Welfare Reform and Work Bill

Baroness Hollis of Heigham Excerpts

Monday 25th January 2016 Lords Chamber

[The Earl of Listowel]

My Lords, I support these two amendments. In the family to which I referred earlier, Ms Lorna Sculley has three children; the oldest and youngest sons have a disability, and she is a working mother. She works 16 hours a week as a dinner lady at the First Love Foundation—the food bank—and she discussed the prospect of getting more work. She calculated that if she worked seven more hours a week, she might get only another six pounds. It just was not worth her while to progress along a work route. I welcome very much what the Government have said about introducing the new, much higher, minimum wage, but the actual effect on families’ incomes might not be as positive as we would all hope, so I hope the Minister will consider accepting this proposal.

I would like to raise another point about a further complication for Ms Sculley. She depends on housing benefit and lives in Tower Hamlets. Her benefit has not been sufficient to pay her rent, so she has to subsidise it from her other income. She says that she cannot move from where she is because of her eldest son’s disability: he is at a school that is good at meeting his needs. That is what I understood from what she said, so that is perhaps relevant to others in our discussion.

My final point in relation to Ms Sculley is that she was offered a parenting class because of her two sons’ disabilities, but it took place on a Thursday, which is when she has to work at the school. She is therefore, in a way, disadvantaged by being in work because she cannot take up the opportunity of attending the parenting class. There is a lot to be said for these two amendments, and I look forward to the Minister’s response. Before I finish, however, I would like to thank him for the time that he took last week—an hour—to speak on the needs of children as they relate to this Bill. I certainly appreciate that very much.

[Baroness Hollis of Heigham (Lab)]

My Lords, I very much support the amendment of my noble friend Lady Lister, which was supported so ably by the noble Lord, Lord Kirkwood. I will be puzzled if the Government propose to resist the thrust of this amendment. The Government know perfectly well that, although the incidence or percentage of poverty among workless families is high, and higher than that among working families because the number of working families is so much greater than the number of workless families, as has been mentioned already, two-thirds of children who are in poverty live in a family where an adult is in work. Part of that might be that the parent, if a lone parent, has restricted hours, but we know that, with insecure contracts and the minimum wage and so on, the key lever to get that family out of poverty is not just to get the single adult into work but, where there are two adults, to get the second adult into work as well. We know that that is a function of the age of the youngest child and the size of the family. Child poverty might well be for a temporary period until the second earner—let us say, for this purpose, the mother—is able to go back into the labour market along with her husband or partner in order to amplify the family income. The need to support those children may be a temporary issue.

Given that the Minister today has put so much weight on the strain being carried by the new minimum wage and given that he will want to know, as we will all want to know, the interaction of that with the benefit bill, and the extent to which, therefore, that helps to address the levers of child poverty, above all of which is getting the second earner into part-time work, I do not understand why he would not want to track the information that my noble friend has called for. We all support the Government’s move to increase the national minimum wage. If he is right, this hopefully will have repercussions that we would all accept and support for the benefits system. But do we need to do more than that? We do not know. It may be about the size of sibling groups or the need for a second earner. We need to know what levers to pull. Unless the Government track that information, we will not know. I am sure that the Minister does want to know, so I hope that he will think very carefully about this amendment.

[Baroness Manzoor]

We totally support this amendment in the name of the noble Baroness, Lady Lister. I also totally agree with my noble friend Lord Kirkwood, who has amply identified the arguments as to why it should be supported. The noble Baroness, Lady Hollis, rightly said that we need levers. If we do not have such levers, how are we to address the issues about people who work, those who are not in work and in-work benefits? We will talk about the universal work allowances and the implications and ramifications of that. I hope that the Minister is listening very carefully. If the amendment is called to a vote, we on these Benches will support it.

--- Later in debate ---

[Lord Freud]

My Lords, let me go straight to that question while it is fresh in my mind. It is, of course, possible to be poor while both parents are in work, particularly under the present legacy system. That is why we are bringing in universal credit—to make that much harder. We are not arguing about the level of poverty; it is about what is likely to happen to the life chances of that child compared to both parents being at that level of income and out of work and in work. That is the argument I have been trying to make all afternoon, with, I think, some resistance.

Under Amendments 8 and 11, noble Lords seek to expand the reporting duty placed on the Secretary of State so that his annual report to Parliament must include data on children living in low-income families where one or both parents are in work. Their amendments would add the terms “low income” and “in work” to the list of terms to be defined in the annual report.

I have already gone on enough about the centrality of worklessness and educational attainment. Alongside these statutory measures, the Prime Minister has announced that we are committed to publishing a life chances strategy in the spring, which will set out a comprehensive plan to fight disadvantage and extend opportunity, including a wider set of non-statutory measures on the root causes of child poverty such as family breakdown, problem debt, and drug and alcohol addiction.

I have said before that work is the best route out of poverty but I want to restate our arguments about the centrality of tackling worklessness. The risk of a child being poor is dramatically reduced if at least one parent works. According to the latest statistics, the risk of being in relative poverty for a child in a working family is 13%, compared to 37% for a child in a workless family. So a child in a workless family is almost three times as likely to be in poverty as a child living in a family where at least one adult works. Perhaps those are the figures for which the noble Baroness, Lady Sherlock, was asking.

Last year, we published an analysis on the transitions into and out of poverty. What we found was staggering, although some might say that it was obvious. Of the children who are in poor workless families, 74% will leave poverty altogether if their parents move into full employment. The analysis also made clear that the more work parents do, the more likely they are to leave poverty, with 75% of children from poor families in part-time employment leaving poverty if their parents enter full-time employment. I remind noble Lords that we have a package of reforms to encourage people to work. These policies include the national living wage and changes to the personal tax allowance, which will allow people to keep more of what they earn. Furthermore, over 30 million individuals will see a tax cut as a result of the changes we will make in this Parliament. Some 570,000 individuals will be lifted out of income tax altogether by 2016-17 and, as a result of the introduction of universal credit, more people will enter work due to improved financial incentives. We have a vibrant and growing economy, and last year real pay grew by 2.1%.

On the question from the noble Baroness, Lady Hollis, on support for women, we are supporting families through the national living wage, which is expected to have a stronger positive impact on the female workforce, boosting the wages of three in 10 female employees by 2020. Our childcare reforms will provide support to women who want to find employment, helping them to increase their income.

We have discussed before that two-thirds of children in relative poverty are from working families, but let me go over my argument. I am not convinced that it will convince the noble Baroness, Lady Lister, but I must try. It is correct that the latest figures published in the HBAI show that 64% of children in relative poverty are from a family where at least one adult is in work. This proportion has grown over the last couple of decades due to the improved progress in tackling poverty in workless families. In 1996-97—the earliest period for which data are available—around 60% of children in relative poverty were from workless families, which is around 2 million children, and around 40% of them were in working families, which is around 1.5 million children. During the 2000s, there was progress in reducing the number in poverty in workless families by focusing spending on tax credits, but this had the unintended consequence of weakening work incentives that resulted in hardly any change in the number of children in in-work poverty, which stood at 1.3 million in 2009-10.

[Baroness Hollis of Heigham]

My Lords, if the Minister will allow me to say this, he is misrepresenting the statistics. It may be a statement about children in poverty, but in particular the number of lone parents in that period who were in work went up from barely 50% to some 65%. Therefore, tax credits made work pay for them.

[Lord Freud]

It may have made work pay for some people, but it had the effect that, while it was possible, through income transfers, to drive down the out-of-work poverty of children, which is what they were designed to do, it had virtually no impact on in-work poverty. That brought that policy to a reductio ad absurdum: you could not do it without undermining your work incentives because you were raising the level of the benefit structure and it was beginning to knock up the income scale. That was the problem; that is what the data show.

In-work poverty, combined with falling levels of children in poverty from workless families, led to a greater proportion of children in poverty being from those workless families. This meant that, from 1996-97 until the end of the last decade, the proportion of children in poverty from working families actually went up from four in 10 to six in 10. That is the reality of the situation today. I can see that there is some ideological difference to be found over that analysis.

The evidence review, raised by the noble Baroness, Lady Lister, highlighted the importance of low earnings, but emphasised the impact of working a lower number of hours, rather than the impact of low-paid work. On the question of how we will know about the levels of poverty—in work and out of work—I reassure her, as I already have, that we will have that data in the HBAI. It will continue to be available. Indeed, those in-work poverty figures in the HBAI can always be broken down by whether the family is in full-time or part-time employment.

I described why having two separate systems worked so poorly. We are introducing universal credit exactly to address those disincentives. I can tell noble Lords that I have spent the most enormous amount of personal time trying to get this structure so that we do not have these odd disincentives, which are really undermining for society. Universal credit is the best way to give people the incentive to enter work: it reduces poverty by making work pay and making sure that people do not lose out as they start to earn more, which is the terrible discontinuity in the legacy system. It provides an effective route out of poverty, while supporting the most vulnerable households. We already see the evidence under universal credit that people are working more and are better off in work.

As with Amendment 2, which we discussed earlier, these amendments would reintroduce an income-based relative poverty measure, which, as I have tried my best to explain—perhaps not as successfully as I might—do not tackle the root causes of child poverty. The Government are concerned with focusing our efforts and attention on those areas that will make a real difference to children’s lives, and concentrating on those root causes.

Resources are finite. It is crucial that we prioritise our actions to make the biggest difference for children. Statutory income measures cause the Government to focus their action and resources on direct and incremental increases to family income, but that does not necessarily drive any real change and is detrimental to the things that we think are vital—noble Lords know what I think they are.

Let us focus on the things that matter and drive the actions that will give our children the future they deserve. Let us not be distracted by measures that detract from that aim. As I said, we will continue to publish the HBAI figures so that we will know exactly what is happening. I therefore urge the noble Baroness to withdraw the amendment.