Welfare Reform and Work Bill (Third sitting)

Hannah Bardell Excerpts

Tuesday 15th September 2015 Public Bill Committees

[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—

[Neil Coyle]

Their income?

Dr Callan: Sorry?

[The Chair]

Please continue, don’t be put off.

[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—

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[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—

--- Later in debate ---

[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.

--- Later in debate ---

[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.)