Households Below Average Income Statistics

Mr Speaker, with your permission I would like to make a statement on the poverty statistics published today. These statistics cover a range of poverty indicators. In a year when inflation was relatively high, average incomes were flat but still remain at a record high. These numbers show that between 2016-17 and 2017-18 relative poverty after housing costs has decreased by one percentage point; absolute poverty after housing costs is unchanged in percentage terms; and absolute poverty and relative poverty before housing costs have increased by one percentage point.

Since we entered government in 2010, income inequality has fallen, and we have lifted a total of 400,000 people out of absolute poverty, but of course no one in Government wants to see poverty rise. After all, we all came into politics to help people plot a path to a better life. That has driven me since I entered this place in 2010 in the midst of a national economic crisis, because I know it is vital that the Government support their citizens and provide them with the opportunities they need to succeed. I sit in a Department that has huge power to do that. I have seen what a force for good universal credit can and will continue to be when we roll it out further. I know how committed my Jobcentre colleagues up and down the country are; I have had the privilege to visit many of them over recent months. They truly do change lives for the better—no matter what the Labour party sometimes says.

Colleagues in this House are rightly proud that this Government have cleared up Labour’s economic mess and helped over 3.5 million people into work since 2010. Behind every employment statistic is a person or family whose mental health, wellbeing and life chances are improved by being in the workplace and having the security of a regular pay packet. It means that 665,000 fewer children will grow up in workless households, providing them with the support of an income, meaning that they are less likely to grow up in poverty, and giving them a role model in work. It means that there are now nearly 1 million more disabled people in work than in 2013, and I want to be more ambitious to ensure that even more disabled people are in work. It also means that millions more people receive a much earned pay increase, with wages now growing at the fastest rate in a decade.

That is the record of a Conservative Government who provide opportunities for all, rather than trapping people on welfare. Remember that every Labour Government left office with unemployment higher than they inherited. Under the previous Labour Government, 1.4 million people spent most of the previous decade trapped on out-of-work benefits, meaning that spending spiralled out of control with benefits increasing by 65% in real terms. Trapping people who can work on benefits does not help them; it holds them back. Every household paid an extra £3,000 a year to cover that splurge, and that included the lowest earners who were paying income tax. It was vital in such circumstances that the Government brought spending under control.

Colleagues know that our careful management of the economy means that we continue to improve our support for the poorest and the lowest paid. Today’s statistics capture household incomes up to April 2018. Since then, we have had nearly a year of real wage growth. The Government have also made significant changes to increase the incomes of the poorest since then, injecting an additional £1.7 billion per annum into universal credit alone at the 2018 autumn Budget. Those changes begin to take effect next month, when we will also give the country’s lowest earners a pay rise, introducing the highest-ever minimum wage. From April, we will be increasing work allowances by £1,000 for families with children and disabled people, which will enable 2.4 million households to keep more of what they earn, increasing the national living wage, which will rise to £8.21 an hour from next week, and increasing the personal allowance to £12,500, taking millions of the lowest paid out of paying income tax altogether. But I know we can do even more, and I want to do more.

Since coming into post, I have been determined to deliver a compassionate welfare system that supports the most vulnerable. In January, I announced that we will no longer be extending the two-child policy to apply to children born before 6 April 2017 and that we would trail support for up-front childcare costs with the flexible support fund, allowing parents to start work before paying for childcare through universal credit. We have also committed to building an online system to enable private landlords to request that a tenant on universal credit’s rent is paid directly to them, supporting the most vulnerable to manage their money. We are also looking at how to ensure that the main carer in a household—usually a woman—receives the UC payment.

This month, I further pledged to scrap personal independence payment reassessments for 287,000 disabled pensioners, to introduce a personalised and streamlined assessment service to improve the experience for people claiming health-related benefits, to pilot a single assessment for UC and PIP, and to consider how we can best reduce the number of claimants who appeal decisions on PIP and work capability assessments by ensuring that we do more to make the right decision the first time around. In addition, the Chancellor has already announced our aspiration to end low pay, starting with a new review into the future of the national living wage.

I will continue to work with colleagues across the House to further improve our support for those on the lowest incomes, because I know that no one in Britain should have their future determined by the circumstances into which they are born. Every single boy and girl born in this country should be able to reach their maximum potential, escape any societal constraints, dream big and reach the highest heights. Every single man and woman should be able to go into the workplace knowing that a better future awaits them and their family—that endless possibilities and ambitions are within their grasp. Every town and city in this country needs to know that this Government are on their side, that we match their aspirations, and that by working together we will make every community a better one to live in. These are ideals that are at the heart of this Government—at the heart of the work that I do every day—and we will not stop until we have completed this mission.

I am determined to tackle poverty, in particular child poverty, and as I look at the next steps on welfare policy and at the DWP budget, including at the spending review, I will of course look at what more can be done to address poverty. This is what it means to be a compassionate Government: one that supports work, lets dreams become reality and helps those in need. We will work tirelessly to deliver that. I commend this statement to the House.

I thank the Secretary of State for advance sight of her statement.

The figures published today are truly shocking. They highlight the devastating impact of austerity on families throughout the country. It is a national scandal that 14 million people, including 4.1 million children, are living in poverty in one of the richest countries in the world; yet the statement was marked by complacency and denial. As universal credit has been rolled out throughout the country, we have witnessed a sharp increase in food bank use. We are one of the richest countries in the world, and that increase is a source of national shame. We see families unable to feed their children. As a former schoolteacher, I know what it is like when children are hungry in school: they cannot learn, they are unhappy and worried, and they do not want their parents to know how worried they are. It is a scandal that has to be addressed.

In the face of such human misery, we hear the Secretary of State attempt to justify austerity and the Government’s clear political decision to balance the books on the back of the poor and disabled. It is a disgrace. The Joseph Rowntree Foundation estimates that continuing the benefits freeze for a fourth year will mean families will be on average £560 worse off. On 10 January, the Secretary of State said that the freeze was

“the right policy at the time.”

If it is not the right policy now, why is it being continued until April 2020? And why was there nothing in the statement to address that?

In the past, the Government have responded to our criticism of the rises in relative child poverty by saying that it is absolute poverty that matters. Well, we all know that we have to look at all measures of poverty, so what is the Secretary of State’s response to the figures released by her Department today, which show that in 2017-18 the number of children living in absolute poverty before housing costs increased by 300,000, and after housing costs by 200,000? It is truly shocking that the number of people in absolute poverty before housing costs increased by 600,000 in that same year.

It is because we care so much about the changes in poverty that I have come here to make a statement about today’s statistics and to answer questions.

It is because of the Government’s commitment to the triple lock that pensioner poverty is at a near-record low. I gently point out to the hon. Lady that the only reason we are able to fund the triple lock is that this Conservative Government are running a strong economy. A focus on how we deliver benefits, whether to pensioners or working-age people, is absolutely key to being able to deliver those important contributions.

The hon. Lady mentioned the Joseph Rowntree Foundation, but its analysis shows that universal credit will reduce the number of people in working poverty by 300,000. That she continues to attack universal credit shows a fundamental misunderstanding of the changes it brings to people’s lives. I urge her to engage with her jobcentre and speak more to the work coaches and clients. If she does, she will find, as I have, how positive the response to universal credit is. Many people I know are still concerned about it, but in my experience, and that of many other MPs from across the House, once people have engaged with universal credit—once they are on it—they realise it is a much more positive source of income than the previous benefits.

There are many different sources of poverty. One area we have particularly made sure we put more money into is the lowest-income children in schools, because that is a way to bridge the gap between people born into different households. Under this Government, the education attainment gap between disadvantaged pupils and all other pupils at key stage 4 has narrowed by 9.5% since 2011. The pupil premium, which most colleagues will be aware of, is incredibly important for focusing additional funds on pupils on the lowest incomes. This combination of initiatives, funded by this Government, will help to reduce the poverty gap.

To what extent does the growth of tax credits actually reduce wages?

I would invite my right hon. Friend to come to my Department and find out a bit more about how universal credit works and how the taper rate has changed the benefits system—how people who start a job and earn more receive less from their benefits but only on a very gentle trajectory. The taper ensures there is not the sort of trade-off he is hinting at from the previous system of tax credits.

I thank the Secretary of State for advance sight of her statement. There has long been a debate in this place about whether we should measure absolute or relative poverty—in that regard, I wish she would look at the work of the Social Metrics Commission—but, regardless of the measure, the Government are presiding over a trend of rising impoverishment. The relative child poverty rate, before housing costs, is up 400,000, and the absolute rate is up 300,000 in a year. This takes the rate before housing costs to its highest level in almost 20 years. After housing costs, we see a stagnation in relative terms and a 200,000 rise in absolute terms, while severe poverty and material deprivation are both up 4% to 5% for all children.

The Secretary of State must know the impact that policy, particularly social security policy, has on poverty levels—she spoke about the power of her Department in this regard. When there is investment, poverty levels drop, and when there are cuts to individuals, levels rise. That is why ending the benefit freeze this year would have been the best place to begin to stop—and, in some cases, to reverse—the rising poverty trend. She could also have lifted the two-child cap, which is a cut directed at children that is impoverishing them. Why has she not done the right thing in these areas?

The Secretary of State has taken some welcome steps, and she has moved further than any of her five predecessors I have dealt with, but I know that she understands that she must go further. These figures should put a rocket under the discussions that she is having with the Chancellor ahead of the spending review. Work should be a route out of poverty, but it currently is not. What does the Secretary of State see as her key anti-poverty policy, and what is her anti-poverty target for the next year, given that whatever type of Brexit occurs will harm family budgets and affect living standards?

I thank the hon. Gentleman for his partially constructive comments. We are looking at the Social Metrics Commission’s assessment of poverty. It is an interesting approach, because it puts the measure of poverty back towards what people spend their money on, as well as what they actually get in. It is a fair point for the hon. Gentleman to raise with me, and I will come back to him when we have some further conclusions.

The hon. Gentleman highlighted difficulties for families with moving into full-time work. We have made a commitment to make the process more straightforward by providing more free childcare. We have ensured that more money per year is invested in childcare; that has gone up from £4 billion to £6 billion, providing 30 hours of free childcare for people with three and four-year-olds. That is an important change to ensure that people can go into full-time work. The hon. Gentleman also highlighted the difficulty for people on low incomes in part-time work, and we recognise that. We are trying to make it easier for people to go into full-time work, because there are much lower instances of poverty when two parents are in full-time work, and that must be people’s goal.

Does the Secretary of State agree that growing up in a workless household is one of the most damaging factors for a child’s life chances? Consequently, will she commit to investing more in universal support to help people with difficulties to overcome them and move into long-term employment?

My hon. Friend is absolutely right. Households with nobody in work are much more likely to be in poverty, and they are a bad role model for everybody else. It is important to ensure that we engage successfully with households so that everybody has the opportunity of getting a job. There are now 665,000 fewer children in workless households since 2010.

Is not the most horrifying omission from the Secretary of State’s statement that we live in a country where people are cold, hungry and pushed into destitution? When does she expect to be able to come to the House and report on the numbers of people in destitution? As claimants have contributed so much to the revival of public finances by having cuts to their living standards, will the Secretary of State allow herself to be judged by how much she gets when the Chancellor starts allocating funds, and ensure that those moneys first go to the poor, who contributed most?

The right hon. Gentleman is more aware than many people that the Chancellor has put a lot more money into the welfare system. When it is fully rolled out, the system will be £2 billion more generous than it was previously. The right hon. Gentleman knows more than anybody else that, important though welfare contributions are and as committed as I am to ensuring that universal credit works for everyone, the causes of poverty are not allayed by benefits alone. That is why we have made such a commitment to invest in the poorest children through the pupil premium and to invest an additional £33 billion a year into the health service by 2023. All these additional investments will help people on the lowest incomes to have a better quality of life.

Does the Secretary of State agree that it is right that we look at the pressures on people’s incomes in the round? That means that we should look at the cost of childcare, which the Government are addressing, and at taking people out of tax, which the Government are addressing. We should also look at putting up wages for the poorest people on the lowest wages, so will my right hon. Friend confirm that the national living wage is rising, which will benefit a lot of people on low incomes?

My hon. Friend is right. Next week the national minimum wage will go up to £8.21, which is the highest it has ever been. Furthermore, the level at which people start to pay tax is rising to £12,500. It was not very long ago that people on very low incomes—as low as £6,500—could be paying tax, and that has changed under this and the previous Government.

It is welcome to see the Secretary of State gradually repairing the damage that has been done by her predecessors as a result of caps, cuts and freezes, but she will accept, I am sure, that she has a long way to go to match Labour’s excellent record of taking 1 million children out of relative poverty. Will she pay particular attention to the high risk of poverty among larger families? I welcome the first step she has taken in relation to the two-child policy, but she will know that larger families face a particular risk of poverty, so will she look at removing the two-child limit altogether?

Since entering government in 2010, we have removed 400,000 people from absolute poverty. I have acknowledged—this is why I am here today—that today’s statistics are disappointing. I am highlighting that there is more to be done both in terms of other services around benefits and in terms of my engagement with the Chancellor. The hon. Lady raises the important point that it is often people with the largest families who have difficulties, and I will be looking at that area ahead of the spending review. However, we will not be changing the two-child policy, which is still an important part of having fairness in the benefits system for the people who pay the tax as well.

One of the regular challenges that those in poverty face is in finding suitable accommodation, as the Secretary of State referred to in her statement. What work is she doing in talking to the Ministry of Housing, Communities and Local Government to ensure that we deliver the quality homes that people need, at an affordable price, across the country?

That is such a good point from my hon. Friend. He is right that we need to constantly address poor-quality accommodation, as well as making sure that that accommodation is affordable. I am engaged in conversations with my right hon. Friend the Secretary of State for Housing, Communities and Local Government to ensure that we address this together.