Statement on Child Poverty

1st July 2015

Iain Duncan Smith announces a new way of measuring child poverty which will focus on the root causes of poverty by taking into account educational achievement and living in workless households as well as income.

The Secretary of State for Work and Pensions (Mr Iain Duncan Smith): Over a decade ago, I demonstrated that the relative income measure of poverty was flawed, and that it was driving Government policy on an unsustainable path. In 2007, the Centre for Social Justice report “Breakthrough Britain” made this point:

“Many poverty analysts are concerned that setting this simplistic poverty threshold has warped government priorities.”

I shared that concern, and in 2011 I reiterated that message in a speech to the London School of Economics, calling for a rethink about the way we improve the life chances of the poorest in society.

How we measure things matters because it influences what Governments focus on and what we target. As the right hon. Member for Birkenhead (Frank Field) himself said,

“this income measure…drives…policy in a single direction which is in danger of becoming counterproductive.”

Even the current chair of the Social Mobility and Child Poverty Commission, Alan Milburn, made a point in its latest report, before the election, that there is a real challenge to all parties to deal with the issue of this measurement.

The problem with a statutory framework set around the relative income measure has become all too apparent to all people and to everyone who wants to be honest about this. At 60% of median income, if someone sits below the line they are said to be poor; if they sit above it, they are not. Asking Government to raise everyone above that set percentage often led to unintended consequences, although for good reasons. Most of all, it led to poorly targeted spending, pumping money into the welfare system and focusing more often on inputs than on what those outcomes meant.

For example, as I have said before, we saw massive spikes in tax credit spending in the run up to election years. In the two years before the 2005 election, tax credit spending increased by nearly £10 billion, and in the two years before the 2010 election, it increased by nearly £6 billion. From 2002 to 2010, spending on tax credits more than doubled and cumulatively rose to £258 billion by the 2010 election.

Spending on welfare overall increased by 60% in real terms under the Labour Government, driven by the legitimate and reasonable need to chase what became, after the early successes, a moving line. Despite all this spending, by 2010, under the Labour Government, the number of households where no member ever worked nearly doubled, in-work poverty rose, and the Government missed their 2010 child poverty target by 600,000 children. I allege nothing from this. The motives were good, but the figures did not work.

We reached the position where a growing economy, ironically, drives increases in the measure of child poverty, whereas if the economy crashes, as happened under the Labour Government, child poverty apparently falls. Even today, if we were to increase elements of the state pension, we would run the risk of increasing the median income and thus increasing the number of households that would then fall into poverty.

We consulted widely over a number of years during the last years of the previous Government. The challenge was and remains to get a better way of identifying what we measure and how we tackle the root causes of the problem. This is because the current Act does not do enough to focus Government action on improving a child’s future life chances, to acknowledge the key role education plays, or to recognise that work is clearly a very important way, if not the real way, out of poverty.

Let me deal with the issue of work. I believe work is the best route out of poverty. It provides purpose, responsibility and role models for our children. Yet after more than a decade of welfare spending increases, by 2010 one in five households had nobody in work. During the previous Parliament we began to turn this around. There are now 2 million more people in work than in 2010. The number of children living in workless households is at a record low, and workless households are down to record levels as well. In this Parliament, I want to continue to press to improve that so that more parents get into work, stay in work and, importantly, progress when in work.

On education, the other aim that I just referred to, our ambition must be for disadvantaged pupils to be successful at school. We are committed to raising the bar among poor pupils as part of raising standards for everyone. This is because we know how important educational attainment is for improving their life chances. The Wolf report commissioned by the last Government showed that English and maths skills are vital for labour market entry, and continue to have a significant impact on career progression and pay. This is clearly shown by the staggering fact that 63% of men and 75% of women with low literacy skills have never received a promotion, remaining locked on the income on which they entered work. We are committed to ensuring that more poor pupils achieve excellent grades at GCSE, attend the very best universities, and do an apprenticeship or gain skilled employment, so that every child, regardless of background, is given an education which allows them to realise their full potential.

To that end, today I am announcing that we will bring forward legislation to remove the existing measures and targets in the Child Poverty Act 2010, as well as the other duties and provisions. However, the legislation will introduce a statutory duty to report on measures of worklessness and educational attainment. The worklessness measures will identify the proportion of children living in workless households, and the proportion of children in long-term workless households. The educational attainment measures will focus on GCSE attainment for all pupils and particularly for disadvantaged pupils.

The worklessness and education measures will reflect the agreed responsibilities in the devolution agreements. As with all our reforms, we will work with the devolved Administrations as we progress. They must make decisions about what they want to do. Alongside these reports we will continue to publish the HBAI—households below average income—statistics annually.

Alongside the statutory measures, we will develop a range of other indicators—I think this is very important—to measure the progress against the root causes of poverty. We know that in households with unstable relationships, where debt and addiction destabilise families, parents lack employment skills, and children are not ready to start school, these children do not have the same chances in life as others. It is self-evident. They cannot break out of that cycle of disadvantage. We are currently developing these measures, including family breakdown, problem debt, and drug and alcohol dependency. We will report each year on these life chances measurements as well.

We will reform the Social Mobility and Child Poverty Commission to become the Social Mobility Commission. The commission will ensure independent scrutiny and advocate for improved social mobility. This approach will ensure that tackling the root causes of child poverty and improving future life chances become central parts of our business as a one nation Government. As the Prime Minister said:

“We need to move from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society.”

Governments will no longer focus on just moving families above a poverty line. Instead, we want to focus on making a meaningful change to children’s lives by extending opportunity for all, so that both they and their children can escape from the cycle of poverty and improve their life chances. This process will, I hope, mark a shift from solely measuring inputs of expenditure to measuring the outcomes of children-focused policy. I commend this statement to the House.

1.55 pm

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