Welfare Reform and Work Bill (Third sitting)

Helen Whately Excerpts

Tuesday 15th September 2015 Public Bill Committees

[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—