Poverty

Lord Freud Excerpts

Thursday 14th July 2016 Lords Chamber

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, I am responding to this debate in the most unusual circumstances imaginable. I started off with a Whip beside me; she disappeared after a few minutes and then popped up on my telephone screen as my new boss, the Leader of the House—the boss of all of us. So that is unusual. Later, I saw on the screen—I am sorry, I have not been quite as attentive as I normally am—that apparently my other boss, the Secretary of State, Stephen Crabb, has resigned. When the noble Baroness, Lady Sharp, talks about the delights that she is looking forward to—going out in the evening, perhaps watching a bit of TV—I really, really get it. I pay tribute to her, as others have done. She has done this House great service and is appreciated all around the House. We all thank her for what she has done over many years. I am sure the House will understand that when the noble Lord, Lord Hunt, asks me how I am going to translate the words of the Prime Minister into action, I am slightly hamstrung in making firm commitments.

I congratulate the noble Lord, Lord Bird, on securing this debate and bringing to the House’s attention this vital issue—that to dismantle poverty we must tackle its root causes. This sentiment is wholeheartedly endorsed by this Government, as we heard yesterday from the new Prime Minister. We have made a clear commitment to tackling the root causes of poverty and extending opportunity so that everyone, whatever their background, has the chance to realise their full potential.

We demonstrated this when we rejected the narrow, income-based approach that the Child Poverty Act 2010 incentivised. Focusing on moving families above a notional poverty line is not sufficient if we want to address the root causes of disadvantage. Instead, through the Welfare Reform and Work Act, we have introduced two new statutory measures to drive continued action on worklessness and educational attainment. As the noble Lord, Lord Ouseley, pointed out, these are the two factors that can make the biggest difference to the life chances of disadvantaged children and families. We agree with the noble Lord, Lord Bird: we want to tackle some of the deep-rooted and complex social problems that mean people are held back, and the underlying factors that can trap people in poverty.

I will set out the current ways in which we are tackling the causes of poverty in the UK, following the recent publication of the HBAI report, which covers the year to March 2015. I know that noble Lords follow this very closely, as do I. The report showed that average incomes have grown at their fastest rate since 2001-02 and are at a record high, with the average household now receiving £473 a week—an extra £800 a year compared with 2013-14. The average annual income of the poorest fifth of households is also at a record high—around £900 higher in real terms than in 2007-08. Inequality is unchanged, with the Gini coefficient remaining at 34%. Inequality, therefore, remains statistically significantly lower than in 2009-10.

The noble Lord, Lord Crisp, said that poorer people are able to identify what they need to do to get out of poverty. In responding to that, it is really important that we empower people. Empowerment is underlying what we are trying to do with our welfare reforms. We are trying to give claimants responsibility for their own lives. That leads me, as the noble Lord, Lord Kirkwood, would expect, to what we are trying to do with universal credit; that is, to make it very clear that extra work means extra money, which you keep in your pocket. There are strong signs in the evidence that we are collecting that it is starting to transform lives, with people on universal credit moving into work significantly faster and staying longer in those jobs. For every 100 people who would find work under the old JSA system, 113 universal credit claimants would move into a job. There are none of the cliff edges of the old system. As earnings increase, universal credit payments reduce at a steady rate, so that working and earning more are clearly incentivised. Basically, people know where they stand; that is the definition of empowerment.

There is also more coherent support. A Jobcentre Plus work coach remains in touch with the claimant, offering personalised support to increase their hours, earn more and progress in work. These are very early days with regard to this aspect but I expect that it is going to be key as we raise low incomes.

The noble Baroness, Lady Warwick, expressed concern about childcare. As she will be aware, we are now providing 85% of childcare costs in universal credit. There is some complexity in the various areas of provision. We have a cross-ministerial team working on that so that people understand all the different ways in which they can access support with childcare.

The noble Baroness, Lady Finlay, raised the point about treating the widowed parent’s allowance as income in universal credit. The widowed parent’s allowance provides support for normal living expenses, and it would not be appropriate to disregard it as a source of unearned income.

I think the point that was echoed the most was about silos—that is what the noble Lord, Lord Mawson, called them—and all the different ways that services come on a siloed basis. The noble Lord, Lord Bird, spoke about breaking down budgets so that they can be used on a joint basis. The right reverend Prelate the Bishop of Derby talked about models of partnership and how we might provide guidelines on that. The noble Lord, Lord Whitty, also spoke about it. This is the most important single area that we need to get right. As noble Lords will be aware, I have been trying to develop a system to do so, with the development of universal support. It will work as a partnership between ourselves, local authorities and third-sector groups—other bits of government and other bits of public provision—to try to get coherent support for people.

We have built that system and tried it on a couple of barriers: digital exclusion—the noble Baroness, Lady Lane-Fox, will be pleased that we are trying to help people to handle such issues, because the challenge with UC is to be able to handle them—and financial barriers. We have done a lot of experimentation, and we have just completed the report on 11 of the trials. One thing that found is that people need to tackle a number of barriers. Following those trials, we are reviewing the whole way in which we are looking at universal support and at how best to address these and a broader range of barriers. My view—it is a personal view—is that this is really quite a promising development to supplement universal credit, but there is a long way to go.

On life chances, we know that work is the best route out of poverty. The Child Poverty Transitions report that came out in June 2015 found that 74% of poor children in workless families that moved into full employment exited poverty, and the highest poverty exit rate was for children living in families that went from part-time to full-time employment. One of the really good statistics is the dramatic fall in the number of children living in workless households, which is down by 449,000 since 2010. My noble friend Lady Stedman-Scott spoke about how we measure this, and she referred to the work of our noble friend Lady Stroud in setting up the Social Metrics Commission. That is a very interesting approach, which we have never had before. We have had the IFS, which tries to assess the fiscal impact of government measures, but no one has tried to measure the social impact of government measures. It is extraordinarily ambitious to try to do so, but if anyone can do it, my noble friend Lady Stroud can. We will watch that, and if it is promising, we will clearly find it of great value.

The noble Lord, Lord Empey, said that it was important that people should leave school being able to read and write. There have been improvements. The move to using phonics more rigorously means that an additional 125,000 pupils are on track to read effectively. Last year, four out of five children achieved the national expected standard, or higher, in reading and writing and maths at key stage 2.

I should not pass up this opportunity to point out today’s IFS analysis—I do not know how many noble Lords have seen it—on what has happened to income inequality for families with children. It describes the fall in the numbers of children in workless households as “remarkable”. I cite that because it is very rare to get a quote from the IFS saying this is going the right way. The IFS gives the example that, for the poorest fifth of children, household worklessness has fallen from 60% to 37% over the past 20 years. Most interestingly, it highlights how earnings make up a much higher proportion of the household income of poorer children than they did 20 years ago, and how that income has grown over the period.

A number of noble Lords raised the critical issue of education. It clearly is critical, and the Government regard it as such. Since the pupil premium was introduced in 2011, the disadvantage attainment gap has narrowed by 7.1% at key stage 2 and by 6.6% at key stage 4. Our commitment to protect the pupil premium at current rates means we will provide billions of pounds of additional funds for schools to continue to boost the attainment of their disadvantaged pupils. Our ambition, as reflected in the education White Paper in March, is to ensure that every child and young person can access world-class provision, achieving the best for his or her ability, regardless of location, prior attainment or background.

Let me pick up a few of the points made about housing, which was another issue raised by several noble Lords—the noble Baroness, Lady Warwick, the noble Lord, Lord Whitty, and the right reverend Prelate the Bishop of St Albans—including the importance of having the right housing to tackle poverty. Everybody needs the security and stability of a decent affordable home, and it is a government priority to increase the provision of affordable homes. We have doubled the housing budget to more than £20 billion over the next five years. That includes £8 billion for affordable housing, which will deliver 400,000 affordable housing starts.

The point raised by the noble Lord, Lord Hunt, about bringing together health and work was well made. This goes beyond universal support, at one level, but we could look at it in that context. We still enjoy the benefit of Dame Carol’s expertise; she is undertaking a review of addiction. We have set up a joint health and work unit, staffed by colleagues from both the Department of Health and the DWP, with the aim of pulling together our approach on health and work.

Work, education and health issues are right in the centre of the Government’s sights when it comes to tackling the fundamentals of poverty. I hope that the noble Lord, Lord Bird, feels reassured that at least the questions he is asking are the same as the ones the Government are trying to answer.