Poverty

Lord Knight of Weymouth Excerpts

Thursday 22nd July 2010 Lords Chamber

[Lord Knight of Weymouth]

My Lords, we are grateful to my noble friend Lord McKenzie of Luton for instigating this debate, the subject of which brought so many of us into politics and public life in the first place. We have heard some excellent contributions, particularly the maiden speeches. Like my noble friend Lord Haskel, I am not sure what the collective noun is, but my noble friend Lord Boateng, as ever, gave us an outstanding oration and an uncontroversial appetiser for what I am sure will be substantial contributions to come. I was particularly pleased that he reminded us of the importance of giving a voice in your Lordships' House to looked-after children and other children at risk, for whom he has been such a great advocate throughout his career.

The noble Baroness, Lady Donaghy, treated us to a taste of her extraordinary range of experience and reminded us of the threat of joblessness leading to increased poverty—something that I will return to later. It was great to hear once again from your Lordships’ equivalent of a retread with the return of the noble Earl, Lord Clancarty. He made a passionate plea for attention to the dangers of stigma being attached to those dependent on benefits. Like him, I had an early career in the arts on the enterprise allowance scheme and I look forward to the Minister's answers to his questions on that.

The noble Lord, Lord Shipley, gave us an insight into his experience of tackling child poverty in Newcastle, particularly on the council there, especially reminding us of the links to health and education inequalities. As a former Schools Minister, I was particularly struck by his description of the excellent work done on family linking with schools. I was delighted to be here for the final maiden speech of the day, from the noble Lord, Lord McFall of Alcluith, which he explained meant “the rock on the Clyde”. For me, the noble Lord was the rock during my time in the other place, chairing the Treasury Committee and always leading off the Back-Bench contributions to the Budget debates as the measures flowed out from this place to the country. We look forward to more contributions from all these excellent new Members of your Lordships' House.

We have not yet heard from the Conservative Benches, but I am sure that it would be unkind to suggest that they are contracting out concerns for poverty to their coalition partners. In the lead-up to the general election, in response to questions about fairness from the Child Poverty Action Group, the Deputy Prime Minister, as he now is, said:

“The Liberal Democrats want to make sure that the burden of controlling spending falls on those who can afford it… so that closing the gap doesn’t bear down on those who already have too little”.

I welcome the coalition’s commitment to continuing the work undertaken by my party to eradicate child poverty by 2020 but, taking on board the findings of numerous non-governmental studies, I believe that this Government’s economic policy risks not only delaying that target but plunging further families into poverty. Cuts in allowances, the VAT hike, decreased incomes and increased outgoings—the right honourable Chancellor is going to hit the poorest hardest. As my noble friend Lord McKenzie said, it was his choice. As the noble Baroness, Lady Jones of Whitchurch, reminded us, that was the choice made in the 1930s, when the then coalition Government, encouraged by business, pursued austerity and then took us into the great depression. From that situation, Keynes developed his great economic theories, now abandoned by the Liberal Democrats. As the noble Lord, Lord Touhig, reminded us in the context of disabled children, if we want to raise children out of poverty, we need to raise their household incomes, and this Budget promises anything but. While the Chancellor may claim that his cuts are not expected to raise measured child poverty, there is little of any comfort in it to those families already below the poverty line. I share the fears of Save the Children that, as a result of this Government's regressive approach to tackling the deficit,

“those families living in poverty will have less income and fewer or less effective services to mitigate the worst affects of poverty”.

Despite the welcome, if menial, increase in personal tax allowance and child tax credits, the Work and Pensions Secretary’s mangling of the benefits system and the axe-wielding of the Chancellor will undoubtedly cost lower-income families more than they can hope to gain. As the noble Lord, Lord Watson, reminded us, more than half of those 3.9 million children whose families live in poverty come from households where at least one of the adults is in paid work. For these families, child tax credits, which many noble Lords have spoken about, are vital. Yet many will see that lifeline disappear in the immediate future. A family with one child on as little as £15,000 will see their tax credits fall next year. The following year, a one-child family earning just £30,000 will lose all their tax credit. Meanwhile, the promise of a £210 increase in that benefit for those eligible over the next two years is, of course, when isolated, a great step forward—but not if that increase ultimately leaves lower-income families worse off than they were previously. Failure to correspondingly amend the way in which housing benefits are calculated will have exactly that effect. At present, the child tax credit is not disregarded in calculations for housing benefits. Resultantly, the coalition's proposed rise in child tax credits, increasing the family income, will lead to cuts in that family's housing benefits.

Other conflicting and confusing measures have been discussed by noble Lords, including the proposed 10 per cent cut to housing benefit for those who have been on jobseeker’s allowance for 12 months or more, which the Child Poverty Action Group has called a stealth cut on JSA. The Chartered Institute of Housing has calculated that the cumulative outcome of the coalition's proposals means that by 2020 every tenant's housing benefit will be too low to cover their rent. The net outcome of this is clear: debt, overcrowding and homelessness. There are already 1 million children living in overcrowded households. Such living conditions affect children’s mental and physical health, their education and, ultimately, their life chances. As we have heard from speakers such as the noble Lord, Lord Best, reductions, restrictions and caps on the housing benefit that families can claim will force some of them to move, often into accommodation inappropriate to their needs. In addition, that might unnecessarily fracture the family unit and leave families out of reach of the services that they rely on. So much for being the party of the family. The Child Poverty Action Group warns that:

“There may be, in effect, an expulsion of low income families from some communities and a tendency for greater ghettoisation of poverty where there are concentrations of substandard housing stock”.

The coalition could go some way towards remedying this simply by altering the status of child tax credits so that they were disregarded in benefit calculations. Furthermore, the proposed cuts in public services present a severe indictment against the fairness of the emergency Budget.

Poorer households are higher users of public services. Thus, cuts to these services disproportionately hit lower-income families compared with those that are more affluent, owing to the larger contributions that they make to such a family’s income. One study projects that public spending cuts will be equivalent to 20.5 per cent of the poorest 10th of households' regular income, but equivalent to only 1.6 per cent of the richest 10th. These measures reverse any positive impact that direct taxation or government-provided subsidies and services might have for the poorest in society.

As my noble friend Lord Haskel has just argued so forcefully, the unfairness in the Budget manifests itself most significantly in the VAT rise. This will, as Save the Children has identified, simply widen inequalities and entrench existing unfairness. Not only does a rise in VAT, so nobly campaigned against by the Liberal Democrats at the election, risk economic recovery at such a fragile time but it disproportionately hits the pockets of low-income families. The VAT rise impacts on the entire population, regardless of earnings or income level. In that respect, it does what the Chancellor says it should—we all share in the pain.

There are exemptions, of course, and it is argued that these equalise such measures, assuming that lower-income families spend the majority of their income on exempted items like food, children’s clothing and household bills. But do poorer people not need beds to sleep in, clean clothes to wear or hot food in their stomachs? There are no exemptions on furniture, toiletries or household appliances like cookers and washing machines. Increasing VAT simply makes these items even more difficult to afford, making it harder for low-income families to stretch their budgets even further. Simply because the Budget does not discriminate, that does not make it non-discriminatory. These rising costs are likely to increase the number of households that fall below the poverty line.

There is much more to say but I do not want to delay your Lordships. The noble Baroness, Lady Greengross, reminded us of the health consequences of the Budget, especially for the elderly. On Tuesday I set out some of my concerns about unemployment rising due to cutting too fast and due to cutting employment programmes such as the Future Jobs Fund and the six-month allowance. As the noble Lord, Lord Bilimoria, said, work is the best route out of poverty, but the Government are pulling up that ladder.

Similarly, the free-market schools policy and allowing outstanding schools to be academies risks allowing the best schools to advance at the expense of the poorest, widening the gap and making it harder for poorer families to use education as a route out of poverty—as, again, the noble Lord, Lord Bilimoria, said. Mention has been made of ending free school meals and breakfast clubs, both fundamental to alleviating poverty. I will just argue with the noble Lord about the Labour Government’s record on schools; to take reading as an example, we ended a 30-year standstill in improvements in reading quality during the course of the previous Government with the introduction of the literacy hour.

Because of this Budget, the founder of the Child Poverty Action Group, Peter Townsend, warns that we risk perpetuating the exclusion of already impoverished children from the,

“ordinary living patterns, customs and activities”,

of average families. Accordingly, the Budget elevates the risk of negative life outcomes. These measures condemn to poverty those kids from lower-income households—families looking not for a handout but for a foot up.

One of the key measures of the success of this Government and their Budget will be how they tackle poverty. Like so many others, I am worried that they will fail miserably.