Households Below Average Incomes Statistics

Statement

My Lords, with the leave of the House I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Work and Pensions, Amber Rudd. The Statement is as follows:

“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 where 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, decreased by one percentage point; absolute poverty, after housing costs, was unchanged in percentage terms; and absolute poverty and relative poverty, before housing costs, 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 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 that it is vital that government supports its citizens and provides them with the opportunities they need to succeed. I sit in a department that has huge power to do this. I have seen what a force for good universal credit can be—and will continue to be when we roll it out further. I know how committed my jobcentre colleagues are up and down the country, having had the privilege of visiting so many of them over recent months. They truly change lives for the better, no matter what the party opposite may say.

Colleagues on this side of the House are rightly proud that this Government have cleared up Labour’s economic mess and helped more than 3.5 million people into work since 2010. Behind every employment statistic is a person or family whose mental health, well-being 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 this Government have supported almost 1 million more disabled people into work; I want to be more ambitious to support even more disabled people into work. It means that millions more receive a well-earned pay increase, with wages now growing at the fastest rate in a decade.

This is the record of a Conservative Government who provide opportunities for all, rather than trapping people on welfare. Remember, every Labour Government have left office with unemployment higher than they inherited. Under the last Labour Government, 1.4 million people spent most of the previous decade trapped in out-of-work benefits, meaning that spending spiralled out of control, with benefits increasing by 65% in real terms. Trapping people on benefits does not help them; it holds them back and it costs those dearest to them, who do the right thing: get up early and go to work. Every household paid an extra £3,000 a year to cover Labour’s welfare splurge, including the lowest earners, who were paying income tax. It was vital that, in these circumstances, 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. This Government have made significant changes to increase the incomes of the poorest since then, injecting £4.5 billion into universal credit alone in the 2018 Autumn Budget.

Next month these changes begin to take effect. We will also give the country’s lowest earners the biggest pay rise in 20 years. From this April we will be increasing work allowances by £1,000 for families with children and disabled people; 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, costing £250 million and helping 15,000 families a year. We will trial supporting upfront childcare costs with the flexible support fund, allowing parents to start work before paying for childcare through universal credit. We committed to building an online system to enable private landlords to request that a UC tenant’s rent is paid directly to them, supporting the most vulnerable to manage their money. We are looking at how we can ensure that it is the main carer in the household, usually a woman, who receives the UC payment.

This month I further pledged to scrap PIP— personal independence payment—reassessments for 280,000 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 WCA, by ensuring we do more to make the right decision 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 they are born into. 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, and 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 and at the heart of the work I do every day. We will not stop until we have completed this mission. I am determined to tackle poverty, in particular child poverty, and I will look at what more can be done in the spending review.

This is what it means to be a compassionate Government who support work, let dreams become reality and help those in need. We will work tirelessly to deliver this. We will act to support the lowest paid and the most vulnerable. We will deliver a country that works for all. I commend this Statement to the House”.

My Lords, I thank the Minister for repeating that Statement and for advance sight of it, but, not for the first time, I rather wish Lords Ministers were allowed to make their own Statements. I do not blame the Minister for the rather partisan nature of that; I suspect it may be aimed more at the Secretary of State’s Back-Benchers than at this House. None the less, since she has had to put that on the record, I am now obliged to repudiate it before we can get on to talking about poverty figures. Bear with me while I do that briefly, then we can talk about what was actually in the Statement.

Since the Secretary of State chose to attack what she called “Labour’s welfare splurge” and what we called lifting children out of poverty, I have to put to rest once and for all that old canard that the Government were forced to cut spending on the poor because of Labour’s record. A detailed study, by Ruth Lupton et al, of the coalition Government found that,

“the poor bore the brunt of its changes to direct taxes, tax credits and benefits”.

Meanwhile, with the exception of the richest 5%, those in the top half of the distribution were net gainers from the changes.

“Perhaps surprisingly, overall the ‘welfare’ cuts and more generous tax allowances balanced each other out, contributing nothing to deficit reduction”.

Those coalition austerity cuts were not needed to reduce the deficit or to do anything about Labour’s spending in the past; they were to pay for tax cuts. The benefits of those tax cuts are felt primarily by higher earners. If you increase the personal allowance, someone earning £80,000 a year benefits from all of it. A single mum working 35 hours a week during term time at the minimum wage does not earn enough to benefit at all.

I have now taken a deep breath and will move on to today’s Statement. One thing that the HBAI—households by average income—does is to give us an interesting sense of perspective, and I want to remind us of that today. It tells us that, to lie in the top half of the income distribution, a single individual last year needed a net income over £17,700. A single individual with an annual net household income of over £34,900 would be in the top decile. In other words, he or she would have an income higher than 90% of the population. We all tend to assume that other people earn similar amounts to us and that is a really good reminder that, if that is what the average is, think what the poor are living on.

My Lords, I am afraid that I am a very inadequate substitute for my noble friend Lord Kirkwood of Kirkhope, who is unavoidably absent today. I am a very poor stand-in—or rather, sit-in.

Today’s figures come as a result of a deadly combination of high inflation, weak pay growth and big cuts in benefit support for working-age households, as we have heard. The most shocking figure is that there are 200,000 more children in absolute poverty. I echo the noble Baroness, Lady Sherlock, in asking the Government to use the upcoming spending review to restore the remaining £1.3 billion taken out of universal credit work allowances in 2015 and consider introducing a work allowance for second earners to help get both parents into work.

As for getting more disabled people into work, which was mentioned in the Statement, the National Audit Office report which is out today is pretty critical of the department, saying that it cannot assess, for example, whether disabled people receive a consistent service between jobcentres or over time. It also says that the department underspends its budgets by overestimating the take-up rate of some of its programmes. Will the Minister say whether the department will undertake to look seriously at the recommendations from the National Audit Office?

Finally, disabled people themselves are very keen to help the Government to get this right. There are a lot of brilliant disabled people who would be very keen to engage with the department on employment.

My Lords, I will do my best to respond to the noble Baronesses, Lady Sherlock and Lady Thomas of Winchester, without repeating what I have already said in the Statement. It is important to make clear that these statistics focus on household income only, and are based on a survey of households which took place in 2017-18. It is important to recognise that the vast majority of people who were part of this survey were trapped on legacy benefits at that time, as only 10% of the universal credit programme had been rolled out. I make that point because it is important to recognise that we believe that one of the most important ways of lifting people out of poverty is through the universal credit system, which is encouraging many more people to go into full-time work.

It is true that many of those trapped in poverty are the lowest paid or are part-time paid, and those on very low, self-employed incomes. I want to make that clear. Unfortunately, inflation was also high in 2017; it was 2.8% but that has now come down. Lone parents were not incentivised to work full-time due to the 16 and 30-hour cliff edges on legacy benefits. In other words, the tax credits were a disincentive to work, and there was no incentive to work more than a 16 or 30-hour week. Universal credit is changing all of that. Indeed, in 2017-18, there was also stagnant wage growth following the financial crisis.

It is important for me to articulate to your Lordships’ House, to the best of my ability, where we are now. We believe we are in a better place: it is getting better and we want to make it even better. The taper rate is being reduced; work allowances are being increased by £1,000 next week; we have the run-on of housing benefit for those transferring to universal credit; transitional protection has been budgeted for next year; and our fiscal position has improved. We are looking to reduce fraud and error—hugely important to affordability and our ability to inject more into the welfare system—which costs more than £3 billion at the moment. I reassure all noble Lords that an amazing team in the Department of Work and Pensions is improving the way we can track it, with the support of amazing technology, so that will make a real difference.

My Lords, I welcome the Statement and much of what the Minister said regarding achieving high rates of employment, with its benefits to mental health and the importance of children having the role model of parents in work. However, I am very concerned at the rise in the number of children in poverty where the parents work. I highlight the two reports of the All-Party Parliamentary Group for Children on the funding of children’s services in local authorities. Cuts to local authority funding have reduced early intervention to support vulnerable families, and I hope that the Minister will take that into account when considering the pressures that these families are under.

I particularly welcome the reference in the Statement to a new review of the future of the national living wage. What is the likely timescale for that? When will it start and when might it end? Might there be an interim report? The Low Pay Commission has been asked to produce recommendations on the national living wage and the national minimum wage in October 2019, and it will clearly need the report from that review well before then to be able to make good recommendations. I look forward to the Minister perhaps writing to me on those points if she cannot answer in detail now.

My Lords, in many ways we are approaching our support and the welfare system slightly differently from how we did it in the past in terms of where the money goes. We do not necessarily agree that just reinjecting into the system money that might have been saved is the right thing to do. Obviously we want to support people to the best of our ability, but part of that should be practical support. Therefore, although we are putting money into the welfare system with the £1.7 billion a year boost announced in the last Budget, enabling 2.4 million households to keep more of what they earn, our focus is on how much more we can do to help children out of poverty.

As I said, children in workless households are around five times more likely to be in poverty than those in working households. We are supporting people into full-time work where possible—for example, by offering 30 hours of free childcare to parents of three and four year-olds. However, importantly, in addition we are trying to deal with the practical barriers. For example, following a speech in January by my right honourable friend the Secretary of State for Work and Pensions, we will trial paying mothers their first childcare costs up front so that they can start work with their children looked after. Importantly, we want to be more practical in our support but, as the economy has continued to grow, we have been able to share the proceeds of growth to support some of the most vulnerable in society. We have seen increases to the income tax threshold, which will reach £12,500 this year, taking 4 million of the lowest earners out of paying any income tax at all, and that will of course help children. Whereas spending on children was £4 billion in 2010, it will be £6 billion by 2020, which is a 50% increase in the last nine years. However, more can be done.

On the national living wage, this is an important review. We must be careful in increasing the national living wage to ensure that jobs are still sustainable. This review will be very much a cross-government task. I take the risk of saying at the Dispatch Box that I suspect it will be led by the Treasury, which the noble Earl will not be surprised to hear. That is quite right, because we have to balance the degree to which we can increase wages, which is crucial, while keeping people in jobs. We are very proud of our employment rate and we want to keep it. Of course, low wages are across the piece—not only in the private sector but in other sectors.

My Lords, might the Minister apply herself succinctly to the points raised? We are using up all this valuable time.

My Lords, instead of talking about “welfare splurge” at the end of the last Labour Government, the Minister should have given credit to the enormous success of that Government in tackling child poverty. I thought that we had established a national consensus in 2010 that we were all striving to overcome child poverty. Does she now accept that there are deep flaws in this Government’s approach and that, when then Chancellor George Osborne said that the way to deal with child poverty was to increase minimum wages while cutting government spending on welfare, this led to a crisis for poor families?

It is no good just talking about reductions in worklessness, which I acknowledge the Government have achieved. The real problem is that the lives of poor working families have got a lot more difficult. Do the Government acknowledge this failure, and that it should be a central objective of their policy in future to correct that failure?

My Lords, of course nobody wants to see poverty rising, and we take these statistics extremely seriously. But I hope the noble Lord heard me when I made it very clear that the statistics relate to two years ago. The reality is that we have done a huge amount to inject more money into the system as well as making a great difference in practical support terms. We do not want people trapped on legacy benefits, which have been a disincentive to their working full-time to support their families and give them life chances. We are looking across the piece on how we can help families out of poverty. The best ways are through work and a good education system for all children. My department is an important part of the jigsaw, but we want as a Government to be much more joined up in how we approach poverty.

My Lords, there is much to commend in the Statement but the Government say they want to do more. Is it not time to recognise—and this applies to the thinking in both political parties—that the whole process of new wealth creation produces benefits that go almost exclusively to those who already have savings and wealth, and to people who are personally accumulating capital on a scale they could never conceivably use, whereas the vast majority of households do not gain at all? They must rely only on wages income or, in the case of the poorest households, on income from welfare in the way that my noble friend has described. Is it not time to think of ways in which we can get more dignity and status from the ownership of resources and capital to millions of households who presently struggle with no benefit from the growth of wealth in the economy? Is it not time that our own party and the party opposite thought much more about ways in which wider ownership of capital and resources could be spread to millions of households, so that they benefit from the new wealth rather than see it grow among fewer and fewer people—in a tiny number of hands—creating social tension and denying the vast majority of people any benefit from the growth in capital and wealth that our system can now produce?

I entirely agree with my noble friend. Of course this is very important. It is why I welcome a review of low wages. That is why I want to talk about the big picture; we talk in silos, across different departments, about what each department is trying to do to support those who need support, but the reality is that we can do this only if we take time to stand back and talk across the piece. Obviously, much of this rests with the Treasury, which has an incredibly difficult job to do in deciding who receives what from each budget, but the reality is that we need to turn this on its head rather than just trying to increase by increment what people receive to lift them out of poverty.

Attacking the key causes of poverty is terribly important through a good education system and a welfare system that gives people sufficient support so that they can focus on improving their lives, rather than on getting by week to week. All the evidence shows us that the universal credit system will help; indeed, it is already helping—look at the record reduction in unemployment. Under the last Labour Government one-fifth of all UK households in the UK were entirely workless, but we have brought that down to somewhere below 13.9%, although I do not have the latest figure.

The reality is that we believe in having households where people are working and children are in school, and which have the right support systems in place. Focusing on those who are unable to work is of course hugely important, but we are spending more than £100 billion a year on benefits for people of working age. Think what we could be doing with much of that if we could lift those people out of the need to turn to support. My noble friend is right: it is a tough challenge.

My Lords, I wish I could believe all the things that the Minister has claimed the Government are doing about poverty at the moment. I declare an interest as a trustee of Feeding Britain and of the Food Foundation. I do not know how many people saw the recent ONS figures about life expectancy, which are completely up to date. They show that the gap between the richest and the poorest in terms of years of life lived with health has widened yet again. In fact, if a woman in this country is poor, she will have 18.4 years of ill health. The richer the person, the longer they will live with health.

Is there any reason for that? Right now—not two years ago or whenever—the poorest 10% of UK households have to spend 74% of their disposable income after rent to afford the Government’s “eatwell plate”. That is not even up to the level of the House of Lords canteen; it is very basic food. If you do not have that food, you are 2.2 times more likely to be obese by the time you are five, and that gets worse. Recent material has shown that children who are badly fed, who get so little, are actually a centimetre shorter. We are sentencing a generation of children, the poorest 20%—one in five of our kids—to a lifetime in which they will not thrive or be equal unless we deal with some of the underlying causes.

I believe there are things that the Government could do. For instance, we could allow universal, free, healthy school meals to all children. We could also bring back meals on wheels for seniors who are struggling. I ask the Minister to think about this.

My Lords, I reassure the noble Baroness that we spend hours and hours crafting what we will say at the Dispatch Box because it is hugely important that what we say is accurate. I can confirm to the best of my ability that the noble Baroness should believe what I have said, because I can say categorically that life is tough if we get it wrong.

The noble Baroness is right, of course, that we need to do more to ensure that people are able to feed themselves well and live a full life in terms of their life chances, their life expectancy and their health and welfare. That is exactly what we are focused on, and it is why we are running all sorts of programmes within the department relating to healthy lives, along with work programmes to encourage people who have not felt able to join the workforce. We want not only to give people the right financial support but to see that they have dignity and the ability to live their lives fully and reach their full potential. It is important to say that we absolutely believe in helping the vulnerable through our world-class public services, and we are injecting more and more money so that we can help disadvantaged pupils in schools, help people through the NHS system and help people through what we do at the Department for Work and Pensions.