families with a multitude of problems where adult family members are currently out of work, irrespective of the length of time they have been unemployed. Information on how the programme has supported adults into employment is therefore already an important part of the troubled families programme’s independent national evaluation, which will be the basis of the Secretary of State’s annual report to Parliament.
On amendment 4, clause 3 provides that, at the start of each financial year, the Secretary of State shall issue a notice “specifying the matters” by reference to which progress will be measured and reported on in the following financial year. The amendment would place employment as a progress measure into statute. We have purposely not set out a progress measure for the programme within the clause, so as to ensure that the programme remains flexible enough to respond to families’ emerging needs and to reflect future Government priorities. The right hon. Member for East Ham mentioned that the programmes are varied geographically, and in respect of the local authorities involved and the multi-agency work that is taking place. Ensuring that the programme can remain flexible to respond to the needs of those families is therefore vital.
Stephen Timms
The Minister emphasised that getting people into employment is at the heart—I think those were her words—of the troubled families programme. I welcome her assurance, but that should surely then always be in the criteria against which the programme is assessed.
Priti Patel
The full employment measure, which we have discussed, is outlined in an annual report. This is about the troubled families programme, which already has an independent national evaluation. That will be the basis of the Secretary of State’s annual report to Parliament. We take the view that we are already reporting on those measures. Different information that can be used to measure progress may, of course, become available during the lifetime of the programme. The annual notice issued by the Secretary of State will accommodate that information and will be based on the operating framework for the programme.
The current financial framework includes progress measures for employment, and therefore the first report to Parliament will include information on the number of adults in families supported by the programme who have moved into continuous employment. We believe that that is covered and that the amendments are therefore not necessary, so I urge the right hon. Gentleman to withdraw them.
Stephen Timms
I am glad that the point will be covered in the first report, but I am rather puzzled as to why the Minister is not willing to say that it should be covered in all reports, given the centrality of employment to the goals of the programme. Nevertheless, I am grateful for her response and will not press the amendment to a vote. I hope that, in practice, we will find employment featuring prominently in each of those reports in each of the years they appear.
Amendment, by leave, withdrawn.
Stephen Timms
I beg to move amendment 6, in clause 3, page 3, line 6, at end insert—
‘(4A) A report prepared under this section must include information about the total value of expenditure directed at supporting relevant households by—
(a) local government,
(b) central government, and
(c) government agencies.”
To require the report on support for troubled households to specify how much has been spent to support targeted households by different parts of government.
I will not take up much of the Committee’s time on amendment 6, but there is one other set of data that we need to make a full evaluation of this programme: how much is being spent on it? As I understand it, the central Government allocation is £4,000 per participating family but, of course, other resources are also being allocated to those families. In particular, many local authorities, because it makes such a big difference to them if the families can be set on a new and positive path, are supplementing the resources provided by central Government, and other agencies are also contributing. We need to know the total value of spending on those households by the relevant agencies, and amendment 6 simply requires the report produced under clause 3 to include that vital piece of information.
The Government say that the 120,000 or so troubled families in the current programme cost the state £9 billion a year. Ideally, we would like to have a set of figures that add up at the beginning to £9 billion being spent on those families but that then fall as the programme starts to take effect. The announcement last March, on which the Full Fact website was rather sceptical, claimed that £1.2 billion had been saved as a result of the programme but, to secure a robust evaluation of the programme and to grasp the impact of those families on the Exchequer and the effect of the programme, there is no alternative to compiling the figures required by amendment 6, which would hopefully decline year on year if the programme is having the impact that we all want.
This is my final point, Mr Streeter, because I have a shrewd suspicion that you may not call a stand part debate on the clause today. The Local Government Association has made the point to us that, to minimise additional work in producing the report required by clause 3, data contained in the report must, so far as is practicable, be derived from any relevant official statistics, the national impact study and family progress data. What is the Minister’s response to that specific proposal?
Priti Patel
Again, I thank the right hon. Gentleman for his comments. Obviously, the troubled families programme is focused on better outcomes through the more efficient use of resources. It is therefore right that the primary focus of the report to Parliament is on the outcomes for those families.
Local authorities have been given the freedom to shape their own local programmes with their own local public service partners. In exchange, the Government have asked local authorities to provide information that will enable us to assess the impact of those programmes, which of course includes an understanding of what is being spent on families and the savings being achieved across local public services. That information on costs is part of the troubled families programme’s independent national evaluation, which I have touched on and which will also be published as the basis of the Secretary of State’s report. Information on Government spend on the programme is published annually in the Department for Communities and Local Government accounts. On that basis, it is not necessary to expand the scope of the duty.
There are a couple of points on the £9 billion estimate, which was based on the best information available at the time for the purpose of designing the original troubled families programme. The figure was the result of an analysis of a range of spending on troubled families by central Government Departments. The right hon. Gentleman also mentioned the £1.2 billion figure and the Full Fact website. That figure comes from a report published during the previous Parliament, and it is simply an indicative figure that suggests what potential savings could be made if average savings were replicated across local authorities.
It is fair to say that, because the information on costs identified in the independent national evaluation of the troubled families programme is already published, and will continue to be published—there is a line in the DCLG accounts, too—we do not believe we need to expand the scope of the duty. I therefore urge the right hon. Gentleman to withdraw his amendment.
Stephen Timms
I am grateful to the Minister. When the evaluation came out in March, the then Secretary of State for Communities and Local Government did not speak in the circumspect terms used by the Minister. He claimed that £1.2 billion had been saved.
Full Fact points out, however, that that was based on just seven of the 152 local authorities that took part. Most areas showed gross savings per family of between £6,000 and £10,000, but in Salford savings were £18,000 and in Staffordshire they were claimed to be £49,000. The average was taken from those seven and grossed up to the 152, with the result being the £1.2 billion figure that Full Fact is understandably rather sceptical about. Ministers claim the figures to be savings with some authority, but it would be advisable to provide the more robust data that underpin the figures and estimates before such a claim is made. I do not propose to press the amendment to a Division, but the next time figures are claimed for savings resulting from the programme, I hope we have a more robust basis than that used in March.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Stephen Timms
In my earlier remarks I raised a question for the Minister about the request from the Local Government Association that information should be taken from existing sources where possible to minimise the amount of work. Is she in a position to comment on that, or perhaps will she drop me a line?
Priti Patel
I cannot comment at this stage, but I will be very happy to take that offline and drop the right hon. Gentleman a line.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Guy Opperman.)