Child Poverty Bill

Committee (2nd Day)

14:00:00

Clause 6Interpretation of terms used in relation to targets

Amendment 9

Moved by

9: Clause 6, page 3, line 9, at end insert— “(ba) the circumstances in which a child living in communal accommodation may be regarded as living in a qualifying household;”

Lord Morris of HandsworthLet me say at the outset that I welcome the provision of income-related target-setting provided for in the Bill. However, I regret that the income targets will be related to children only in a narrowly defined definition of “qualifying households”. Amendment 9 seeks therefore to widen the definition of the “qualifying household”.

The definition as provided for is set out in the draft statutory instrument child poverty target 2010. The draft regulation requires a qualifying household to have a postcode and to receive no more than 50 items of mail per day. That is, in my view, a perverse provision, because it does not in any way reflect the reality of life in modern Britain. The qualifying criteria start with a set of stereotypical assumptions that we are all part of a nuclear family with 2.5 children living in white, middle-class suburbia. Nothing could be further from the truth.

To make my point, I can do no better than to quote the summary of the scrutiny report on the Bill by the Joint Committee on Human Rights, of which I am a member:

“The Government have provided sufficient information to show that children who live in communal accommodation or who live in accommodation without a postcode, such as Gypsy and Romany children, are unlikely to be encompassed by the definition of children in qualifying households”.

What the Joint Committee is really saying is that if you link the principle of qualifying households to a postcode, Gypsy and Romany children, for example, and many other groups, will be left out. The definition of qualifying household means that children in communal accommodation such as children’s homes, children in bed and breakfast accommodation, Traveller children and children of asylum seekers in detention centres will not be included. To date, when challenged on the point of the limitation on the qualifying household, the Government’s response is that a wider definition is not practicable and would cost too much. On that point of cost and practicability, the Joint Committee says:

“We are not persuaded by the justification provided by the Government which rests on the costs and impracticability of surveying children who do not live in qualifying households. We recommend the inclusion in the Bill of a target or targets that would apply to children not living in the defined qualifying households”.

Indeed, the Joint Committee states in its report that the use of targets which exclude large groups of children from the criteria of qualifying households is potentially indirectly discriminatory and, as such, it questions whether the Bill is compatible with Article 14 of the human rights convention. The Government, in response, indicated that it is not discriminatory because the qualification would be set out in qualifying statutory instruments. I have already quoted from the draft instrument, and it does not in fact take the Government’s argument any further. The draft instrument says that it is a postcode with less than 50 items of post on any one day. So I believe that that is the end of the Government’s argument that they will be looking at secondary legislation to define the statutory qualifying household.

In conclusion, the amendment seeks to widen the definition to include children in communal accommodation or communal households, as we believe that they have as much right to be included as any other children. They have not taken any action to put themselves in that situation and therefore they should not be excluded. It is on that basis that I seek to widen the definition of qualifying household. I beg to move.

Baroness WalmsleyMy Lords, I thought that it might be for the convenience of the Committee if I were to group my Amendment 26 with those of the noble Lord, Lord Morris of Handsworth, in order to expedite our progress a little—something that I am sure we are all interested in doing. I have included it in this group because I share the noble Lord’s concerns, and my amendment partly addresses the same concern as that held by the noble Lord, Lord Morris.

Amendment 26 is intended to kill two birds with one stone. The definition of a “child” in Clause 25 currently excludes 16 and 17 year-olds, which means that vulnerable young people may not be covered by the scope of the UK child poverty strategy. In addition, as the noble Lord, Lord Morris, pointed out, children living in communal accommodation will not have their income measured and so may not be included. I believe that all children and young people up to the age of 18 should benefit from these strategies, so I have tabled Amendment 26 to that end. However, I have addressed a different part of the Bill from the one addressed by the noble Lord. My amendment relates to Clause 8, where the strategies appear.

The effect of my amendment would be, first, that 16 and 17 year-olds who are in danger of living in poverty, such as those not in education, employment or training, care leavers and those living independently who are very poorly paid, would all benefit. Secondly, the UK’s strategy would be in accordance with the UN Convention on the Rights of the Child, which defines a child as a person under 18 and affords all children the right to an adequate standard of living. Thirdly, it would future-proof the legislation against changes to the benefit rules, on which the current definition of which children over 16 are included depends. Fourthly, it would cover children in communal accommodation, such as asylum seekers, those in children’s homes and Gypsies or Travellers, who are not covered by the surveys on which income is measured.

We cannot assume that young people not in education or training will be supported by their families, or indeed that their families will be in a position to do so. Of course, by definition, we cannot assume that about young care leavers either, as they may not have a family to support them. Young workers receive a lower national minimum wage, and in future they will have to take part in education or training for part of the week, so their earning time will be further restricted. Therefore, all these three groups are very susceptible to poverty and I need not repeat the evidence, which the Minister well knows.

The Minister kindly told us in a meeting that he offered us that the strategies in Clause 8 are the means by which the Government will include these people—that is, those outside the Bill’s definition of a child and outside the household surveys. Therefore, I have chosen to make a small but significant alteration to the wording of Clause 8 in order to make it quite clear that the strategies developed under that clause must include all children as defined by the UN convention.

One might think that I should also have proposed similar amendments to Clause 10 relating to Scottish children and Clause 11 relating to children from Northern Ireland. Indeed, depending on the Minister’s reply, I well may still do so. However, I believe that the Assembly for Wales has taken care of all children in Wales.

I also looked at the clauses relating to local authorities in Part 2 and found the wording to be similar to the wording elsewhere in the Bill. Clauses 21 and 22 mention “child poverty needs assessments” and “child poverty strategy”. I assume the same under-16-only definition applies to the meaning of “child” in those clauses.

Also, Clause 24 refers to measurements of households, which concerns me because at every level the Government are failing to mention those who do not live in normal households. For the moment, I propose this neat amendment to Clause 8 and thereby give the Government the opportunity of demonstrating that they mean what they say when they tell us that “every child matters”. I was tempted to delete the words “as far as possible”, but I resisted the temptation because, had I done so, there would be no chance whatever of the Government accepting my amendment. I hope that the Minister will accept it because it may save him considerable embarrassment next time the Committee on the Rights of the Child inspects this country's compliance with the convention. I cannot imagine that this failure will not be picked up and criticised by the committee on that occasion.

The noble Lord, Lord Morris of Handsworth, and I both want our amendments on the face of the Bill, so I hope that they will be accepted. However, if I should be unlucky and the Minister does not look kindly on my amendment, at the very least, I would like an assurance from him that the guidance to local authorities and other partners will make it clear that 16 and 17 year-olds and those in communal accommodation must be covered by their strategies.

Baroness AfsharMy Lords, I support the amendment because it is surely not the intention of the Bill to make marginal children invisible. Of all the children who actually need help, the greatest numbers are asylum seekers and Gypsies, who have virtually no access to other resources. I assume that this is not the intention of the Bill. Therefore, it is important to make it clear in the Bill that those children are included and their well-being is at the centre of the Bill.

Lord FreudMy Lords, the noble Lord, Lord Morris of Handsworth, made some important points when introducing his amendment and identified yet another serious flaw in these four targets. He is quite right to raise the possibility of many children much in need of support who will fall through the holes of this provision as currently drafted and who will go uncounted. Overlooking children who should certainly be included in an assessment of child poverty is a real danger of the Government’s decision to legislate on such a complex issue in only 30 clauses. By defining the success or failure for future government around the four financial targets, the Bill unavoidably biases any UK strategy to the households covered by those targets. The noble Lord’s amendments highlight that some children are almost impossible to catch in surveys and any assessment of their circumstances will be generalised and potentially misleading. Does that not cast doubt on the wisdom of measuring all success and failure against those four targets?

The Minister will no doubt point out, once more, that any measures taken under Clause 8 or Part 2 need not restrict themselves to the households covered by Clauses 1 to 6. But “need not” and “will not” are two very different matters. The Bill has been introduced as an influential Bill that will actively focus the Secretary of State's attentions towards child poverty. How can the Minister accept that and yet remain unconvinced that its provisions will not actively focus attention on the households that it specifically identifies?

The Earl of ListowelMy Lords, I support the drive behind these amendments, particularly what the noble Baroness, Lady Walmsley, said. I want to take this opportunity to hear from the Minister what has been done for Traveller children. The concern is that many of them are not receiving the education that they should receive. Their parents did not get an education either, so they are therefore unable to gain good remuneration in their employment. There is a generational problem of lack of access to education resulting in poverty.

This is an important issue that the Bill should certainly not miss. I look forward to the reassurances that I hope the Minister will offer, particularly on improving the access to education of Traveller children. I know the Government have taken some steps to improve it.

14:15:00

The Parliamentary Under-Secretary of State, Department for Communities and Local Government & Department for Work and Pensions (Lord McKenzie of Luton): My Lords, I thank my noble friend Lord Morris and the noble Baroness, Lady Walmsley, for these amendments, which give us the opportunity to discuss an important area of the Bill. I am delighted that the noble Baroness is resisting temptation today. I am not sure that my noble friend would see this as an opportunity for the noble Lord, Lord Freud, to have another go at the targets and seek to undermine them, leading inexorably to his conclusion that he does not feel bound by any of them. However, we will see where that debate heads at the end of the Bill.

I say to my noble friend Lord Morris that it is not the case that there is a narrow definition of “households” for the purposes of the Bill. Something like 98 per cent of households are within the definitions in the surveys we are studying and cover the vast majority of children. Neither does that approach assume that all families are alike. The definition covers, for example, children on local authority Traveller sites, asylum seekers in families who have been placed in social housing and children in care with foster families, although clearly it does not cover all children.

Amendment 16 seeks to add a further regulating power to Clause 6 which would enable the Secretary of State to make regulations setting out the circumstances in which a child living in communal accommodation may be regarded as living in a qualifying household. While this is not quite its effect, it is clear that the purpose behind the amendment is to ensure that the survey used to measure progress against the child poverty targets in Clauses 2 to 5 covers as many children in communal accommodation as possible.

Let me make it clear that our goal is to eradicate poverty for all children and that the framework that the Bill establishes for achieving this goal, using national child poverty strategies and imposing duties on local government to tackle child poverty, applies to all children in the UK. To ensure accountability for and progress towards this goal, Clauses 2 to 5 define targets for a range of poverty indicators.

As I am sure noble Lords appreciate, these targets will be effective only if progress towards them is measurable. That is why they do not apply to children who are not covered by the surveys that we use to measure poverty. Targeting for these children would not be measurable and, therefore, would be an ineffective way to ensure that experiences of poverty are tackled. The Bill therefore sets out that targets apply only to children living in qualifying households. These will be defined in regulations in terms of the households covered by the surveys used to measure poverty.

When this amendment was debated in another place, there was considerable sympathy with what it was seeking to achieve. However, it was also recognised by Members on all sides of the other place that, for the reasons I have explained, it is incredibly difficult, if not impossible, to work out how poverty for these groups should be measured given that the targets in the Bill are based on household income data. Given these difficulties, it was suggested that these children should be addressed by the clauses referring to socio-economic disadvantage.

The surveys which will be used to measure progress are the best instruments available for measuring the household income of children across the UK, but they do not cover children who reside in communal establishments. That definition is assumed to be equivalent to the communal establishments set out in the draft regulations which have been made available to noble Lords in the Peers’ information pack.

There are a number of different circumstances under which a child may be living in a communal establishment—an issue touched upon by many noble Lords—and I shall try to address each of them in turn. For many children living in communal establishments, the concept of household income is simply inapplicable. There would be no way of allocating a household income for children living in residential care homes, young offender institutions, asylum centres and other similar communal settings, and so the concept of income poverty could not apply.

However, in many of these cases, statutory minimum standards apply to ensure reasonable standards of living. For example, in residential care homes, minimum requirements include healthy meals, clothes of an individual’s choosing and sufficient financial resources to fund leisure activities and trips. For children living in households in communal establishments such as women’s refuges, there are obvious ethical reasons why it is not appropriate for interviewers to enter the premises and ask individual families about their circumstances.

Households with children which reside in communal establishments such as bed-and-breakfast hotels are not covered by the surveys because the cost and difficulty of including such households in them is considered to be disproportionate to the additional information that would be gained. Even if such establishments were covered by the surveys, they comprise such a small proportion of the population that it is almost certain that the change would have no impact on the child poverty statistics used to measure progress against the target.

The number of such households continues to fall. The Government have set a national target to halve the number of households in temporary accommodation by 2010, as part of their aim to increase long-term housing supply and affordability. The number of such households with children has fallen from 5,240 in the first quarter of 2003 to 510 in the second quarter of 2009.

The Family Resources Survey is subject to comprehensive methodological reviews, which include assessment of the coverage of the survey and whether it can be improved. The Office for National Statistics is reviewing the feasibility of extending coverage of some surveys to include communal establishments such as bed-and-breakfast accommodation. If this is considered feasible and is adopted by the surveys used to measure poverty for the Bill, the Bill is designed so that the coverage of the targets can be amended to match the new coverage of the survey. Clause 6(4) requires the Secretary of State to ensure that the targets have as wide an application as is reasonably practicable. However, it is recognised in that provision that the targets can apply only to households which can be surveyed,

“having regard to the statistical surveys that are being or can be reasonably expected to be undertaken”.

If there is evidence that wider coverage has become practicable, the Secretary of State is required to ensure that the targets match this coverage.

I hope that my noble friend Lord Morris is assured that where children reside in communal establishments either it is not appropriate for them to be covered by the targets or continuing review processes are in place to ensure that if and when it becomes practicable for surveys to cover them it will be reflected in the Bill.

I also reassure my noble friend that the well-being of many of the children not covered by the targets is monitored or assured in other ways. For example, we monitor a range of outcome and well-being measures for looked-after children who live in accommodation not covered by the surveys; we have minimum statutory standards for looked-after children in residential care; and the Government have a target to reduce the number of households living in temporary accommodation, including bed-and-breakfast accommodation.

Amendment 16 would require the Secretary of State to ask for advice from the commission regarding appropriate levels of survey coverage before regulations are made defining qualifying households. Survey coverage is relevant to the regulations because qualifying households will be defined based on which households are covered by the surveys used to measure the child poverty targets. The role of the commission is to provide advice on the child poverty strategy and the child poverty targets. However, it is not appropriate for the commission to have a role in defining terms which appear in the Bill, which is what the amendment would involve. There is no guarantee that any member of the commission would be appropriately qualified to advise on the technical issue of what statistical surveys can reasonably be expected to be undertaken with regard to coverage of households.

Paragraph 1(4)(b) of Schedule 1 requires the Secretary of State to have regard to the desirability of securing that the commission has experience of child poverty research, but there is no requirement to ensure that the commission has in-depth knowledge of the coverage of the surveys which are used by government to measure it.

I assure noble Lords that there are already sufficient safeguards in place to ensure that the definition of “qualifying households” set out in regulations reflects the widest survey coverage that is reasonably practicable. First, the surveys which gather the statistics used to measure progress against the targets in the Bill must meet National Statistics quality standards. The coverage of these surveys is regularly reviewed, and wherever coverage can be improved without excessive cost or detriment to the survey, changes are made. Secondly, Clause 6(4) requires the Secretary of State to have regard to what statistical surveys can reasonably be expected to be undertaken. Finally, any regulations made under subsections (1)(a) and the proposed new subsection (1)(ba)—if this amendment was made to the Bill—are subject to affirmative procedures, and so Members of both Houses will have the opportunity to debate them.

I am grateful to the noble Baroness for tabling Amendment 26, since it provides another useful opportunity to explain to noble Lords the meaning of the duty in Clause 8(2)(b) and the reasons for its inclusion in the Bill. Clause 8(2)(b) states the second purpose of the child poverty strategy, which is to ensure, as far as possible, that children in the UK,

“do not experience socio-economic disadvantage”.

The noble Baroness referred to “as far as possible”. That is included because it would be impossible to have, and legislate for, an absolute. I hope she would acknowledge that point. This complements the other requirement for the strategy, as stated in subsection (2)(a): to comply with the duty in Clause 1 to meet the targets by 2020.

The duty to tackle the experience of socio-economic disadvantage among children was included for two reasons. First, as noble Lords are aware, it is not possible to measure a small number of children, as we have just discussed. It is regrettable but unavoidable for reasons that have already been explained. However, we fully recognise that these children may be among the most vulnerable and that any strategy to tackle child poverty must address their needs. The duty in Clause 8(2)(b) therefore extends the application of the strategy to all children in the UK.

In its recent report on the Bill, the Joint Committee on Human Rights welcomed the inclusion of this duty. Page 20 of the report says that the committee,

“accept that this part of the Bill will benefit all children living in poverty and not just those who are caught by the targets”.

To set out the Government’s commitment to alleviate child poverty in legislation, it is necessary to set measurable targets and these can relate only to measurable children. Including a duty to prepare and publish a strategy in relation to all children demonstrates that the intention of the Bill is to address poverty experienced by all children, and not to discriminate against any groups. I hope noble Lords are reassured by that.

The second purpose of including the duty to tackle socio-economic disadvantage is to broaden the focus of the Bill beyond tackling income poverty alone. Socio-economic disadvantage is difficult to define precisely, as was discussed earlier today. I am aware that noble Lords debated its meaning at some length in the first Equality Bill Committee debate last week. For the purpose of this Bill, we may consider that it broadly relates to a child’s access to material and social resources, and their ability to participate in society. A person who is affected by socio-economic disadvantage will be in an unfavourable economic and/or social position, relative to someone else. Over the long term, lack of access to stimulating and enriching experiences and opportunities may adversely affect children’s development and well-being. As they grow up this is likely to impact on their outcomes in such key areas as education, health, employment and income.

Some noble Lords have argued that the Bill looks in the wrong direction by tackling the symptoms rather than the causes of poverty, but I do not accept that description. While it is true that the targets focus on income poverty, although I contend that the combined low-income and material deprivation target is broader than that, we have always been clear that provisions in the Bill go wider than tackling income poverty alone and that it is necessary to do so to ensure a sustainable end to child poverty. The duty to tackle socio-economic disadvantage among all children in the UK will ensure that the strategies published under the Bill describe actions needed to tackle the root causes of poverty, and Clause 8(5) lists what we have identified as those root causes.

14:30:00

The amendment would have the effect of narrowing, in some respects, the application of the strategy to only those children under 18 who were entitled to child benefit, although I accept that that is not the intent. It would, for example, exclude from the second limb of the strategy children, as defined by Clause 25, who are aged 18 and 19 and entitled to child benefit. I understand that this is not what was intended; I believe that what it is trying to achieve—indeed, this is what the noble Baroness said—is the extension of the application of the strategy to all children under 18, irrespective of whether or not they are entitled to child benefit. Although the amendment does not achieve that, I will respond to the point that was made when it was moved.

Our aim is to end child poverty. Through the Bill, we wish to ensure that the measures taken to meet the targets and to ensure that children in the UK do not experience socio-economic disadvantage are relevant for all dependent children. The Bill has a focus on providing for the improvement of children’s living standards. It is therefore right that the definition of a child used in the Bill relates directly to the financial support that the Government provide for families to support their living standards. Children under this definition are financially dependent on their parents. I contend that many young people who are over the age of 16 and are not in full-time education are capable of earning in their own right. They are therefore not necessarily dependent, and are therefore not covered by the measurement of child poverty.

There are very few 16 and 17 year-olds who are not eligible to receive child benefit. Those excluded are persons who are employed or who are in receipt of certain benefits, and persons whose education or training ceased more than 20 weeks ago and who are not registered for work, education or training with a qualifying body. However, I recognise the concerns expressed by noble Lords regarding the potential exclusion of some 16 and 17 year-olds, particularly those not in education, employment or training. I therefore assure noble Lords that, in practice, work to support young people will form part of a sustainable child poverty strategy. We need to ensure that these young people do not become the poor adults and parents of the future. Work is under way in other parts of the Government to take action to help this group, so they will not be forgotten.

The noble Baroness may be aware that by using the words,

“no child under the age of 18”,

in the amendment, the actual effect may also arguably be to confer on every individual child in the UK a legal right to not live in socio-economic disadvantage. This is neither realistic nor necessarily desirable. The Joint Committee on Human Rights agreed when it stated in its report on the Bill that,

“economic and social rights should not be fully justiciable and legally enforceable because that would be too subversive of the constitutional relationship between the courts and the democratic branches in this country”.

Instead, the Government should be,

“placed under a duty to make progress towards realising those rights”,

and that is what Clause 8(2)(b) does, as well as requiring us to report annually on that. I suggest that this clearly demonstrates that the existing duty in Clause 8(2)(b) is human rights-enhancing, as indeed are the provisions in the rest of the Bill.

I reiterate to noble Lords that the Government’s goal is to eradicate poverty for all children in the UK and to ensure that they do not experience socio-economic disadvantage.

My noble friend Lord Morris talked about compatibility with the ECHR. I will not go through the detail of this, but I should say that we have considered that issue and do not think that the Bill is in breach of Article 15 of the ECHR. To engage Article 14 a person must show that they are within the scope of another ECHR article, and we consider that the Bill is not within the scope of any other article.

The noble Earl, Lord Listowel, asked about excluded groups and in particular about what support was being given to Traveller families. I shall briefly summarise the position. In terms of the numbers excluded for Gypsy, Roma and Traveller children, in total from the 2008 school census there are more than 3,800 Travellers of Irish descent and more than 8,600 Gypsy and Roma children, although anecdotal evidence suggests that that figure may be underestimating by some 20,000. The PSA 11 target aims to narrow the gap in educational achievement between children from disadvantaged backgrounds and their peers. Children from Gypsy, Roma and Irish Traveller backgrounds are captured by that target. Local authorities are required to set local targets for raising the educational attainment of black and minority ethnic groups, including Gypsy, Roma and Irish Traveller children. DCSF initiatives to improve the outcome for Gypsy, Roma and Traveller pupils include the National Strategies-managed GRT achievement programme and a range of other things, too. If the noble Earl is interested, I shall be happy to write to him further on that.

The noble Baroness, Lady Afshar, like my noble friend Lord Morris, was concerned whether by defining the targets as we have we would exclude some of the most vulnerable groups in our society from the impact of this Bill. I hope that I have explained that that is not the case and that the two legs of those strategies are important to meet those targets, but we will ensure that all children are brought within the scope of the eradication of child poverty. On that basis, I hope that the noble Lord will feel able to withdraw his amendment.

Lord NorthbourneWould the Minister agree that just because a particular outcome is not measurable, it does not make it less important than one that is measurable? In that context, I think that he probably agrees that it is important in this Bill to give an equal strength of importance to the important non-measurable outcomes as it is to the measurable ones.

The Earl of ListowelI add to what my noble friend has said and, in doing so, express my gratitude to the Minister for his reply on Traveller children. I would be grateful for a letter, if that is possible; I was most grateful for the information that he provided and the general response that he has made.

I was moved by what he said in this debate to think how very perverse and unhelpful targets can be and how important it is not to over-rely on targets and to have rich targets, especially when dealing with children. I am reminded of this particularly because of a conference yesterday run by Barnardo’s, called “Counting the Cost of Care”, which looks at children in care. Martin Narey described how in the past the Government set targets to keep children out of care, so local authorities have a target to reduce the numbers of children taken into care. When he was commissioned by the Government to look at the issue, he and his colleagues were convinced that that must be the right direction. However, by going out into the field and talking to families, he discovered that children were being placed with families where the mothers were addicted to heroin and were having a terrible experience—but the whole drive was to return children to families, so that must be the right thing.

We have to be careful to choose the right targets and not to over-rely on them. With the education targets for looked-after children, it is right that they have performed very poorly compared with other children, but we have failed to take into account the fact that so many of them had such a difficult experience before being taken into care. The result of over-relying on achieving that target of four or five good GCSEs is that we have rubbished the foster carers and the whole system around caring for these children by saying, “We’ve put so much money in but they are not achieving the results we want”.

I hope that in the course of this Bill we do not have reductive, simplistic financial targets but give strength wherever possible to richer targets, similar to those in the UNICEF report which was so well received and helpful. What is measured gets acted on—that is what I am always hearing. In a time of recession, the danger is that whatever is measurable will receive attention and action and the important other aspects of children’s lives are ignored. A good factor in the UNICEF report was that it looked at time spent by children with their parents. In Italy, which performed best, children have regular meal times with their parents, which came through in the targets. So rich targets of that kind are helpful, but even they have to be treated with circumspection.

I am sorry for taking up the Committee’s time at this point, but I hope that I shall not have to intervene later on, when we come back to this matter.

Lord McKenzie of LutonI am grateful for each of those comments—

Baroness WalmsleyI am most grateful to the noble Lord for giving way. I agree with the noble Lord, Lord Northbourne, who made one of the points that I was going to make. On Amendment 26, the Minister could not have been clearer that the intention of the Bill is to improve the lives of all children, and I thank him for that. However, I am still slightly concerned about children who are not dependent, who are working, but who are earning very little money and whose circumstances may mean that they suffer many of the elements of deprivation that we are concerned about. I think I can assume that the Government intend to help those young people by other legislation outwith this Bill.

On these Benches we were slightly surprised to hear the noble Lord say that it was not desirable that no child should suffer socio-economic disadvantage simply because he is afraid that those rights would be justiciable. Coming as I do from a children’s rights point of view on all these matters, I think it would be a very good thing if a child had a justiciable right to that sort of thing, which the UN convention offers the child. However, on that point, we could have more confidence in the common sense of the courts to not come up with decisions that are unreasonable in the current economic circumstances. I am most grateful to the Minister; he has reassured me and he has put on the record that all these strategies at every level—local, regional, devolved and national—must address the poverty of all children. I thank him for that.

Lord McKenzie of LutonI am grateful to the noble Baroness for her support for our position. When I was quoting issues around the rights that children may have, I was quoting the JCHR report, so its view was advanced in that quotation, which is one that I support. The noble Baroness is right. We are talking about one Bill on strategies around child poverty, and inevitably there will be lots of things going on around government. At the moment, lots of effort is focused on young people who are NEETs. I think it is right to say that the figures around 16 and 17 year-old NEETs have reduced for the past three years. A lot of work is focused on trying to get young people into training or work or remaining in education. That will continue. The juxtaposition of children who are dependent on our definitions and others will inevitably be something that the strategies to deal with child poverty will have to address, and they will be encompassed within that.

The noble Lord, Lord Northbourne, and the noble Earl, Lord Listowel, picked up on the point about what is measurable and what is not measurable. In my response on that matter, I was trying to focus particularly on the income-related targets. If we have those targets, measuring whether we meet them has got to only encompass things that we can include within that measurement. That is not to say that there are not—as there are at the moment—a lot of PSA targets and subsidiary targets around a whole range of government business and aspirations, and that will continue. The noble Earl is absolutely right that sometimes targets—the noble Lord, Lord Freud, has pursued this line to some extent—can engender perverse behaviour. We need to ensure that is not happening in this case. The assurance is that strategy has to be refreshed every three years, and there has to be an annual report on that. That report is not going to just be along those narrow income targets; it will be around the generality of the strategy.

14:45:00

Lord Morris of HandsworthMy Lords, I thank the Minister for his well considered and detailed response. No one questions the Government’s commitment to the best interests of children in broad, general terms; however, on this occasion the view is being taken, and is sincerely held, that the measuring tool is too restrictive and may not bring about the Government’s desired outcome. It is for those reasons that the Joint Committee reached the conclusion that, if best justice is to be done to this worthwhile and noble cause, the Government should look again at the issue and perhaps bring forward a target or targets that would meet the required objective.

As I understand what the Minister said, the door is not closed for ever and a day; the issue of “household”—communal or otherwise—will continue to be a consideration. From that point of view, if the appropriate measuring tool emerges, clearly the Government will revisit the debate and the necessary adjustments will be made. On the basis that this debate will go on and be considered, I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

Amendment 10

Moved by

10: Clause 6, page 3, line 10, at end insert “including revenues from the black economy”

Lord FreudMy Lords, before I launch into the amendment, I will take the opportunity to pick up on a comment the Minister made during the debate on the previous amendment and ask him to stop the peculiar habit into which he has fallen of stating our policies and, while doing so, carefully mis-stating them. It is a fantastical strategy that he has adopted in recent months.

Baroness Hollis of HeighamPerhaps the noble Lord will help the Committee rather more than he has so far been able to do by telling us precisely what his policies are and what the costs and consequences will be.

Lord FreudI am grateful to the noble Baroness for asking that question. I was about to do that.

The Minister said that we are not bound by any of the financial targets, but that is not what I informed him and the Committee of two days ago. I said that we will take the four financial targets, look to improve them and add one financial target. I was pleased to accept an offer from the Minister to discuss that target, as I am sure we will do in the days ahead. We also want to balance the Bill by setting targets in relation to the causes of poverty and adding them to the Bill. Unless it was mischievous—perhaps that is a non-parliamentary word—I cannot understand how the Minister can accuse us or me of not being bound by those targets. That kind of game is beneath him. At the heart of the amendment is the question of how well we measure poverty—it picks up some of the points that we discussed in relation to the previous amendment. The specific issue that it addresses is whether many people lie when they answer the surveys and do not reveal black economy earnings. If they do, we are at risk of pushing support and help towards children and families who are perfectly well off. The IFS expressed the issue with great political correctness in its report, The living standards of families with children reporting low incomes , which was on behalf of the DWP. I shall quote the relevant paragraph in full so that we can all enjoy its delicacy:

“The second puzzle is that a substantial number of families manage to remain out of hardship even during prolonged periods of poverty ... Indeed, the length of poverty is not strongly related to the likelihood of hardship, which is contrary to the view that households can generally maintain their living standards for a short period of time after entering poverty. Of course, part of the explanation for both findings could be that some households have their income persistently mis-measured by household surveys”.

Indeed. That is the point that I wish to explore.

The figures may be very high. I was fascinated to come across some research by Panayiota Lyssiotou, Panos Pashardes and Thanasis Stengos, published in the Economic Journal in 2004. It found that black economy activities conducted solely by self-employed people in the UK amounted to 10.6 per cent of GDP.

Their approach was to look at the under-reporting of income by the self-employed. The survey suggested that households whose heads are in blue-collar occupations on average report only 46 per cent of their income and that households whose heads are in white-collar occupations on average report only 61 per cent of their income. Both are self-employed groups.

The study used the relationship between the demand for goods and the level of household income estimated from data drawn from the Family Expenditure Survey, the FES. To the extent that certain household groups such as the self-employed under-report their income, their expenditure pattern would resemble that of better-off households known to report their income correctly, such as civil servants.

The findings of the research indicate that self-employment income reported by blue-collar households needs to be scaled up by a factor of 2.18 to correct for under-reporting, whereas the corresponding figure for self-employment reported by white-collar households is 1.64 per cent.

Considering that reported self-employment income is around 12 per cent of GDP, and that blue-collar households account for nearly 46 per cent of reported self-employment income and white-collar households for more than 54 per cent, the estimate suggests that self-employment-related black economy activities in the UK amount to 10.6 per cent of GDP. That is the equivalent of around £140 billion washing around unaccounted for, and it relates purely to the under-reporting of self-employed incomes.

I am aware that it is very difficult to lock down this information precisely. I remember writing a feature for the Financial Times in 1979, when I was an economic journalist, looking at the ways in which the underground economy might be measured. If your Lordships are enthusiastic, you can find the article: it is dated 9 April 1979—I know that some Members of the Committee are very enthusiastic about doing research. At that time, the chairman of the Inland Revenue, Sir William Pyle, offered a guesstimate of the black economy as a whole being 7.5 per cent of GDP. It is interesting that the Office for National Statistics is making significant strides in approaching the relevant datasets. I refer particularly to its fascinating report in this area from 2005, Identifying Sources on Entrepreneurship and the Informal Economy . There are suggestions that the figure may have risen recently, particularly with the recession. According to Professor Friedrich Schneider at the Johannes Kepler University, one of the world’s foremost economists on this topic, the black economy’s share of gross domestic product in the UK is set to grow from 10.1 per cent to 10.9 per cent this year alone. Interestingly, this is a very similar figure to that thrown up by the Lyssiotou study.

It would seem ludicrous for the state to rush around trying to help children who are living in families who are comfortably off, but who are careful to disguise the sources of their wealth and income. It would be particularly dangerous politically if this was done through income transfers, which is the Treasury’s stated preferred strategy, at least until recently. Hard-working voters would see people whom they knew were shady operators being rewarded with additional government largesse. This amendment is designed to make sure that the Government get a realistic grip on the flows of black money when setting their anti-poverty strategy. I beg to move.

Baroness Hollis of HeighamMy Lords, this is a very interesting amendment. I do not think anybody would disagree with the noble Lord, Lord Freud, particularly when he is quoting, I suspect, Italian writers on the phenomenon of the continental system. I may be wrong; they may be Romanian or something.

Lord FreudThey are Greek Cypriot.

Baroness Hollis of HeighamI stand corrected. I was not clear, from what the noble Lord said, as to whether he was talking about assumptions about the inability to draw a proper tax take from the self-employed because of corrupt cash transactions and so on, or he was concerned about the implications for benefits and income transfers, which is what we are dealing with today.

I do not think anybody would deny that, certainly, with the self-employed and payments in cash and so forth, there is a significant black economy. I would not wish to challenge the noble Lord’s assumptions about the figures; I have no way of knowing whether he is right or wrong on that. He talked about low-hanging fruit taking the figure to more than 60 per cent. It is certainly the case that one of the big reasons why it is so difficult to be precise about poverty and get below 55 or 50 per cent is, as the noble Lord says, the disparity between reported income and reported living standards. I am surprised that he does not loop this back into his discussions on other amendments. It is not just that people are in the black economy. You may be dealing with shopkeepers who are living on their stock, or using wholesale rather than retail prices. I remember a discussion on the Welsh hill farmers not that long ago when BSE was hitting across the country. Welsh hill farmers were reported as earning on average something like £7,000 a year. I was briefing colleagues in what was then a version of MAFF that they should be taking up working tax credit and child tax credit but, of course, they could not because they were living off their land. Their real income was well above their declared income and, being reasonably—though not entirely, I do not doubt—honest souls, they were therefore not claiming benefits which, on the basis of their income, they were entitled to. There are many dimensions to this issue, apart from those who are, perhaps rather deliberately, cheating the system.

That is my first point. The other thing that one picks up is how dependent people with very low earnings are on intergenerational and family loans, gifts, trading and care in kind. It makes it very hard to depart from the reported figures.

15:00:00

My first question is to the noble Lord. If we depart from the reported figures, as he says, and we have a putative assessment, a putative add-on to declared income of everyone who is self-employed for benefit purposes, that is not just rough justice but profoundly unfair. In some jobs, such as plumbing or gas-fitting, it may be easy to add to the black economy, but there may be other areas of self-employment where it is impossible to do so. His assumption would be to add maybe £20, £50 or £100 a week for all those declared incomes, whether or not they were actually received through the black economy. I suspect that that would force at least as many children into poverty as his assessment would save in terms of taxes on the taxpayer.

My second question is to my noble friend, and I think the noble Lord may not disagree with me, having seen some of his material on the dynamics of benefits. Would it not be a more appropriate way, particularly with lone parents, to tackle this through disregards so that we help to build fraud out of the benefits system for the lowest-paid? One territory is lone parents, who currently get a disregard of £20 a week and may do some part-time cleaning, pick mushrooms, see to caravans and boats in the summer season and so on. If they do not declare that, they are in the grey economy. As a result, there is again a nebulous quality to what their entitlements may be.

I was delighted to see my noble friend’s response to the Welfare Reform Bill, reinforced by the Chancellor’s commitment in the PBR, to be considering extending a £50 disregard to all lone parents. First, that would certainly address some of the problems that the noble Lord has raised regarding those who are in, if not the black economy, at least the grey economy, and would help to build fraud out of the system. Secondly, it would also help employers to have a more flexible supply of above-board labour. Thirdly, it would lift those parents out of poverty. Fourthly, it would help to train them into work by preparing them through mini-jobs. I hope that the noble Lord, Lord Freud, will join me in encouraging my noble friend to be as explicit as he can on this remedy for at least some of those who may perhaps be understating their incomes.

Lord Kirkwood of KirkhopeMy Lords, I am interested in the approach that the noble Lord, Lord Freud, takes. I encourage him to continue to freshen up the debate; it is a long time since I have heard anyone tackle benefits from the direction of talking about the black economy.

I start with a question of terminology. Can we talk about the “informal economy” rather than anything else? I do not want to be too correct about this, but it is more comfortable language.

I have a technical question for the Minister. We are now in Clause 6 and looking at the interpretation of terms used in relation to targets. It is not clear to me whether these are affirmative or negative procedure regulations. It would be helpful to know that, and I would be reassured if they were affirmative rather than negative.

Turning to the amendment, how on earth is this to be done? Leaving aside some of the side issues, I understand that the substantive point, as the noble Lord was arguing from an interesting and useful point of view, is whether we can really find out what is going on with household incomes in future. We are right in this Committee to look at ways to improve our knowledge about that. This is wider than just financial benefit levels, although we have had some useful debates about that in the past.

If we are going to look at the informal economy, what measures are we going to use? How is this to be done? We know a bit about the University of Essex expanding its longitudinal survey of Britain, and there may be opportunities to get things done differently. I am puzzled by how to begin to determine, on any kind of basis, any kind of valid information that we could act upon.

So my first point regards functionality. Supposing that we could do this, we might be able to target money away from those errant families that are in the informal economy. Actually, I think you should ring the police, or at least the benefit fraud unit, if there are people in the informal economy. That is my next point: if we are trying to encourage people to take up entitlements to benefits, absolutely the last thing you want to do is send a tax inspector round. A Treasury report was written for the Government in 2000 by Lord Grabiner, a distinguished Member of this House. I have a copy of it here. It is all about enforcement, and rightly so. It contains estimates of the extent of the problem, and the problem is great, which I do not think anyone denies. The headings under the summary of recommendations are “Prevention”, “Detection”, “Punishment” and “Publicity”. That does not sit comfortably with the eradication of child poverty, and I do not know how the two things would mesh in a way that would work.

This is a tax issue more than anything else. I think we have all known for a long while that self-employment is porous, and it is more so at the high end than at the low end. I suspect that GDP percentage losses to the economy occur at the high end, among the people who are rather wealthy, rather than among people who are self-employed as hairdressers or whatever, who are trying to rub along and make ends meet. I am being prompted to say that it will be happening with barristers and the like. So there is disproportionality in that, but the point that the noble Lord makes about self-employment is understood and accepted.

I agree with the noble Lord that getting more information about what is happening with family incomes is the right thing to do, but I would want to know about the overhanging, and sometimes astonishing, levels of debt. If we are to look at the wider picture, we need to look at both sides. Of course, there are people who might be understating, moonlighting or ghosting, or whatever the terms are, in the informal economy, and HMRC deals with them daily, but we should also look at credit card debt, which has become fantastically inflated over the past five or 10 years. That also has to be weighed up, and it would be interesting to do so in order better to target benefits in the future.

I welcome the fact that we are taking a broad look at all this afresh and drilling into it, but how do you prevent people being frightened off claiming means-tested benefits to which they are absolutely entitled? If you have all the information that you want, it might make the problem harder to solve than the noble Lord may think, according to what he said when introducing his amendment.

Baroness AfsharMy Lords, I thank the noble Lord, Lord Kirkwood, for saying that this is about the informal sector, in which people of all colours participate. I want to make two points. First, the informal sector is the most insecure and uncertain sector in the economy. My understanding is that risk-taking is encouraged, and many people use tax avoidance in order to balance risk-taking. However, the greatest risk-takers are those at the very bottom, who take risks all the time. It seems to me that there is disproportionality there.

In terms of equality, it is simply unequal to guess someone’s tax. There is a wide range of literature on the moral economy of kin, whereby people do not pay one another and have been working for generations on the basis of recognition of their responsibilities and duties, which are reciprocal. This means that, to help their kin, people in very poor households often offer all kinds of care, including, not least, accommodation where the housing is very tight. The kind of guesstimates that would apply to the tax avoidance category would certainly discriminate against people who are doing their very best to ensure that their children do well. That is particularly true of migrant families, who forgo everything in order to offer their children a good education. Therefore, they might appear to be better off but we do not know the hardship that they go through in the hope that the next generation will fare better. I am sure that we do not want to discourage people who are doing their best to improve their situation.

Lord NorthbourneMy Lords, I do not want to widen the issue too much and so I shall be extremely brief. On the question of measuring informal sources of income, or measuring sources of income at all, we have to take cognisance of the fact that the household is no longer a stable thing in today’s society—at least, some households are not very stable. I am not making a value judgment, but you can get a situation in which a mother lives with two, three or four children, all with different fathers, and the man who is living with her is not the father of any of them. Who is paying benefit and maintenance and who is paying rent? There are all sorts of issues in that area.

Lord McKenzie of LutonMy Lords, I thank the noble Lord, Lord Freud, for his amendment. Perhaps at the start I might just clarify one or two points. The purpose of offering the meeting was to convince the noble Lord that his persistent material deprivation target did not add anything to the measurements that the other targets had, rather than to sit with him and devise a fifth target. But I hope that he would still be happy to meet. If he tells me that he is committed to the other four targets, that is fine and I accept that entirely. I took it from one exchange that we had last time that, although an income-related target was something that he would support, he was not very specific about whether that was the income-related target that we had in the Bill. If he wishes to clarify that, it would be fine, but it has not been clear to date.

This is a fascinating area. The noble Lord raised the issue of the significance of income transfers, which are a key part of tackling poverty, but they would never be made on the basis of reported incomes in a survey. They are made on the basis of the usual strict rules that apply to benefits. I do not have the data to hand, but if he looks at the statistics he will see that benefit fraud has been progressively reduced in recent years through lots of concerted effort. On the other side of that coin, as we touched on with the noble Lord, Lord Kirkwood, we talk about benefit fraud as part of the informal economy but often do not talk enough about benefit take-up. This Government are the only Government in history ever to have benefit take-up campaigns, and significant progress has been made in some areas, but there is still progress to make in others, particularly around council tax benefit take-up. If we could crack that one, we would have made significant strides on pensioner poverty, for example. So we need to keep that in mind.

Amendment 10 seeks to include income from the informal economy—I believe that is a much better expression—in the calculation of a household’s income. Given the obvious difficulties in defining the informal economy and the income streams flowing from it, the noble Lord will not be surprised by the fact that this information is not currently explicitly asked for in the survey of household incomes which we would use to monitor progress towards the child poverty targets. However, some respondents may offer this information; for example, if they work cash-in-hand, they may report this as their employment income.

The question of whether such revenue should be included in our measure of income was touched on in the Second Reading debate, where it was argued that survey respondents who depended significantly on the informal economy for their living could misreport their true incomes. This, it was reasoned, would affect how accurately our measures of income reflected the true living standards of the respondent. That is the basis of the noble Lord’s amendment. The Government recognise that the issue may marginally affect the accuracy of our measures of income, and we wish to emphasise our commitment to building up a fair and truly representative picture of households’ living standards. However, we argue against the adoption of this amendment, for some practical reasons, if no others.

Asking interviewees explicit questions on unlawful income would impact on their willingness to participate in the survey. Indeed, any interviewee asked to provide such information, and in regular receipt of income gained in the informal economy, would be unlikely accurately to report the amount received. For these reasons, no other comparable surveys capturing information on incomes attempt to collect this information. Likewise, administrative data would not reflect the extent of the informal economy.

15:15:00

The issue of ensuring that income is captured as accurately as possible by the survey, and that our measure of income accords with a household’s living standards as closely as possible, was examined extensively as part of a national statistics quality review in 2004. We have a commitment to the accuracy of these statistics, and they are produced to national statistics standards. Additionally, we do not rely only on income measures of poverty. Children in families with a higher level of income through the informal economy would not experience material deprivation and would therefore not be considered to be in poverty on that measure.

To pick up on other points made by noble Lords, the noble Lord, Lord Kirkwood, asked about the nature of the order. It will be an affirmative order. Most of the regulations in the Bill are subject to affirmative orders. Only three are negative, and I think that we will be challenged on one of those as well.

My noble friend Lady Hollis raised the issue of income disregards. She made an important point because some of the drivers of unreported income in the informal economy are potentially issues around whether work pays. Disregards are an important component of that. As my noble friend is aware, we are looking at piloting increased disregards. We have increased disregards in relation to housing benefit and in relation to child maintenance payments, for example, so there is movement in that direction.

An interesting issue that arises from all of this is the assumption that, in aggregate, there is clearly an informal economy and income that is not captured in the tax system, which may have negative consequences in the benefit system. But I do not see that the distributional impact of that and where it would fall would lead us to make different judgments in relation to our strategy. The conclusion would not necessarily follow that income from the informal economy may not be reflected in the surveys. In a sense, we can only speculate whether the proportion is a greater issue for those at the higher end of the income scale than for those at the other end.

Over a number of years, the Government have had a raft of measures to tackle tax avoidance. There are particular arrangements going on at the moment where overseas bank accounts and so forth are recommended to be in the purview of the Inland Revenue, and rightly so. Along the way we are often criticised for these measures because it can lead to quite complex legislation. There is always a trade-off between complexity, whether in the benefit system or the tax system, and fairer collection. Clearly, as we have done, the Government need to continue to crack down on benefit fraud, and we certainly need to crack down on tax avoidance, so we would have common cause on that issue.

A point was raised in our last Committee about the process of the surveys. There was a suggestion that the way in which people’s data were collected was a bit ad hoc. It is clearly stressed to interviewees that the data collected by the survey can be used only for statistical purposes and cannot be used to investigate unlawful income or tax irregularities. There are no explicit questions asked about income from unlawful sources, but there is nothing to prohibit respondents providing information on their income from informal economy sources. The respondent may say that they are receiving a benefit amount which, based on their personal and family characteristics, they would appear to be claiming fraudulently, but that amount is not corrected or adjusted in any way.

The noble Lord alights upon an issue, but what it tells us about the strategies that should be devised to focus on it does not take us very far. To adopt a specific requirement on the basis of this amendment would not be helpful or productive, but a continued effort to challenge the informal economy—the tax avoidance and evasion that goes with that, as well as benefit fraud—is something we must continue to be vigilant about.

Baroness Thomas of WinchesterMy Lords, will the Minister clarify that the amount of unpaid benefit is in the region of £6 billion?

Lord McKenzie of LutonI cannot confirm that figure off the top of my head. I can certainly get the latest data that we have, but I know that it is not an insignificant sum over a range of benefits; council tax benefit is one, while pension credit is a smaller issue but still a significant one. Housing benefit is also affected.

Sometimes the underclaiming arises because people do not necessarily take the point that some of these are in-work benefits as well as out-of-work benefits—that impacts on housing benefit and council tax benefit in particular—but the drive to have better take-up of those benefits is crucial to tackling poverty and income inequality. That is another feature of this debate: we are talking about poverty and relative incomes, but this touches upon income equality as well.

Baroness Hollis of HeighamOn that last point, I am sure that the Minister is right about the problems of persuading pensioners to take up benefits, first, because they think they may not be entitled to them—like council tax, for example, because they are sharing a household; secondly, because there may be a small debt at the end of the taper; or, thirdly, because of issues of stigma. We also agree, however, that, fortunately, the most careful and scrupulous of claimers—scrupulous, at least, in terms of attention to detail—are lone parents, and we know that, for most of the benefits that lone parents are entitled to claim, the take-up rate is 90 per cent, compared with pensioners whose take-up is something like 70 per cent. With regard to child poverty, the underclaiming of benefits may be less of a problem than for older age groups. That does not mean that it is not a serious problem, but perhaps it is less important for this particular issue.

Lord McKenzie of LutonMy noble friend makes an interesting and pertinent point. I am grateful for that.

Lord FreudI thank the Minister for that response. I should start again on our little side issue about whether we are making our intentions entirely clear. I have looked at what I said on Tuesday, where I did my best to be as clear as possible. I will read it out again—

Baroness Hollis of HeighamWhich column is the noble Lord referring to?

Lord FreudI am on column GC130-31. I probably should not bore everyone by reading it all out again.

Baroness Hollis of HeighamIt was very good stuff.

Lord FreudIt was. I said that,

“we are trying to amend the Bill by the addition of some targets. Measurement is clearly important, but the risk is that the measures, being purely financial, drive state intervention in a particular direction … We want a better balance of targets. We want to see targets that look to the causes of poverty, not only to the measures of poverty”.—[ Official Report , 19/01/10; col. GC130.]

I think that I made it quite clear then, and I make it clear today, that we accept the need for financial targets. As noble Lords know, we are discussing some amendments now where we are looking to improve some of those targets. I do not think you could represent an attempt to improve specific targets as an attempt to destroy or fundamentally change those targets. Where an amendment seeks to add a target—

Baroness Hollis of HeighamI am sorry to interrupt the noble Lord. He just said three seconds ago that he supports financial targets but wants to do x, y and z in addition. Which financial targets in the Bill does he support?

Lord FreudI support the four financial targets in principle.

Baroness Hollis of HeighamI—

Lord FreudLet me just explain what I mean by “in principle”. I am looking to improve them in particular ways—we are in the middle of a discussion on one of the ways in which one could tighten them—and I am looking to add one where I think it would capture the very poorest children in a precise way, which would be immensely valuable. I am looking forward to meeting the Minister—this will be the high point of the next few days for me—where he will try to convince me that any additional financial target is entirely unnecessary and I will endeavour to convince him that it will add valuable information about the neediest children.

Baroness Hollis of HeighamForgive me; I am obviously being very obtuse about this. Is the noble Lord saying that he accepts the four targets in the Bill? Is his criticism of them only that they are not sufficiently fine-tuned, so particular considerations—for example, of Gypsy or Traveller children on the one hand, and inappropriateness of income determination because of the black economy on the other—need to be brought to bear? Does the noble Lord support the four targets as specified, provided they can be delivered more accurately than he fears they may otherwise be?

Lord FreudI can confirm that. I said that I introduced the fifth financial target as an additional target. It may be that, after discussion, if it is in any way acceptable to the Government, the Minister will decide to switch or subsume it. That is the only change in the structure of the targets. Having said that, I am exploring improvement of the precise nature of the process that we are now dealing with in regard to the black economy. I hope that is now utterly clear and that I shall never again in this Committee be accused of encouraging as much child poverty in the country as possible. That seems to be the general point.

The most enjoyable thing about this Committee is to watch the noble Baroness, Lady Hollis, giving a wonderful impression of a miniature Vesuvius every time I talk. I enjoy that more than anything else. I hope it goes on.

Baroness Hollis of HeighamDoes the noble Lord run for safety?

Lord FreudReturning to the amendment and taking the point of the noble Lord, Lord Kirkwood, about what we call the black economy, I utterly accept renaming it. Now that he has raised the point, I remember in 1979 having a ferocious debate with the editor of the Financial Times about exactly what we would title a particular article. We ended up with the expression “underground economy”, not “black economy”. We will go to “informal economy”.

I regard this as important because it is more than a marginal issue, which is what the Minister said. It is more than marginal to have potentially £140 billion slopping around the economy, unmeasured and unaccounted for. It is very dangerous to have what is now a statutory target in an area where there is such poor definition of funds and income. That is why this is a very dangerous area to ignore. When you are out in the community, everyone knows people who have extra sources of income. If those people are wrongly rewarded for lying—which could be one of the processes—there will, in practice, be a backlash against the whole welfare state. That is the issue.

Baroness AfsharMy Lords, I am sorry to intervene but it seems that there will be an equal backlash if attempts by people to make the lives of the next generation better are seen to be penalised by a guesstimate. If somebody says “I guess that you are earning more because your daughter is better dressed”, it would cause outrage, not least from me and many others. It is a question of balance and fairness. Guessing, estimating and saying that maybe one person is better off than another is a very unstable basis for fairness.

15:30:00

Lord FreudI thank the noble Baroness, Lady Afshar, for that intervention. I entirely accept that we cannot do this by saying, “Well, for everyone here we will add on 20 quid or 50 quid”, or whatever number. That would be a desperate process of averaging, and I accept the noble Baroness’s point that it would be deeply unsatisfactory and equally unfair from the other direction. However, amazingly, the Office for National Statistics is beginning to get to grips with the issue. In 1979, it put up its hand and said, “We cannot possibly get anywhere here”, but it is now beginning to get more of a grip. It has improved over the past 30 years, but not as much as it might have.

Inserting a requirement in the Bill that you have to worry about this area will encourage the state to understand the impact of informal incomes on the process. If you do not understand that, clearly you cannot do much about it; if you do understand it, you can fine tune the strategies. It is to be hoped that over the next 10 years we may learn more about how to do this—it would be a shame if we did not—because the figure involved is not marginal.

The points made by the noble Baroness, Lady Hollis, are smack on. I have not agreed so much with her for several amendments and I hope that we will agree on many more. In its report, Dynamic Benefits: Towards Welfare that Works , issued last year—which we shall debate later—the Centre for Social Justice dealt with the concept of disregards. It is interesting that the centre recommended it as one of the most efficient ways of doing several things, one of which is getting rid of the desperate disincentives to work or to getting back into the formal economy. Under the current system, we are almost begging people on the marginal rates of 90 per cent—more in some cases—to cheat the system. A methodology which discourages that kind of behaviour and brings flexibility back into the formal economy would make enormous sense. The amendment would encourage the Government to introduce a process which is structured in that way.

I cannot resist making the point that when the Minister referred to trying to prevent tax avoidance and all the complexities that go with it, he was playing a game with us. He is a formidable accountant and he knows that we are not talking here about the avoidance of tax but about the evasion of tax.

Lord McKenzie of LutonYes, evasion is a key issue, but avoidance could well involve seeking to convert income to capital, or to some other kind of asset which might be enjoyed but is not necessarily accountable as income for tax purposes or for any other reason.

Lord FreudAs the Minister knows all too well, avoidance is not to be found in the “informal”, “black”, “underground” or whatever economy; it involves trying to minimise your tax bill, usually using peculiar legal devices in Aruba, or somewhere else nice, to avoid paying tax. You certainly declare the money and the money is visible to the authorities. With evasion, the money is invisible to the authorities, and that is the money that we are worried about. The Minister talked about benefit fraud being one area of the informal economy. In practice, nowadays the tax credit system is probably the big area where informal processes are at work, as has been given away by the fact that the disregards for income in the tax credit system have been whipped up to £25,000—I think that that is the figure; I am speaking from memory—because the state has simply been unable to get a grip on this matter. Rather than accuse everyone receiving or having to reclaim tax credits of making overclaims or underclaims or whatever, they have had to whip up the disregard level to an astonishing figure.

Baroness Hollis of HeighamOnly for one year. It is simply a rollover figure.

Lord FreudBut it is a huge figure. I end by saying that this amendment is designed to make sure that the authorities take this very important, non-marginal activity into account and that they do not just push it under the carpet, which is all too tempting to do. I do not know the extent to which we will wish to push this matter—I shall have to explore that further—but, for the moment, I beg leave to withdraw the amendment.

Amendment 10 withdrawn.

Amendment 11

Moved by

11: Clause 6, page 3, line 10, at end insert “including passported benefits and benefits in kind”

Lord FreudMy Lords, the concern that has generated this amendment is based on how best to help the poor, and poor children in particular. The targets that the Government are seeking to establish with this Bill are all effectively financial measurements, and the Government will be held to account on how well they do in reaching them.

A significant number of benefits in this country are benefits in kind and they are often passported based on the receipt of the primary benefits. These are not included in the financial measure as it stands. I refer to benefits such as free school meals, maternity grants, health costs, support in education and so on. This naturally raises the question of why we have selected 60 per cent of median line as a comparator and a target, when other countries may not include benefits in kind at all. This is an important point in its own right, as one reason that we have selected 60 per cent of median line is that it is possible to make a comparison with other OECD countries that use it. I am aware that on Tuesday the Minister said that it was used for other reasons as well, although I think he acknowledged that that was one of them. However, that is not the point that I wish to make here, and we have already had a debate about it.

My point is that, if we exclude these benefits from measurement, they will inevitably start to be eroded as more emphasis is placed on the financial measures which are part of the target. The source of the concern is based on the findings of the 2009 OECD report, Doing Better for Children , which points out:

“Ill-thought out targets may arguably create less than appropriate policy responses”.

In this case, the example that it gave was how the state might push children just below the line to just over it. But one of the most important issues that it discusses is the cash versus kind policy choice. It is worth quoting that report in this area in full. It says:

“The relative efficacy of cash-v-kind may vary with the age of the child, with cash transfers superior for younger children and in-kind provision (e.g. via universal education) for older children. Certainly this is the revealed preference of many OECD countries. The relative efficacy of cash-v-kind can also vary across the risk or outcome distribution of children of a certain age. Children at greater risk may benefit more from in-kind services, because their parents may not be capable of functioning as agents acting in the best interests of their children with income transfers”.

Here is the problem. According to this evidence, the children most at risk may be helped most by services in kind, because their parents are not up to making the right choices for them. It may make sense to move between cash and in-kind services at different stages of a child’s development or household circumstances. As this Bill stands, however, this sort of flexibility could be gravely discouraged, because a move from cash to in-kind support could throw the child into apparent poverty on the income basis. I beg to move.

Lord Kirkwood of KirkhopeMy Lords, again, I am grateful for the creative and innovative approach that the noble Lord, Lord Freud, demonstrates on this. I am puzzled, however, by how he makes his case. For anyone who has watched the benefits system over the past 15 to 20 years, benefits in kind have been a mitigating factor, because the levels of income support have been so low. That is a clear objective. It started with the report of the noble Lord, Lord Fowler, in 1986, which produced the 1988 welfare Act. What flowed from that was a means of diminishing costs; it also simplified the benefit administration, because you did not have to duplicate applications, so it had force in that direction. But one thing that I am absolutely certain about is that passported benefits are an absolutely core part of the system right now; I refer to housing benefit and things like that, which have now been extended to tax benefits. It would frighten a lot of people to hear him talk of interfering with passported benefits, as he seems to suggest, unless he was very clear about what he was doing.

I understand the argument that he was making, intellectually. If everybody had a modest but adequate income and could be sure that they could live and meet their nutritional standards from day to day and week to week, I would be very interested in listening to him develop his argument. He may be right—but what he threatens to do, if he is not careful, is to impose passporting of benefits and vouchers and all the rest into situations in which people actually cannot cope at the moment. That would be a serious worry for me, and I suspect for others as well.

My second question is the same one that I had in the informal economy debate. How is this to be done? With the best will in the world, if I am in a household where I have a Sure Start maternity grant, free school meals, a Healthy Start scheme and a child trust fund, how am I to fill in the family resources survey form when it comes round to try to identify what is available to me, or not, so that we can make these lofty decisions about whether it would be better to do all this in kind? How is it to be done? What mechanism is to be used? What questions do you ask? If you start putting together a form with every passported benefit on it, it will be a very difficult form to fill in. There are people who do not understand that they are getting benefits of a passported kind, so complex is the system.

Again, I am willing to be challenged by the kind of things that the noble Lord is saying, because it is right that we should think about these things afresh. There is value in that. Passported benefits are such a sensitive issue for millions of households in this country, and I would be very nervous about interfering with them in the way that is suggested in the amendment.

15:45:00

Lord FreudI want to respond to the noble Lord instantly, because I think he may not have understood the point that I was trying to make. My point is this: if you have a target which is based on financial transfers only, any bureaucracy that is driven towards performing to those targets will tend to look at financial transfers, and the importance of other, in-kind transfers, will be increasingly ignored. The risk is that in-kind transfers, which may be highly valued by people, will steadily, in a bureaucratic way, decline in relative importance because the bureaucracy is not driving to them; they do not exist. Targets, as we all know—we have had a lot of them in the past 10 years—can have perverse effects. They work; they force people to do things in certain ways. I am saying that these targets risk undermining in-kind provision because they are not counted.

Baroness Hollis of HeighamI support the noble Lord, Lord Kirkwood. I think the noble Lord, Lord Freud, is running two arguments simultaneously, and I am not sure which he is after. Is he after a concern which was first expressed by the noble Lord, Lord Northbourne, and the noble Earl, Lord Listowel, and which we all agree with? It is the problem that if you have limited, tiny definitions of targets, if I can put it that way, people perform to them; such as how quickly you answer a telephone. That warps and distorts a more holistic approach. I think we all share that view.

If that is what the noble Lord is saying in response to the noble Lord, Lord Kirkwood, there is probably no distinction between us. Actually, his speech was laden with remarks about parents who fail to make the right choices and parents who do not cope properly, and the implication of what he was saying was that there was a case for perhaps a greater share of benefit provision being in kind rather than in cash, and that therefore you should make sure that you count that in. If that is not what the noble Lord is saying, I will not need to say anything further. If that is what he is saying, I would like to continue. Perhaps he can help me on that point before I waste the Committee’s time by trying to rebut an assertion that he is not making.

Lord FreudLet me take up the noble Baroness’s point. I was actually quoting from the OECD on this. The simple point that it is making is that you are better helping some of the children who are absolutely the worst off in kind. What I am saying is that that kind of effective intervention, if that is what the policy should be, is actively discouraged by a set of targets that has no way of measuring the in-kind intervention as it stands.

Baroness Hollis of HeighamI understand that perfectly well; I do not understand whether that is what the noble Lord is recommending.

Lord FreudTo be honest, I am not an expert on the most effective interventions for the most vulnerable children. There are some people in this room who I may consider to be far more expert. I do not know; but when I read a report that is of the quality and status of the OECD report that says that in-kind provision for the most vulnerable may be far more valuable than cash transfers—mainly because the parents are not able to use that money effectively—and when I see a set of targets that would rule out acting on such a recommendation, I get very worried.

Baroness Hollis of HeighamPerhaps the noble Lord is overlooking the fact that the OECD reports have real problems—as he will know from the research of Jonathan Bradshaw—in equivalising between countries because in some, for example, people have to pay for their healthcare or education, whereas here they are, so to speak, goods in kind. That is the problem that the OECD faces. It is not that the British system is problematic, but parents in countries where they are expected to provide in cash what here is provided in kind may not always feel that they are able to afford to do so, particularly if they have very large families where different members may be prioritised. It may be more important to keep the man well fed so that he can work than to get the youngest child healthcare, because without the father working all the other children fall into malnutrition. I am not sure that the OECD is helpful in this regard as far as the UK is concerned.

I want to pick up the point made by the noble Lord, Lord Kirkwood. I would encourage the noble Lord, Lord Freud, to be very careful indeed about going down the path that has to some degree been explored with asylum seekers in terms of vouchers rather than cash. Behind that has to lie a judgment about the appropriate expenditure of income, and a lofty, white, middle-class, educated judgment might be preferred over the judgments of other people, who may be in very different circumstances.

I say that because I was very struck when I visited a social security office in my city of Norwich. I was talking to staff there—EOs and HEOs—about how they handled the social fund. It is a town with limited budgets and they had to prioritise, and we discussed how they prioritised their budgets from the social fund. They were mostly women and were very able, competent, kindly, well intentioned and completely scrupulous and professional. One would prioritise the lone parent who was struggling to buy white goods; another would prioritise the unmarried woman trying to help elderly parents in the home with heating costs; and someone else would prioritise a person with a disabled relative. However, the person who prioritised the lone parent was herself a lone parent. The person who prioritised the care of an older person was herself caring for her elderly mum. The person who prioritised the disabled person herself had a disabled member in the family. That taught me that there is a real problem in the exercise of discretion and with standards because you are tapping into the dowry of experience that people bring to a particular situation and the situations with which they themselves can identify.

There was always a tension, from Donnison onwards—when, as the noble Lord, Lord Kirkwood, said, we moved away from supplementary benefits to income support—between the role of discretion and the role of standardisation. Whenever someone like Frank Field, whom I respect in many ways, calls for discretion, he is actually replacing not a perfect judgment by a decision-maker with the imperfect judgments of families but one form of discretion and personal experience with another. Sometimes it will be better, sometimes different and sometimes inferior.

I urge the noble Lord, Lord Freud, to be very careful of going down that route. Obviously one wants a degree of flexibility to offer tailored support, and a lot of packages recommended by advisers and personal advisers have exactly that. Tailored support is very desirable, but once it becomes a form of replacing benefit entitlement, it is open to the judgment of others as to whether people should get help in kind. That is a dangerous, treacherous and slippery road, and I cannot begin to imagine the judicial reviews that would follow from those organisations. I hope that the noble Lord will distance himself from it because it will make the so-called solution worse than the problem that he currently identifies.

The Earl of ListowelI want to step into this discussion. I agree with everything that has been said about this very difficult and vexed question. The noble Lord, Lord Freud, drew attention to the comments in the OECD report on the danger of ill-thought-out targets not serving children well. Of course, that is something we all agree with, and the noble Baroness, Lady Hollis, was kind enough to highlight that it is a concern that my noble friend and I share.

This is a tremendously interesting debate. From my limited experience of working with children—I am not sure whether I can say this—I sense that some children have a healthier life because they get free school meals. Food is given to them. They may have breakfast when they get to school or something that they would not have at home, so these things can be tremendously important. I recall attending a conference recently at the Family and Parenting Institute in nearby Church House. An academic from a continental country described to us the type of in-kind support offered to new mothers. She showed us a photograph of the support offered, such as nappies for a year, different sets of clothes and all sorts of apparatus. The interesting thing for the noble Baroness, Lady Hollis, and others to consider is that the families could choose to have that package or choose to have the money, but they would get a lot more for their buck with the package, so they tended to choose that. To some degree, that gets around the issue of outsiders making judgments about what is or is not good for people. However, I share the concern of the noble Lord, Lord Freud, that, by focusing too narrowly on financial matters and not giving attention to the benefit of providing services in kind, we may not be giving the best service to these families.

One other thing that comes out of the debate is the importance of people on the front line having excellent training. We must recruit the best, and their supervisors should also be experienced to help them to reflect on their practice. A key thing with social workers is that it is easy to extrapolate from one’s own narrow experience and say, “This is right for this family because that is what happened in my family”. It is easy to bring one’s personal, narrow experience to bear on the lives of others, especially when one has such an influence on those people’s lives. I am thinking about social workers. They may make misjudgments and that is why we need to recruit and retain the best people on the front line. We must give them excellent support so that they make judgments that are, as far as possible, in the best interests of their service users.

Another concern is that we use targets too heavily in this country. We measure things to the nth degree and have the most measured children in the world in terms of education results. We do not rely on the judgment of people on the front line. A recent example is that we have not valued CAFCASS officers—the old guardians who were the elite of social work. They used to work in courts providing advice to judges, which was very much valued. With the best intentions, we have driven out many of those professionals and have arrived at a bureaucratic approach that is not delivering what we wish for. I am sorry to digress but there is a reasonable cause for concern here and I look forward to the Minister’s response.

Lord McKenzie of LutonMy Lords, this has been a fascinating debate and I thank the noble Lord, Lord Freud, for his amendment. I thought that it would be a rather techie debate beloved of us accountants, but it has been much more profound than that. My noble friend Lady Hollis certainly touched on the circumstances in which you might go about giving in-kind provision rather than cash, as did the noble Earl, Lord Listowel. The starting point of the noble Lord, Lord Freud, is that there is an assertion—by some at least—that in-kind benefits may be a better way of supporting people and helping them out of poverty than cash. The question is whether that is right and how you would go about that, with all the risks and dangers to which my noble friend and the noble Lord, Lord Kirkwood, alluded.

16:00:00

A related question isif in-kind provision rather than cash were determined to be a better route in some circumstances and such in-kind provision were not measured in the targets, would that drive adverse behaviour? One could envisage in some instances a potential conflict between targets and a strategy, but I stress that the Bill is not only about meeting those targets but also about producing and delivering a strategy. It has to touch on a whole range of issues, including the building blocks. I accept that there could be instances of potential conflict between meeting a target on the one hand and delivering on a strategy on the other. That has to be resolved along the way, and may or may not be in relation to in-kind provision. The situation may evolve in the future, but it is not a reason for not having targets; rather, it is a reason for looking at how those potential conflicts can be resolved.

The amendment refers to,

“passported benefits and benefits in kind”.

When I saw “benefits in kind”, I thought that we might at one stage be talking about company-provided vehicles, which is not an unrelated issue. The extent to which those “fringe benefits”, as we used to call them, are captured in the statistics is a subject of constant review. Passported cash benefits such as housing benefit and council tax benefit, where eligibility is automatic if an individual is entitled to income support, are included in the measure of income along with all social security benefits.

The noble Lord, Lord Freud, touched upon delivering services in kind. The Government are committed to measuring the effects of in-kind provision so that they continue to be considered as policy options in the fight against child poverty. As such, the cash values of certain benefits are included in the measure of household income that is currently used. For example, free school meals, free school milk and free TV licences for those aged 75 and over are captured in the data.

In measuring household income, the Government follow the principle that, where receipt of a benefit in kind can on average be accurately captured by the survey, and where the monetary value of that benefit can be sensibly imputed, we attempt to include its value. If receipt cannot be captured satisfactorily, or if the value cannot be established, the value should not be included. This issue was examined in detail as part of a national statistics quality review in 2004. We therefore agree with the objective of including benefits in kind. Attempts are under way to make sure that it is as accurate as possible.

The criterion used to assess whether benefits in kind should be included is whether the overwhelming majority of households would be expected to fund the benefit from their own finances had it not been subsidised. It must be quantified with some confidence and allow repeated and consistent comparisons over time. The receipt of benefit must be prevalent enough for its exclusion to lead to significant biases in the HBAI picture of income distribution as it changes over time. Capturing the data needed to measure it must not require disproportionate analytical effort. We support the thrust of the point on measurement that the noble Lord is pressing, but because we include, where feasible, the value of benefits in kind in our measurement of income, the amendment is unnecessary and I ask the noble Lord to withdraw it.

The Earl of ListowelI may have been incorrect earlier. I said that the Government and local authorities had a target to reduce the number of children taken into care. I think that they had more of an aspiration to do that and that they may have been considering a target.

Lord McKenzie of LutonI apologise to the noble Earl for not having picked up that point. In any event, I would be happy to revert to him on precisely where we are on it.

Lord FreudI thank the noble Lord for that full answer. He is showing his accountancy background when he thinks about his fringe benefits, on which I have no doubt he has done many calculations. This area is somewhat problematic for the welfare system. When people do the back-to-work calculations and often do not include the passported benefits, the adviser doing the calculations says, “Yes, it is worth you going back to work”, but the person gets back home and thinks, “Well, actually, I’m not sure”—because they will lose out on quite a few other things that have not been calculated. If we reformed the system on the lines that the noble Baroness, Lady Hollis, discussed earlier, with higher disregards and so on, getting monetary values for these figures when trying to sort out the system may be a very important part of it. I would make the point to her that it is one thing to have a presumption that we have some benefits in cash and some in kind. That is the state today. One worries about setting up a targeting system; one drives the system down one road or the other over 10 years. The noble Baroness will be more aware than I am of the daily pressures on politicians and bureaucracy to achieve particular targets. If they are not drawn up very precisely here, they will have effects.

Lord Kirkwood of KirkhopeThis is a puzzling point. The noble Lord may be saying that things will completely change when these new targets are in place. I would argue that we have had PSA targets for yonks, and I cannot think of a passported benefit that has ever been lost. Indeed, it is the other way around. With ESA, passported benefits were very carefully protected. My worry is that benefit levels would be so low that we will get more passported benefits, rather than fewer of them. The noble Lord has not persuaded me that passported benefits are more at risk just because we have targets.

Lord FreudLet me make this absolutely clear. Some passported benefits are in cash and are counted. The Minister made that point. There are some that are not, which are the ones at risk. Clearly, housing benefit is counted, as is the council tax rebate, as we will be calling it shortly. I am talking not about those passported benefits, but about the ones that are not cash measured. The Minister explained clearly, for which I was grateful, how many of them were in the basic figure. I do not think that those are the ones under risk; the ones under risk are those that do not have a notional monetary value attached to them, perhaps because it is quite difficult to do. Those may appear at risk, when you look ahead over the decade, without the good will that you would hope for from those who run the system. If one sets up a statutory target system, one must not assume goodwill in a bureaucracy and a government. One must assume that they drive behaviour; that is, after all, the intention.

The noble Lord, Lord Kirkwood, was actually getting at what we are driving at here, and I shall use his amendment later to raise the issue. It is the gap between minimum income standards and benefits rates. I am sure that he will refer to that as well. This is the hole that we are talking about; there is a slight mystery going on about how that is filled. This is just one of the ways in which we try to fill it.

Having said that, I am grateful for this important debate about getting these benefits in kind as a full part of the system, if it is decided that they are valuable, in whatever form. The noble Earl made the point that one can design these so that you can choose packages against a cash figure. Indeed, interestingly, the OECD report particularly recommended that approach, so it makes a lot of sense.

We have had a good debate. The Minister has made a clear response. The importance of “in kind” should be thoroughly measured but, for the time being, I am pleased to withdraw the amendment.

Amendment 11 withdrawn.

Baroness CrawleyThis may a convenient moment for the Committee to break for 15 minutes.

The Chairman of Committees (Lord Brabazon of Tara)The Committee stands adjourned until 4.27 pm.

Committee adjourned at 4.12 pm.

16:27:00

Amendment 12

Moved by

12: Clause 6, page 3, line 13, at end insert “so as accurately to reflect relative costs”

Lord FreudMy Lords, the amendment is driving at whether the method of equivalising households selected here is the best one. The decision was taken to use the modified OECD scale in 2006, which was a move from the McClements scale for measuring poverty. The McClements scale worked by giving the first adult a weight of 61 per cent, the second 39 per cent and then further weights to additional household members, ranging from 9 per cent for an infant to 42 per cent for an additional adult.

The modified OECD scale is much cruder. It assigns a value of 100 per cent to the household head, 50 per cent to each additional adult and 30 per cent to each child, regardless of age. According to Policy Exchange, the extra weighting of very young childdren in the modified OECD scale pushed up the child poverty rate by 100,000 children when the switch was made, according to the report Poverty of Ambition .

We here face a conflict between targeting and comparability. The modified scale was chosen because it made our figures comparable with those of other EU states. However, targeting is different to comparing. If a scale is wrong and is a target, we will end up spending money and taking initiatives which are not targeted at the right people. If this was the case, we would be better off in using a scale which was a better match with the real world for the sake of our targets, and providing another set of figures for comparative purposes. It would, after all, be matter of a few strokes of the keyboard to adjust the figures to produce them in both ways.

The evidence that we are using the wrong equivalence scale is pretty strong. I am indebted to the excellent paper by Jonathan Bradshaw of the University of York’s Social Policy Research Unit for focusing the concern. He points out that the scale used for benefits and tax credits originated with the Rowntree poverty standard in 1936, as adopted in the Beveridge report and altered by successive ad hoc up-ratings. They have never, according to his paper, been rebased against a minimum income standard, or any other evidence or understanding of what families need.

The McClements scale was based was based on an econometric analysis of household expenditure data from 1978 onwards. However the OECD scale was derived as a consensus of scales used by national Governments. This, according to Bradshaw,

“had no basis in science”.

He continues:

“For reasons that remain obscure, the Statistical Office and the European Union (Eurostat) decided that their original scale was too generous to children and modified it”.

That is the ugly history of equivalence.

Bradshaw’s paper compares a minimum living standard with the modified OECD equivalence scale and concludes that the scale is,

“underestimating the relative needs of singles of working age and families with children. It therefore underestimates their poverty rates and overestimates the poverty rates of childless couples and single and couple pensioners. In fact the original OECD scale was a closer fit with MIS”—

minimum income standards.

The amendment seeks to make sure that we do not build in expensive distortions to our support for the poor simply to save a small amount of effort by our statisticians when they supply data that can be compared with that of other countries. I beg to move.

Lord Kirkwood of KirkhopeMy Lords, I am a great fan of Jonathan Bradshaw and the noble Lord, Lord Freud, has done the Committee a service by bringing this rather technical but nevertheless important subject to our attention.

There is a value in the consensus on the OECD figure but the noble Lord is quite right to say that there is no scientific basis to it. Presumably the Child Poverty Commission would be able to commission figures of its own and, if McClements’s or any other figures were better, presumably it could make it its business to find out what they are and implement them. In this country we have a body of academic experts in this field which is second to none across Europe. There are many experts in the Scandinavian countries but they come from a different environment, as do many other European experts. We have got good people and there are better scales; I do not see why the commission cannot take advantage of that. I am sure the Minister will confirm that there is nothing in the Bill that would stop the commission looking at other equivalence measures, if it felt that children were being under represented. It is a technical business. I am not a statistician by any stretch of the imagination, but I have serious doubts, and I concur with the view of the noble Lord, Lord Freud, on this issue. We should look at it very carefully during the passage of the Bill.

Baroness Hollis of HeighamMy Lords, the noble Lord, Lord Freud, is right to remind the Committee that an academic debate about the equivalence scales is currently taking place. Although he did not mention it, it always strikes me as very odd when I am trying to work out—with or without help from other people—whether a particular benefit payment is above or below the 60 per cent line, when the key issue is whether the child is 13 or 14. At 14 they get a completely different equivalence scale—equivalent to an adult—from the one they get at 13. At that point, according to whether you are dealing with two children aged 8 and 13 or two children aged 8 and 14, it depends on whether the payment received is deemed below or above the 60 per cent line. There are clearly questions to explore.

Perhaps the noble Lord will help me with this issue. All the reports seem to say in common that within the benefits system couples without children—married couples, cohabiting couples, couples in stable relationships—are overprovided for in the benefits system rather than the reverse. Does not this suggest that he and others have misunderstood the issue of the marriage penalty, or the couple penalty, in benefit provision when, on his own evidence, they are already overprovided for compared to single people, such as lone parents with children? Does this not mean that he and his party have to rethink their whole policy area as a result of the helpful analysis he has given today?

Lord FreudI always appreciate the noble Baroness’s comments on my amendments. The interesting thing about this area is that, according to the MIS figures produced by Professor Bradshaw, the people who seem to be underpaid against any kind of income scale are those with children.

Baroness Hollis of HeighamA large number of children.

Lord FreudAt every level. Funnily enough, the noble Baroness should welcome an approach that looks at rebalancing that because, if anything, it would provide more support for couples with children, rather than the opposite, which is what I think she was arguing.

Lord McKenzie of LutonMy Lords, I thank the noble Lord, Lord Freud, for his amendment, which, again, has prompted an interesting debate, if somewhat shorter than our previous one. Amendment 12 seeks to specify that the method used to equivalise household incomes—that is, to adjust them for household size and composition—should be accurate in reflecting relative costs of living. The Government wish to assure noble Lords that the methodology used to measure progress towards child poverty targets is as unbiased and technically sound as possible. As the noble Lord recognised, we use the modified OECD equivalisation scale, which is used for comparisons across Europe and was chosen after extensive consultation in 2002-03 on measuring child poverty. Although it was used for comparison, it was not driven for that particular reason, as I understand it. However, as my noble friend Lady Hollis said, there is an ongoing debate among academics about the performance of the OECD scale for different household types. I acknowledge the Joseph Rowntree Foundation report, which concluded that using the current equivalent scale underestimated the additional income needs of families with children and the extra costs of single-person households. Therefore, we were underestimating the poverty rates of families with children and single-person households and overestimating the poverty rates of childless couples and single and couple pensioners. I think that that was the import of the report.

The noble Lord referred to the scale that we used to use and the fact that we had changed from it. Regardless of the scale used—and the scale currently used is the international benchmark—the relative risks of poverty across household types tend not to change. The change in 2004-05 to the OECD scale had the effect of increasing the total number of children in relative poverty but in general did not change the risk characteristics of children most at risk of poverty. Therefore, the choice of equivalisation scale in that context does not overly affect which types of household are most in need and hence will not affect our policy responses.

Clearly this is a matter on which there will be ongoing significant debate and analysis, and we need to make sure that we use best practice when dealing with these matters. We have no plans to switch from the current equivalisation arrangements but we need to engage in that debate. I ask the noble Lord to withdraw his amendment.

Lord FreudI thank the Minister for that response. I note that Clause 6(1)(e) states that regulations may be made about,

“how net household income is to be equivalised”.

In practice, it leaves it free for the Government of the day, whoever they may be, to optimise the equivalence scale in the way they want. At one level, my amendment was probing in order to raise the importance of this issue. Interestingly, Professor Bradshaw in his conclusion said that the unmodified OECD scale is a rather better fit to minimum income standards than the modified one. As I read his conclusion, it was a fairly arbitrary change. The core point I wished to make was that choosing an equivalent scale for the convenience of making comparisons does not mean that we have to be tied to that scale when we are setting statutory targets that really matter for child poverty. I think that the Bill as it stands would allow that to happen but, before I withdraw the amendment, I ask the Minister to confirm that my understanding is correct.

Lord McKenzie of LutonThe noble Lord is correct to say that Clause 6(1)(e) states that regulations may propose,

“how net household income is to be equivalised”.

That is absolutely right. However, this does not occur just at the whim of the Secretary of State. Affirmative regulations would have to be laid and therefore there would be debate around it. I believe that we have included in the Peers’ information pack draft regulations which cover this point. It would not be just a case of a stroke of the pen of the Secretary of State. It would have to come before your Lordships’ House and the other place and there would be an opportunity for a full debate around that.

Lord FreudI thank the Minister for that clarification. It is entirely appropriate that a matter of such significance as equivalent scale should be debated in the context of a regulatory framework; in other words, a debate without the whole paraphernalia of a Bill. That would clearly be a much shorter process, of which I would approve. However, that is a matter for Parliament to decide. The issue may be very technical but it is also very important. I am satisfied with the situation and I have explored the point. I beg leave to withdraw the amendment.

Amendment 12 withdrawn.

Amendment 13 not moved.

Amendment 14

Moved by

14: Clause 6, page 3, line 18, at end insert “and the costs associated with disability”

Baroness Thomas of WinchesterMy Lords, this amendment would ensure that account is taken of the costs associated with disability, either by excluding disability benefit from the measurement of income or by taking account of the costs of disability. The words in the amendment would be added to the end of the sentence which explains what “equivalised” means in relation to household income, so that account would be taken not just of variations in household size and composition but also the costs associated with disability.

We have just had a debate about equivalent scales. I acknowledge immediately that the whole business of equivalising incomes to take account of the costs of disability is not easy. People’s living standards are measured by their income and if there is a disabled person in the house the weekly income is likely to include disability living allowance, which is a non means-tested benefit. I declare an interest as I receive it. DLA is awarded for the higher costs of keeping mobile, if one is disabled, and for extra care, so it should reasonably be discounted as part of ordinary disposable income because it is not spent on what an able-bodied person would spend disposable income on. However, the figures are surprising in that it turns out that there is not much difference in the number and percentage of children in relative poverty, using income figures that include and exclude DLA. Why is this? We all know that the costs of disability are often high and that families with either a disabled adult or disabled child, even with disability living allowance and possibly attendance allowance, are poorer. Perhaps the poorer families do not claim these benefits as much as better-off families do. I have spoken before many times about the daunting process of applying for DLA, even with the simpler forms. One has only to look at some statistics appertaining to disability. Just to repeat a few that I mentioned at Second Reading, families with disabled children are more than 50 per cent likely to be in debt; only 16 per cent of mothers with disabled children work, in comparison with 62 per cent of mothers with non-disabled children; and one in six families with disabled children goes without essentials, such as food and heating, due to lack of money.

16:45:00

I fully accept that at the moment there is no agreed way in which to equivalise income to take account of the costs associated with disability, but we should surely know which are the households with children in which someone has a disability. If just knocking off someone’s disability benefits is not possible when assessing household income, should we not have a process to scale disability, such as happens with the numbers of people in the household and their ages? We should not just leave the whole question of the cost of disability to the material deprivation indicator, although I have an amendment to Clause 8 that would cover disability. This is an important matter, even if it is a difficult one, and I should be glad to hear if the Minister can give me any comfort. I beg to move.

Lord FreudMy Lords, once again I have a great deal of sympathy with the noble Baroness’s concern that financial targets do not become a wholly inadequate proxy for assessing the well-being and deprivation of children. As I noted when I responded to her Amendment 2, many costs are unavoidable for some families but not others, which will inevitably lead to significant differences between different families on exactly the same nominal income. I hope that the Minister will confirm that the Bill allows for discretion on whether disability benefit must be accounted for in the definition of household income. As I understand it, while household income is specifically defined in Clause 6, there is nothing to prevent a future Government ensuring that the regulations follow the noble Baroness’s amendment. Is that the case? If so, I should prefer to see remain the flexibility as currently drafted. There is already too much prescription in the Bill on what constitutes an acceptable income for widely differing families, and I should not want tie the Government’s hands to a potentially inaccurate equivalisation formula.

Lord McKenzie of LutonMy Lords, I thank the noble Baroness, Lady Thomas, for her amendment. I suspect that she has anticipated my response, but if she will allow I shall give it anyway.

The effect of this amendment is to equivalise net household income to take into account the costs of disability, when measuring progress on the four child poverty targets contained in the Bill. The rationale behind the amendment is that households with a disabled member, be that a disabled adult or a disabled child, often incur extra disability-related costs, which affects the amount of income they have to maintain their standard of living. We touched on the issue at Second Reading, and a very similar amendment was debated in Committee in the other place.

We recognise that families with a disabled member are significantly more likely to be in poverty than families with no disabled member. That is not acceptable, and the strategies that this Bill requires must address that issue. However, as the noble Baroness acknowledged, the links between disability and poverty are many and complex. Analysis by the Institute for Fiscal Studies suggests that it is not the presence of disability which makes families with a disabled member more likely to experience poverty; it is related to other factors, such as being in a workless household or lone-parent family.

The Child Poverty Unit has carried out a thorough review of the evidence base to help us better understand the causes of poverty, including analysing which groups are most at risk of poverty. We anticipate that the strategy required by Clause 8 will outline whether specific action to meet the needs of the most vulnerable groups of children and families, including children in families with a disabled member, is required. This could include, for example, addressing the particular issues facing these families such as the difficulties in finding suitable childcare for disabled children, particularly older disabled children. We are confident that the strategies will help to address the issues facing these families. Indeed, it will be very difficult to meet the child poverty targets without considering particular measures for the groups most at risk of poverty.

As an aside at this juncture, arising from a conversation that I had this morning, I am trying to set up a mini-seminar with the Child Poverty Unit between Committee and Report to give it an opportunity better and more fully to explain the sort of work that it is doing. That may help to inform our deliberations further.

I would also draw noble Lords’ attention to the draft regulations relating to the local needs assessment to be made under powers in Clause 21. A draft of these regulations was provided in the Peers’ information pack, although I stress that we are currently working with partners in local government to develop these further. Noble Lords will note that the list of matters to be considered in a local needs assessment includes, on page 48, the number and proportion of children who live in a family where a child is disabled. The intention is to ensure that local authorities take the needs of disabled families into account when preparing their local child poverty strategies, which Clause 22 requires to be based on the needs assessment.

Returning to the amendment, I would like to be absolutely clear that we recognise that the issue of equivalising incomes to take account of the costs of disability is a difficult one. We recognise that there are additional costs associated with disability. However, as mentioned at Second Reading, research shows these vary significantly in level and nature, and there is no general agreement on how to measure these costs. Therefore, while we understand the difficulties of this issue, there is currently no generally agreed method to equivalise income to take account of the costs associated with disability.

I reassure noble Lords that this does not mean that the extra costs of disability are not picked up at all by the child poverty measures in the Bill. The combined low income and material deprivation indicator, set out in Clause 3, allows a fuller assessment of the living standards of those households facing particular difficulties due to high living costs, including those associated with disability. This indicator will capture families who have an income that is higher than that captured by the relative low income target, but who have a lower standard of living because of additional costs, such as those related to disability. I hope noble Lords will understand that due to the variable nature of the costs associated with disability, it is difficult to equivalise income to take into account the costs of disability in the way proposed by the amendment.

The noble Baroness referred to the data about whether we included DLA and the fact that it did not make much difference to the outcome of the assessment. That is, in part, because it has an impact on median income as well as the income of individual households. The noble Baroness referred to the take-up of disability benefits. A good deal of work is being done to improve take-up of benefits. The Pension, Disability and Carers Service is taking the lead in discussing changes to the delivery of benefit advice and has met the Department of Health to explore practical ways of delivering benefit advice closer to the point of diagnosis—for example, in hospitals. From 2008 we would expect everyone with a long-term condition or need for support and their carers routinely to receive information about their condition that includes sign-posting people to information and advice about benefits.

In the five years to February 2009, the number of people receiving DLA increased by nearly 16 per cent—by more than 3 per cent in the last 12 months alone—and take-up of attendance allowance increased by around 2.4 per cent in the last 12 months. Progress is being made.

The noble Lord, Lord Freud, asked whether it is possible under the Bill to change what is included as income. The answer to that is yes, because what is regarded as the income of the household for a financial year is the subject of regulations—it takes us back to our discussion of the provision at Clause 6(1). The regulations would again be subject to affirmative resolution. We have circulated draft regulations with the caveat that discussion is still going on. A process is therefore in place and the items set down in Clause 6(1) are the subject of regulation. I could not conceive of the noble Lord having the opportunity to promote these things, but if they ever came his way, there is a mechanism for government to change these matters. I hope that the noble Baroness will withdraw her amendment.

Baroness Thomas of WinchesterI am very grateful to the Minister for that reply and to the noble Lord, Lord Freud, for his sympathy with my amendment. The Minister’s reply was not surprising, but it was worth flagging up at this point the high costs faced by people with a disability. I warn the Grand Committee that I shall return to this matter shortly. It is very good news that take-up of DLA is increasing, but, even so, it is still underclaimed because of the daunting nature of the forms. I just hope that some information about it will be made available in doctors’ surgeries, where a lot who are not captured in hospitals or elsewhere, can be made aware. I shall study the Minister’s reply. In the mean time, I beg leave to withdraw the amendment.

Amendment 14 withdrawn.

Amendments 15 and 16 not moved.

Clause 7The Child Poverty Commission

Amendment 17

Moved by

17: Clause 7, page 3, line 25, after “the” insert “Family and”

Lord FreudMy Lords, the amendment would change the name of the commission from the Child Poverty Commission to the Family and Child Poverty Commission. This amendment and Amendments 46 and 75 aim to eliminate inconsistencies in the Bill, both in the drafting and in the Government’s focus.

Quite rightly, the early clauses seeking to measure the income that benefits a child use the income of the household. This is unavoidable since, as we have heard more than once in your Lordships' House and another place, children do not have an income as such. The Government’s research report quite rightly noted that,

“because it is not clear how well the measures of living standards relate to the children, this report uses the formulation ‘households with children’”.

For a few clauses, therefore, the Government have accepted that children, and the families in which they are brought up, are inextricably linked, but this is not the case in later clauses. In my three amendments in this group, I have sought to ensure that the commission is able to keep families, not just children, at the front of its activities. It is extraordinary that the duties placed on this organisation do not suggest that it is at least as important to consult parents as it is children.

I am sure that the Minister will point out that if the commission wishes to consult the family as a whole, it may do so under catch-all Clause 9(4)(d), which is true. However, I am sure that he will admit that the Bill seems to imply that the commission’s focus is on researching what children think they need and not on the difficulties that families might have in providing for those needs.

In another place, our honourable colleagues heard some very interesting evidence from a variety of organisations involved with the families whom this Bill is intended to benefit. One organisation in particular raised the question of the impact of maternal nutrition on the future health of the child. How can the commission be expected to provide advice to the Secretary of State if its duties do not cover such a matter? If the commission is to be the expert body that we hope it will be, it must be able to inform itself about possible causes and not confine itself to the concerns of children. I beg to move.

17:00:00

Lord NorthbourneMy Lords, I am a little confused by the introduction to the amendment proposed by the noble Lord, Lord Freud, because he seems to have added a complication to the Bill. As I understood it, this is either a Bill about household income or it is a Bill about child poverty. However, the noble Lord has now introduced the idea of family poverty and family income. These days, families are not the same as households. They used to be but they are not today. We have to think clearly about what we are trying to do. Perhaps the noble Lord can clarify his thinking on this.

I do not know whether it would be extending the debate too much if I mentioned Clause 7(2), which states:

“The Commission’s functions are those conferred on it … under this Act”.

That is extremely relevant to what I have been saying. Can the Minister explain, perhaps in writing, exactly where in the Bill those functions are clearly set out, because I cannot find them in any unequivocal form?

Baroness WalmsleyBefore I comment, is the noble Lord, Lord Northbourne, intending to speak to his amendments in the group?

Lord NorthbourneI did not understand that I had an amendment in this group.

Baroness WalmsleyAmendments 48 and 77. It might be better if he spoke to them first.

Lord NorthbourneI certainly will speak to them. I had forgotten that this morning I was telephoned and asked whether they could be grouped.

The purpose of my amendments is very simple and very important. As it stands, the Bill makes a point of saying that the commission and the Secretary of State must listen to children and organisations which support and work with children. It is an objective that I totally support. However, we need to think very carefully about whether we want the commission to consult parents and families. If we do not include that in the Bill, I think that we will be making a huge mistake. The reality with young children is that their parents make the decisions. There is a relationship between household income and child poverty. Therefore, if parents’ views are not sought on what happens to the money between it coming in and some of it being spent on the child, that will, in my humble opinion, be completely daft. I very much hope that the Minister will feel the same way about it and accept my amendments.

Baroness WalmsleyWe on these Benches entirely agree with the noble Lord, Lord Freud, when he says that the welfare of children is inextricably linked to their families. However, not for the first time, we prefer the solution of the noble Lord, Lord Northbourne, to that of the noble Lord, Lord Freud. We support the call by the noble Lord, Lord Northbourne, for the commission to have an obligation to consult parents because, as he rightly said, they, more than anyone else, have more influence on what happens to children, and rightly so.

However, we cannot agree with the amendments of the noble Lord, Lord Freud, because the Bill is about children in poverty; his changes would make it a Bill about all families in poverty. Many groups of people who might legitimately call themselves families do not have children in the household. For example, a husband and wife, his elderly mother and her disabled sister may all be adults in the household. It would be inappropriate to insert the reference to “family” in the various places the noble Lord, Lord Freud, has suggested. That is not because we do not agree that families have an enormous influence on the welfare of children—of course they do—but because we feel that that wording is not appropriate in this Bill.

Lord McKenzie of LutonMy Lords, I thank the noble Lords for their amendments and the noble Baroness, Lady Walmsley, for her contribution to our deliberations thereon. The amendments are grouped together as they relate to families or parents in one way or another.

Amendment 17 seeks to alter the title of the Child Poverty Commission. As the noble Lord, Lord Freud, will be aware, the Bill we are debating is the Child Poverty Bill, which is about helping children out of poverty. Noble Lords will be aware that the title of the Bill was discussed in the other place, where honourable Members from the opposition Benches sought to change the name of the Bill to include family poverty. This was rightly resisted as the focus of the Bill must be on the child, not the child’s family. The lobby agrees with us. In its response to the Bill consultation, CPAG stated:

“The child poverty legislation is an opportunity to ensure policy clearly puts children’s needs first”.

The Bill will create the Child Poverty Commission, which will play a huge part in helping the Government formulate the most effective policies to tackle child poverty. The existing title, “Child Poverty Commission”, is important as it sets out clearly what the commission is being set up to address.

The noble Lord, Lord Northbourne, asked me to explain where the functions of the commission are set down. They are in Clause 9 and, in particular, at paragraph 17 of Schedule 1. They are focused on providing advice on the child poverty strategy and the targets to the Secretary of State and the devolved Administrations.

It is important to ensure that the work of the commission is focused on looking at what works best for tackling child poverty. While family poverty is important and, in practice, a large part of helping children in poverty involves engaging with their families, there will also be some areas that focus solely on the child—for example, narrowing the attainment gap in education. The Bill provides the best opportunity yet for the focus to be on the child and remain on the child, which will enable society as a whole to tackle child poverty on the way to its elimination. Altering the name of the commission would dilute this focus and be misleading about its role. I hope noble Lords will accept my reassurance on that point.

Amendments 46, 75, 48 and 77 all relate to consultation with families or parents. Amendment 46 would require the Secretary of State, in preparing the UK strategy required by Clause 9, to consult directly with families or organisations representing children. Amendment 75 would require responsible local authorities, in preparing or modifying a joint child poverty strategy required by Clause 22, to consult directly with families or organisations representing children. Amendment 48 would require the Secretary of State, in preparing the UK strategy required by Clause 9, to consult such parents or organisations representing parents as the Secretary of State thinks fit. Similarly, Amendment 77 would require responsible local authorities, in preparing or modifying a joint child poverty strategy required by Clause 22, to consult such parents or organisations representing parents as the Secretary of State thinks fit. These amendments are similar to those tabled in the other place on Report.

As I have said, the Government’s intention has always been that the child poverty strategy should be informed by the views of children and their families, particularly those with direct experience of poverty. It is for that reason that we will accept the amendments tabled by the noble Baroness, Lady Walmsley, which explicitly put the requirement to consult directly with children into the Bill.

Article 12 of the UN Convention on the Rights of the Child confers rights for children to express their views on matters affecting them and for those views to be given due consideration. We are adhering to the convention and, accordingly, the Bill requires consultation with children. Since we accept that we will be consulting children directly, I do not consider that these further amendments would benefit the Bill.

Having said that, I assure noble Lords that in practice we are likely to consult the children’s parents or wider families, but I do not see that an explicit reference to either families or parents is necessary. I draw noble Lords’ attention to Clause 9(4)(d), which includes a provision for the Secretary of State to consult such other persons as he or she thinks fit. The noble Lord, Lord Freud, anticipated that that provision might be referred to. I have little doubt that the needs of parents and families will be considered through the process of consulting organisations representing children, as the needs of both groups are not mutually exclusive. There is also the requirement in paragraph 4 of Schedule 1 for members of the commission to have experience or knowledge of work with children and families experiencing poverty.

On a more practical note, Amendments 46 and 75 pose some drafting difficulties. It is not entirely clear what is meant by “families”, a point referred to by the noble Baroness, Lady Walmsley, and, for another reason, by the noble Lord, Lord Northbourne. Does this refer to all parents? If so, would that definition include parents of grown-up children? The word “family” also applies to families that have no children, and there seems to be no benefit in requiring the Secretary of State to consult with that group of people—this is, after all, a child poverty Bill. A duty to consult families is effectively a duty to consult the general public at large.

I understand and appreciate the concerns that the noble Lord, Lord Northbourne, raised at Second Reading, that the Bill does not have enough regard for parents. I reassure him and other noble Lords that the views of children and their families are of the utmost importance to us, and indeed steer us in formulating our policy. The Bill is unashamedly focused on children. They are our focus and our priority, and it seems neither helpful nor appropriate to have in the Bill a requirement to consult parents as well as children.

I turn specifically to Amendment 77. It is not clear whether this is intended to make reference to the Secretary of State or whether it should instead say “the authority”, as do paragraphs (a) and (b) of Clause 22(6). Part 2 of the Bill places responsibility with local partners, as we believe that they are best placed to tackle local child poverty. It therefore makes sense for the local authority to decide which organisations to consult and not the Secretary of State, as proposed in the amendment. This may just be a matter of drafting. Even so, I am concerned that accepting these amendments would not help us to focus on the concerns and needs of the children that the Bill is about. It is consultation with children and organisations representing them that will help us to make our strategy more effective.

I strongly believe that the Bill already goes a long way to ensuring that the views of children and their families are properly taken into account. This will be strengthened by the amendments tabled by the noble Baroness, Lady Walmsley, which we will support. I hope that noble Lords will be able to withdraw their amendments on the basis of that reassurance.

Lord FreudMy Lords, in his response, the Minister begged the point at least three times that this was a child poverty Bill and therefore we must keep it confined to child poverty. The reality is that it is no such thing. If you were to define it correctly—here I am following a point that the noble Lord, Lord Northbourne, made on Tuesday—it is not a child poverty Bill but a relative households income Bill. That is what the targets measure. They do not measure child poverty, but the relative poverty of households. On that basis it becomes quite ingenuous to argue that you cannot accept particular things because they do not deal directly with child poverty. These targets do not deal with child poverty.

17:15:00

I made it quite clear when I introduced this amendment that it was trying to eliminate an inconsistency in the Bill, which moves from targets that are based on relative household income—a target of a 60 per cent median income for households. That is not dealt with in these clauses. Of course, the relative household income Bill is a rather less exciting title and may not have appealed as much to the Government. If we are talking about child poverty, a Bill which confines itself to income targets of households and ignores child well-being virtually entirely in the targets—as noble Lords know, we are trying to put such targets into the Bill—misses a huge opportunity.

I am most prepared to stand corrected on drafting. The noble Baroness, Lady Walmsley, and the noble Lord, Lord Northbourne, cavilled, though that is not a nice word—

Baroness Hollis of HeighamThey were reluctant to endorse.

Lord FreudI thank the noble Baroness. They were reluctant to endorse the use of the word “family”. I accept the point of the noble Baroness, Lady Walmsley, that the Bill is not designed to capture the families of grown-up adults. Clearly, there was no intention to do so when I designed the amendment. If the amendment is inadequate, there is a way to capture the point, which is that we are looking at the child and parents as a unit. If that is of interest to the rest of the Committee, or even among the Government, I am prepared to come back at a later stage with an amendment that captures that concept. I would be willing to give way at this stage to the noble Baroness, Lady Walmsley, to learn her reaction to that proposition. I see the noble Baroness making a gesture. What a tragedy that we cannot have her words on paper at this point.

Lord McKenzie of LutonCan I come back to the noble Lord on his point about this being a relative income Bill that should be labelled as such? The noble Lord knows full well that that is not the case. The heart of the Bill is about the strategy; it is about making sure that children do not experience socio-economic disadvantage. Yes, there are targets which help us to measure progress, and those targets are predominantly income-focused. The noble Lord has also looked aside from the material deprivation component of one of the targets. The heart of the Bill is about eradicating and illuminating child poverty in our country. That is what the strategies require. The building blocks are there for the framework to make that happen.

The noble Lord also mentioned well-being. If he looked at the draft regulations that we have circulated about local authorities and their needs assessments, he would see that they are a key part of how we will make progress on this. One provision says that the needs assessment must include for the local area and each part an assessment of well-being, as related to matters set out in Section 10 of the Children Act 2004. The noble Lord claims that this is all about relative income, but that is absolutely not the case. I hope that, after these debates, the noble Lord will accept that.

Lord FreudMy Lords, I thank the Minister. However, I will stay unrepentant on the point. The hard statutory targets in here are about relative household incomes, including material deprivation, which is a very closely related measure. There is a difference between us in this area. We are trying to incorporate in just as tough a way, in terms of statutory targets, an approach that aims to tackle the causes of poverty. That is a difference and we have gone through it on several occasions.

Lord McKenzie of LutonIf the noble Lord would permit me, we really ought to nail the idea that somehow the Government’s intent and the thrust of this Bill is about not focusing on the cause of poverty. That is what the strategies are all focused on and should drive. The noble Lord may argue that we ought to try to measure that in a variety of ways—we can have a debate and maybe a disagreement on that—but to say that Clause 8, in particular, and what comes from it is not about focusing on the causes of poverty and addressing, challenging and changing them is far removed from all our discussions to date and from the reality of the Bill and everything that surrounds it.

Lord FreudI thank the noble Lord for letting me respond to that. We have had many years of targets and we have learnt a lot about them. As the Minister will know, our party is very concerned about the impact that targets have had across the economy. The problem has been that unfocused targets produce effects that you do not want or expect. We have spent a lot of time discussing this. One of the reasons why we have put together a lot of amendments in this area is our concern that we may have a set of targets here that produce perverse outcomes of the kind that we have seen in other areas.

Baroness Hollis of HeighamI remain completely baffled. What seems to be going on is that part of the time the noble Lord seems to accept that there is a difference between targets—which are about income and are tight, precise, quantifiable, measurable and, we hope, deliverable—and strategies, which deal with the much broader issues of the child’s well-being, which we all want to see ensured. This goes back to a much earlier debate when the noble Baroness, Lady Walmsley, and I said that we can all add to the list. The noble Lord cannot turn strategies into targets and then think you are actually doing something useful. All you can probably do is say that the number of teenage pregnancies has gone down, or the amount of addiction has gone down, or the incidence of mental ill health has gone down. The noble Lord seems to spend his time moving between the vocabulary of targets and the vocabulary of strategies and trying to turn strategies, which are much more holistic—that is why they are treated separately under the scrutiny of the commission—into targets. You cannot quantify, measure or deliver strategies in the way he wishes. That is why they are not targets.

Lord FreudI am very grateful indeed to the noble Baroness, Lady Hollis, for that point. We are coming back to this again and again; we are right to do so because it is the heart of the issue. The heart of the issue is that if you have purely financial targets, the way in which they can, and most likely will, be interpreted is that they can be financially adjusted. Our concern is that research tells us that a pound earned is worth more than a pound transferred. In other words, we want to get into a position where we are supporting families to become independent rather than transferring money because we have failed to make them independent. We would like to have the emphasis—

Baroness AfsharI am slightly worried about that statement because evidence shows that since the 1930s the single most effective contributor to alleviating child poverty has been family allowance, which I am sure is hard-earned by mothers but which might be defined as handed out.

Lord FreudAgain, I am grateful to the noble Baroness, Lady Afshar. I am slightly hesitant because I cannot quite place who it was, but I think it was an analysis by the Child Poverty Action Group that came out very clearly showing this balance between the different values of pounds. I will come back with a precise reference on that when we next meet.

What we are driving at is that it is perfectly possible to have measures of some of the things that are most closely correlated with poverty. It may be that we do not have them well enough yet but over a 10-year span it is perfectly possible to build that evidence base, whether it is on how many people are addicted and to what or on other issues. If they are addicted, it is not just a question of saying, “Ooh, they are addicted,” and the figure has gone up or down; one needs to develop strategies to reduce the figures. We may find that the most effective way of doing that is to put a large number of treatment centres in to try to solve particular problems that come up on the key factors that correlate with poverty.

That is the reason. The financial targets do two things: they are targets and they are manipulable. You can do things with income transfers. The IFS has told us that if you were to do it purely through income transfers it would cost £19 billion in 2020. I think that is an underestimate. I have seen other estimates of £30 billion to do that. We risk having an unbalanced Bill because we have only the financial targets; we do not have this balancing set of targets based on the real causes of poverty. There is a difference between us and I am happy to acknowledge it.

Lord McKenzie of LutonWe could spend for ever on this and doubtless we are going to come back to it time and again. Notwithstanding what the noble Lord has just said, to assert in the midst of that that the Bill is not focused on the causes of poverty is not sustainable. The noble Lord may think that our targets are inappropriate and that other targets might be produced in the fullness of time that would better help us to measure progress—we may differ on that point—but to say that we are not focused in this Bill on the causes of child poverty simply is not the case. He has made some assertions around a pound of income transferred and a pound of income earned. For a long time, since 1997, it has been at the heart of this Government’s policies to focus on the importance of work where people are able to engage in it. The noble Lord himself was an adviser to one Secretary of State. I do not have his statement with me but perhaps at the next Committee session I will bring it along and quote all the fulsome things he said about the real progress that the Government have made in these areas. The significance of work and how it helps people out of poverty is not a disagreement between us in principle. However, I urge the noble Lord please not to continue with his assertions that the Bill is not focused on the causes of poverty, because it is.

Lord FreudMaybe we could each withdraw sets of assertions about each other, but for the time being on this particular matter I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

17:30:00

Amendment 18

Moved by

18: Clause 7, page 3, line 39, at end insert— “( ) In formulating its advice, the Commission must consult children and have regard to their wishes and feelings.”

Baroness WalmsleyIn moving the amendment, I will speak also to Amendments 47, 56 and 76, which I grouped with it in the hope of expediting progress—partly because they are all about the voice of the child. For that reason, I hope that we can polish off this group fairly quickly. We have had a delightful amount of agreement across the Room on the last three amendments and I thank the Minister for adding his name to them. That now means that the Government, the devolved Governments and local authorities all have to speak directly to children in working out their strategies.

However, Amendment 18 is about the commission. In another place, the Government introduced an amendment to enable the commission to request the Secretary of State to commission research on its behalf. That will fill in any gaps in knowledge, provide information, develop expertise and help the commission to be able to provide better advice. If the Secretary of State refuses that permission, the Government will have to explain why. All that is very welcome.

However, we feel that it must be clear that the commission can call witnesses. In particular, it needs to be able to listen to children and their parents directly. Indeed, it is vital that the commission is obliged to listen to the voice of the child in the same way that the Minister has just agreed that the Government themselves, the devolved Governments and local authorities must. It is inconceivable that the commission could reach conclusions about what advice to give Ministers without consulting children directly. The sorts of people that have been appointed to the commission are the sorts of people who know very well how to consult with children directly. I am puzzled about why there is no mention of a duty to consult children in the section on the commission.

Will the terms of reference specify that the commission can and should call on children and their families to provide evidence? Indeed, will the commission have adequate resources to do that? Perhaps the Minister can say so. I beg to move.

Lord FreudMy Lords, as the noble Baroness, Lady Walmsley, notes, her Amendment 18 has been overtaken by the later amendments that have been accepted by the Minister. Notwithstanding my criticism of the drafting of these paragraphs when we debated the last group of amendments, I agree entirely that children and children's groups should be consulted in the drawing up of the strategy. As I hope I made clear on Tuesday, one of my primary concerns with the Bill is that it focuses attention on the income of a household in place of the experience of the child within that household. Consultation is an important part of ensuring that the material deprivation criteria used to measure the second target are appropriate. It is also critical in assessing whether a measure is achieving its desired purpose or is failing to make a difference on the ground.

I would be interested in hearing a little more from the Minister about the methods used by the Government to consult children directly rather than through the organisations that represent them. Does direct consultation happen now, or does the Minister anticipate the commission developing new methods of collecting views?

Lord McKenzie of LutonMy Lords, I will be brief about these amendments and thank the noble Baroness for introducing them. As she is aware, we are in agreement and happy to accept those amendments. In relation to Amendment 18, however, I am afraid that we are not quite in the same place. It would require the commission to consult directly with children and have regard to their wishes and feelings “in formulating its advice”.

I reiterate that we are committed to listening to the views of children and young people when formulating policy. We always seek to consider their wishes and feelings. As I said, it will always be our intention that the child poverty strategy should be informed by the views of children, particularly those with direct experience of poverty. For that reason, we have accepted the amendments that I just identified.

However, as there is already a duty on the Secretary of State to consult directly with children, I do not see the benefit of imposing a similar duty on the commission. It is not necessary for the commission to undertake wide-scale consultation with children, as that would duplicate the consultation already being carried out by the Secretary of State, the devolved Administrations in Scotland and Northern Ireland, and local authorities. Indeed, one might argue that it would not necessarily be good value for money.

It is worth mentioning that the commission can make fact-finding visits and meet individuals and organisations for the purposes of carrying out its functions as an advisory body. In practice this may well include talking to individuals, such as vulnerable children and families in poverty.

The Government place a high value on expert and independent advice to inform the development of the child poverty strategies. Therefore, the commission will be a body of experts. Its members will have a wide range of knowledge, expertise and experience in tackling child poverty and of working with families in poverty, as specified in paragraph 4 of Schedule 1.

I should now like to move on to the second component of Amendment 18—namely, that the commission must have regard to children’s wishes and feelings. I understand that in tabling this amendment the noble Baroness is probably picking up on references in the Children Act 1989. Section 22 of Part 3 of this Act places a duty on local authorities to ascertain the wishes and feelings of a child before making any decisions concerning him or her and to give due consideration to those wishes—and rightly so. However, I suggest that this is not directly applicable to the child poverty strategies and that it would be inappropriate to include such a duty in the Bill.

With children in care, the local authority fulfils some, if not all, of the traditional parenting role. It is therefore vital that it is responsive and receptive to the child’s wishes and feelings. The independent reviewing officer needs to formulate an effective and personal childcare plan and can do this only through a thorough understanding of the individual child.

The child poverty strategy, on the other hand, is more about public service allocation, rather than taking actions attuned to the individual child’s wishes and feelings, important though they are. I think that that is the distinction here and why that provision would not be particularly appropriate.

The noble Lord, Lord Freud, asked how we envisage consulting children in practice. It is likely that organisations representing children will carry out the consultation with children on our behalf. The Child Poverty Unit commissioned Save the Children to conduct consultation events with children and young people from across England to gather their views on the proposals and on the UK Government’s consultation paper, Ending Child Poverty: Making it Happen . Drawing on its existing networks and relationships, Save the Children conducted some 10 consultation events. Children and young people were asked for their views on each of the building blocks and for their overall views on poverty, and they were also asked whether they thought anything was missing from the proposed strategy. Other means of consulting will doubtless also be developed. I think that a children’s board is in existence.

The noble Baroness, Lady Walmsley, asked whether the commission’s terms of reference will state that it will consult children. This matter is more appropriate for the terms of reference than for the Bill, but we will obviously take the matter away and consider whether it should be included.

Having said that, I am happy to support the earlier amendments and I ask the noble Baroness not to press the others.

Lord NorthbourneMy Lords, I also support the earlier amendments. I take this opportunity to say that I had not realised that I was not going to be able to reply to my two amendments, and so I shall move them in their proper place. However, in the mean time, I think that the noble Lord is profoundly mistaken and I hope that he will think again.

Baroness WalmsleyMy Lords, I thank those who have spoken in support of these amendments—in particular, the Minister. On Amendment 18, however, I cannot really accept his suggestion that if the commission were to consult children directly, that would duplicate what the Secretary of State was doing. Frankly, if the Secretary of State was doing all these consultations, the commission probably would not be needed. The commission is going to advise the Government on things that the Government may not have thought of and therefore will probably not have consulted on. Therefore, I cannot really accept that statement.

On the matter of wishes and feelings, it is entirely appropriate that the commission—we are talking about the commission here, not the Government, the devolved Governments or the local authorities—should consult children directly about their wishes and feelings about aspects of poverty. Children may have strong feelings about certain manifestations of poverty that adults may not think they care about. We all know that children care about certain things more than we do, such as the brands of their trainers or their iPods, what colour school bag they have, how they wear their school tie and how short their school skirt is. Children have their own wishes and feelings about everything and there is no reason to believe that it would be any different about aspects of poverty, so I cannot really accept what the Minister said about that either. Does he want to reply?

Lord McKenzie of LutonNo one is saying that the commission is precluded from consulting with children. It is the particular requirement that we think is inappropriate. We would expect the commission to be a body of experts who would sometimes be able to come forward themselves with advice, so they may wish to consult. It is building in an obligation to do so that we think is inappropriate.

Baroness WalmsleyI accept that the Government are not precluding the commission from consulting children. Indeed, I hope that, should I not be successful in getting this into the Bill, they will allow it to do so. I thank the Minister for what he said about whether it should be put into the terms of reference that the commission should consult children directly. I beg leave to withdraw the amendment.

Amendment 18 withdrawn.

Clause 7 agreed.

Schedule 1The Child Poverty Commission

Amendment 19

Moved by

19: Schedule 1, page 17, line 6, at end insert “and approved by Parliament”

Baroness WalmsleyMy Lords, I shall speak also to Amendment 21 in my name, which is grouped with this amendment.

Noble LordsAmendment 20.

Baroness WalmsleyAmendment 20 is in the name of the noble Lord, Lord Freud.

Baroness Hollis of HeighamI do not think Amendment 21 is grouped with Amendment 19.

Baroness WalmsleyIt is. There was a mistake on an earlier list; I had asked for it to be grouped with this one, but it mistakenly was not. The latest version shows that it is grouped. Besides, I can speak to it anyway, can I not?

We now move on to Schedule 1, which is all about setting up the commission and its governance. My intention with these amendments is to ensure that the commission is as independent of government as possible. Schedule 1 shows that everyone on the commission is to be appointed by the Secretary of State. I ask you, how independent is that?

What can we do about it? We can give Parliament some say in who the chair is to be. The chair will be a very influential person, so it is vital that he or she has expertise and can sometimes stand up and tell the Government something they may not want to hear. In Amendment 20 the noble Lord, Lord Freud, has specified exactly how Parliament should do this. I find it more appropriate in Amendment 19 to put down the principle that Parliament should approve the chairman and leave it to Parliament to decide how to do it.

The second point in Amendment 21 is that the members should elect the deputy chair. I have a precedent for this: in the Apprenticeships, Skills, Children and Learning Bill, when the governance of Ofqual was being debated, the Government accepted a similar amendment from me for members to elect the deputy chair of Ofqual. I accept what the Minister said in response to this at Second Reading—that this body is not of the same sort as Ofqual. It is, however, just as important that it is independent. Indeed, the Government have committed themselves to it being independent, so why does the Secretary of State want total control over all the appointments?

We might believe the Government when they say that the want the commission to be independent if they gave way on some of these amendments. Without such concessions, I am afraid that I will continue to believe that the Government want a cosy committee of their placemen. Let us see a little slack being cut here, and perhaps we will be a little more convinced. I beg to move.

17:45:00

Baroness Hollis of HeighamMy Lords, I gently suggest to the noble Baroness, Lady Walmsley, that it does not work like that. In previous times, I was responsible for a couple of boards in the disability field—the DLA board and the industrial injuries board. I did not appoint members on behalf of the Secretary of State; I did not read their CVs and decide which one I wanted. It never worked like that. Despite the suggestions of the noble Baroness, those appointments, quite rightly, went through the public appointments system.

Under that system, a civil servant, possibly a medic in a case such as this and someone from the Office of the Commissioner for Public Appointments would adjudicate on a number of interviews. If there was, say, a short list of three people, they would give a point score and an assessment and the Minister would be expected to accept the person with the top point score. If you wished to deviate from that in any way you had to have very good reasons for doing so, in which case issues such as gender balance, regional balance or other criteria which were not in the original job description could be brought into account, and the Secretary of State would then tick it off. That is how it is done. All this vocabulary about it being cosy or needing independence does not bear any relationship to what actually happens.

Baroness Thomas of WinchesterMy Lords, this is very worrying indeed. I would hate it if the members of the commission were just to be people who scored a high mark on a civil servant scorecard.

Baroness Hollis of HeighamThey have an interview.

Baroness Thomas of WinchesterI should hope so. I feel very strongly about this. The Minister knows that I am a great champion of service user involvement but obviously the Child Poverty Commission is not analogous to an advisory body in the health and social care field. However, I hope that at least one member of the commission will have had some experience of the benefits system and that it will not be made up only of people with degrees in social science. It will need people with a wide range of experience and, if such people have to fulfil some kind of box-ticking exercise, that might put off at least one of the people we want to see on the commission.

I do not see why Parliament should not have some say in this. It is very worrying if it is all to be left to the Civil Service process. I understand that you cannot have Parliament deciding on every member of all these bodies, but surely we have a right to say who we think ought to be a member of the commission. I am not talking about the chairman or the deputy chairman but about one of the members. I am not suggesting either that this should be in the Bill, but I hope someone will notice what I am saying. I would like an everyday kind of person on the commission, not only clever academics.

Lord NorthbourneMy Lords, I support the noble Baroness’s amendment because it is important not only that the appointment should be independent but that it should be seen to be independent by the public and not only by those of us who know how the machinery works.

Lord FreudMy Lords, the noble Baroness’s amendment and mine are very similar. I am glad that we are generally in agreement on this side of the Committee on this point. The question of the appropriate level of parliamentary scrutiny was raised in another place but I hope that the Minister will give us fuller answers than my honourable colleagues were able to extract during those debates.

There appear to be two different views of the commission running through the discussions on the Bill and, indeed, through the discussions we are now having. The first model, the one most people prefer—it is the preferred model on this side of the Committee—is of a strong independent body with teeth, established to give credible advice, impartial assessment of the success of a strategy and, where needed, appropriate criticism of government policy. The second model is that of an expert umbrella group, established to collate and analyse data and instigate research in the areas that are lacking. Essentially, the commission under that format would be a valuable resource for the Government to utilise as and when they decided that it was needed. These two bodies are of course very different, and the Government have given us rather mixed signals on which model they intend to establish. These provisions and the statements that the Government have given lead me to think that model two is what they are after, but the Parliamentary Under-Secretary of State for Work and Pensions described the commission’s role as facilitating the production of a strategy to enable the Secretary of State to fulfil her duties. This does not sound like a body that will ever cause the Government any trouble. The Government even had to be persuaded to allow the commission the power to commission its own research—a provision that I welcome and which we will discuss later.

Giving the chair of the commission the chance to have his appointment confirmed by Parliament would raise his or her profile to a position in which we could be assured that any advice or criticism that the commission might have to offer would be given the attention that it deserves by the Government. It would also confirm the impartiality of the appointment. Despite what the noble Baroness, Lady Hollis, says, accusations of cronyism are finding fertile ground among the public these days, and would be particularly damaging in this case. The commission will run across more than one Parliament, and its advice will be on measures that lend themselves to a rapid assessment of success or failure. Protection from accusations of being unfairly biased for or against the prevailing critical winds will be invaluable.

Baroness Hollis of HeighamThe noble Lord has talked about cronyism, but the reverse is true. The whole point of the public appointments procedure was precisely to clean up appointments so that there was no cronyism for the Minister’s friends. What this is saying is that one, two or three people may be above the appointable line. If you do it any other way, it is who you know, as opposed to people coming into an open system, seeing a job description, applying for it and going through the interview process. I would not disagree with this at all, but there may well be a point at which the job description requirements, including the independence, appropriate skills and backgrounds, comes as part of regulations or comes to this House, as a letter to all people concerned. That is the way to do it, to ensure that the job description includes the possibility of the sort of people with the sort of background that we would like to see. To interfere with the public appointments procedure is to go back 10 or 15 years to cronyism, which would be quite disastrous. Could I suggest to noble Lords opposite that they focus on the issue of job description, rather than the mechanics of appointment, which are well established?

Lord FreudI should like to thank the noble Baroness for that clarification. The simple point that I would make is that the attitude of the public and the media towards this institution is now very different to how it was a few years ago, for obvious reasons, which I shall not rehearse as it is too painful. That context of giving Parliament the chance to scrutinise the appointment allows for public reassurance as to the credentials of any appointment. The rejection of this point by the Parliamentary Under-Secretary of State for Work and Pensions in another place was on puzzling grounds. She stated that pre-appointment hearings should focus only on posts where there is a strong public and parliamentary interest. Surely, the whole point of this Bill is to ensure that strong public and parliamentary interest in the reduction of child poverty is sustained over the next 10 years. So I would welcome clarification from the Minister on just how wedded to the first or second model the Government are.

Let me go on to Amendment 21, which is grouped with this one and which was tabled by the noble Baroness, Lady Walmsley, on the appointment of the deputy chair. Some disagreement among members is in the nature of bodies of this type and I do not think that such disagreement is harmful. In fact, I would welcome evidence of ongoing debate about new ideas. But at some point, the disagreement will have to be resolved and the advice of the commission given. The method of appointment suggested by the noble Baroness would make the minority view more likely to be heard. Having both the chair and the deputy appointed by the Secretary of State could lead to an unnecessary degree of uniformity within the body.

Finally, while we are discussing appointments, I would like to take this opportunity to ask a few practical questions. First, how large do the Government expect the final commission to be? In the Bill there is no upper limit at present. Secondly, we already have the Children's Commissioner whose job it is to promote the interests of children. How does that position and role fit with the role and position of the commission? I would also be interested to know whether the Government have given any thought to who might be a good fit for the position of chairman of the commission and how far the process is along in drawing up the job description and putting out feelers for potential applicants.

Baroness Hollis of HeighamThat would be cronyism.

Lord FreudNo. Having begun to learn the conventions, I will assume that there has been a formal intervention by the noble Baroness, Lady Hollis. The question is, “How far along in the process of drawing up a job description are the Government?” and perhaps remove my “feelers” from the question. With advice from her, gratefully received, I will leave it at that.

Lord McKenzie of LutonMy Lords, I thank the noble Lord, Lord Freud, and the noble Baroness, Lady Walmsley, for tabling the amendments. The noble Baroness confessed that she has form on this in relation to Ofqual. We have noted that. If she is praying that outcome in aid of her position, I might also say that if she is stressing precedence there is no precedent to require the chair of an advisory NDPB to be subject to parliamentary approval before appointment. I can help the noble Lord, Lord Freud, because I understand from his contribution at Second Reading some of his concerns around the issue of progress on establishing the commission. Under an OCPA process, that would normally take approximately six months. The noble Lord will understand that the appointment process could not formally begin until after Royal Assent. I am not sure why it should, but if it helps, it seems pretty unlikely that any appointment could be made before a certain event that will face the country in a few weeks’ time.

Lord FreudI assure the Minister and the noble Baroness, Lady Hollis, that we have not put out any feelers for chairing this particular commission. That is for clarification.

18:00:00

Lord McKenzie of LutonI am pleased to hear that. It would seem to be outwith the process if the noble Lord had done so. I will speak first to Amendments 19 and 20, which concern the appointment of the chair of the Child Poverty Commission. Amendment 21 would provide a power to the commission members, rather than the Secretary of State, to appoint a deputy chair. I am glad that there has been such widespread welcome for the establishment of the Child Poverty Commission. This was made clear on all sides of your Lordships’ House at Second Reading. The commission has a key role in identifying barriers to addressing child poverty and advising the Government on the contents of their child poverty strategy.

Amendments 19 and 20, as has been identified, are similar provisions. Amendment 20 requires the Secretary of State to consult the relevant Select Committees before appointing the commission chair. Both amendments would then require the appointment to be subject to parliamentary control before it could be confirmed. I recognise the concerns expressed over the independence of the Child Poverty Commission and, in particular, the transparency of the appointments process for the chair. This was raised at Second Reading by the noble Baroness, the noble Lord, Lord Freud, and his colleague the noble Lord, Lord De Mauley, and was discussed in another place. I wholeheartedly agree that there must be an open and transparent recruitment process, and that the appointment must not be politically driven. I also recognise that Parliament has an interest in such an appointment, but I will explain to noble Lords why the amendments are unnecessary.

The appointment of the chair and, indeed, all members of the commission will be made with utmost care and transparency, in accordance with the principles set out in the code of practice for public appointments, published by the office of the Commissioner for Public Appointments. My noble friend Lady Hollis has given us the benefit of her experience of that process. The code is underpinned by seven principles derived from the work of the Nolan Committee on Standards in Public Life. They include openness and transparency, appointment on merit, independent scrutiny, ministerial responsibility and proportionality. The entire appointment process will be overseen by an independent person approved by OCPA. This will ensure that appointments to the commission are made on merit, fairly and in an open manner, with criteria for selection published at the start of the appointment process.

I draw noble Lords’ attention to paragraph 4 of Schedule 1, which requires the Secretary of State to aim for a commission that has knowledge and experience of child poverty policy, research and work with families. That is quite a broad remit. I hope that will provide some assurance to the noble Baroness, Lady Thomas, particularly that latter requirement about people who have worked with families. It is against these criteria that all applicants for this post will be judged. I hope I have demonstrated that the commission members will be appointed on merit, and will not be beholden to Ministers, political parties, stakeholders or special interest groups. I categorically refute what was said at Second Reading about being swayed by the political affiliations of applicants.

There is also an important point to be made concerning accountability for the appointment of the chair. The Secretary of State will be accountable to the House for the strategies to meet the targets set out in the Bill and, ultimately, for whether the targets are met. The Secretary of State needs to be confident that the work of the statutory body advising on the strategy is of high quality in its thoroughness, independence and timeliness. It is appropriate and logical therefore that the Secretary of State appoints members of the body responsible for advising on its content. Allowing Parliament to have the final say—

Lord FreudI am sorry to interrupt the Minister. I have just realised that I did not know something that I would be grateful to have the answer to. When he said “the Secretary of State”, which particular Secretary of State did he mean?

Lord McKenzie of LutonI understand that it is technically not defined currently in the Bill. To give some assistance, I understand that, in law, all Secretaries of State are the same and interchangeable.

Lord FreudI think I understood the technicalities. I was just interested in whether the Minister would give us an indication of what, under this Government, the plan was.

Lord McKenzie of LutonI honestly do not know. I know that it does not fall to me to decide this. There is a serious point here about which Secretary of State will be responsible. If I can add any more information, I will write to the noble Lord.

Allowing Parliament to have the final say on making these appointments, particularly the chair, risks blurring those important lines of accountability.

Finally on this issue, given the general welcome to the commission, I think it important that we avoid using this Bill to reopen a debate on public appointments that has been had elsewhere. Noble Lords will be aware that in June 2008 the Government announced that pre-appointment hearings would be trialled for a small number of key public sector posts with executive or regulatory powers.

Following discussions with House authorities, a list of 60 or so key public sector posts was agreed. As these posts become vacant, pre-appointment hearings are being held on a pilot basis. It would be impractical and disproportionate to subject all public appointments to pre-appointment scrutiny by Select Committees. I think there are some 800 NDPBs. We are not in any way persuaded that the chair of this small and purely advisory body, however important the issue on which it is advising, falls into the category of posts that should be added to the agreed list of those where pre-appointment hearings might be trialled, particularly given the assurances provided by the OCPA process that I have outlined.

Of course, Committees of the House can invite whoever they like to give evidence, and the chair and other members of the commission, once appointed, will be able to give evidence to them about the advice they provide and the extent to which they think Ministers have regard to it.

On this basis I hope I have persuaded the noble Lords not to press Amendments 19 and 20. On Amendment 21, although it is not specified in the Bill, we envisage that the deputy chair would effectively take on the chair’s role in their absence. It therefore follows that the Secretary of State should retain the overall power to appoint the deputy chair, given the importance of the position and the confidence the Secretary of State must have in their abilities.

However, I understand the importance of a strong working relationship between the chair and deputy chair. That is why paragraph 1(3) of Schedule 1 requires the Secretary of State to consult the chair before any deputy is appointed. In practice, the Secretary of State is unlikely to appoint someone to whom the chair had strong objections, as this would clearly undermine the effectiveness of the commission. However, I have listened to what noble Lords have said today and acknowledge that we agreed that members of Ofqual, rather than the Secretary of State, should select a deputy chair. Realising the strength of feeling on this issue, I will consider further whether the independence of the commission could be strengthened by permitting it to choose a deputy chair from among its appointed members. I very much take the point that if we were able to do that, it would be positive evidence of our determination that it is independent. Without overstating that point, I may revert to it on Report.

The noble Lord, Lord Freud, asked whether the commission will have real teeth. It has a key role in identifying barriers to addressing child poverty and advising the Government on the content of its child poverty strategy. That is a particularly important role. The Bill requires the Government to appoint a commission that understands child poverty issues and is well equipped to provide advice. In the consultation process, stakeholders called for transparency. We responded by including a requirement for the commission’s advice to be made public so that it would be possible to scrutinise how far Ministers have had regard to it, in a very clear and transparent way, so it will be very clearly on the record.

The noble Lord referred to my colleague Helen Goodman’s comments in the other place. She was trying to draw a distinction that the noble Baroness, Lady Walmsley, drew between a body such as Ofqual and one such as the Child Poverty Commission. That is not to say that members of the commission are not fulfilling an important public function—of course they are fulfilling a hugely important function—or that child poverty is not an important public concern. I have referred to the OCPA process and the timeframe that it might involve. We have not formally begun appointing the commission and will not do so until after Royal Assent. If that is some time in March, assuming that we speed up our deliberations, it clearly could not be done before that event, which I know we are all thoroughly looking forward to.

The noble Lord referred to the Children’s Commissioner. The role of the Children’s Commissioner is distinct from that of members of the Child Poverty Commission. Their focus will be on child poverty and the strategy, while the Children’s Commissioner has the much broader role of reflecting on and promoting the views and interests of children.

I hope that I have dealt with each of the points that have been raised. The noble Lord, Lord Northbourne, indicated that he believes that it is important that the commission is seen as independent.

On that basis, I hope that I can urge noble Lords not to press any of these amendments today. We will look to return on Report to see if we can support the issue about the appointment of the deputy chair.

Lord FreudI thank the Minister for the points that he has made. He dealt with the rather interesting point that we have a Children’s Commissioner and a Child Poverty Commission. Given our interest in not having quite so many quangos—I think he mentioned 800—it might make some kind of sense to put these two together. We might be able to discuss that later.

Lord McKenzie of LutonThe noble Lord might be interested to know that there has been a 6.7 per cent fall in the number of non-departmental public bodies since 1997.

Lord FreudI am grateful for that.

Baroness WalmsleyI thank the Minister for his reply and all noble Lords who have contributed to the debate. I thank the noble Baroness, Lady Hollis, for outlining the Office of Public Appointments procedure, which I am well aware of. Indeed, I have been in contact with that office myself. It is an excellent procedure, and I must compliment the Government on introducing it; it makes the whole business of public appointments a lot more credible with the general public.

I am suggesting not interfering with or replacing it but putting something on top of it, just for the chairperson: a confirmation hearing by Parliament, in whatever way Parliament decided. It probably would be the Select Committee for Children, Schools and Families, which has the opportunity, as the noble Lord, Lord Freud, said, to have a confirmation hearing for the Children’s Commissioner—not that the Secretary of State took any notice of that. That is what I would like to see. If there are 60 appointments considered worthy of such a procedure, I suggest that the chair of the commission that advises the Government on the spending of millions of pounds to take hundreds of thousands—even millions—of children out of poverty is certainly as important as many of the appointments that are going through the pilot scheme for confirmation appointments.

This is a matter of transparency, public confidence and strengthening the power of Parliament. Over the past two Governments, the Executive has taken a great deal of power to itself, and we would like to see Parliament being able to rear its head and have a little more say in these important matters. Far from “lowering the lines of accountability”, in the Minister’s phrase, it would raise the level of accountability to have a pre-appointment hearing for the chairman, because Parliament is the most accountable body in the whole country. However, I am grateful to the Minister for unexpectedly saying that he will consider the possibility of Amendment 20, and I look forward to hearing between now and Report whether he is going to bring forward a government amendment or whether he would like me to do that and add his name to it, which I am grateful that he did to my other amendments. It would add to public confidence that this was an independent organisation if we were at least able to get that. For now, I beg leave to withdraw the amendment.

Amendment 19 withdrawn.

Amendments 20 and 21 not moved.

Baroness CrawleyMy Lords, this may be a convenient moment for the Committee to adjourn until 3.30 pm on Monday.

Committee adjourned at 6.16 pm.