Select Committee on Social Security Minutes of Evidence

Examination of witnesses (Questions 240 - 259)



  240. It is not your fault, it is not the fault of present Government—
  (Ms Ghosh) Two points on that. Clearly the pensioner poverty issue is a rather different one in that—well, I know we are encouraging grey work and all that—but there is not an option there which is that we want, in fact, to encourage people back into work. The other point I would make in relation to ICC is that what we are constructing here is a model. We are constructing a system. We are not, at this point, making any assumption about what the various figures that we feed into that system, are. Obviously we want to maintain the work incentive element.
  (Mr Macpherson) I would not really accept this dichotomy between pensioners and children. There have been a lot of very helpful contributions to the debate on what is an adequate income for pensioners and those clearly inform Government policy. Similarly, the Sue Middleton work on children also informs Government policy. The issue you are raising is whether we should go back to a 1960s world where you have a Supplementary Benefits Commission, which then spends many years discussing what a minimum income standard should be. Clearly that is an option but my basic worry on that is that if you talk to academics, they tend to have very different views on what an adequate level is. There is a whole raft of issues about what should go in the basket, some of which are relative rather than absolute. For example, "Do you need a holiday?"

  241. You are not saying that guesswork is a better basis for setting a benchmark?
  (Mr Macpherson) No, I am not saying that. We are not guessing anything here. As I say, we watch and encourage this debate. It is excellent that Sue Middleton has done that work. I have attended seminars with her and I find the results very interesting. Those results inform policy but you have to take a fairly broadly based approach which will also, I am afraid, be informed by cost. Resources are finite. A large amount of resources have been put into this area in recent years to the extent that there are quite big effects. The poorest family with two children on Income Support is something like £1,500 a year better off as a result of the changes the Government has made. I think that there are potential risks in getting sidelined by a long debate about adequacy.


  242. How many times in your professional career do you get a chance to look de novo at the adequacy of the cost of the benefit? This is an opportunity that will come once in your lifetime. What you are saying to me is, "Don't worry if it turns out to be quite generous and we will get 1500 quid." No-one will be better off. Karen's question is absolutely crucial for us. If we do not do it now; if someone does not take a step back from all of this and say, "What does it actually cost?" okay, it is five quid here and five quid there, depending on what academic you talk to, but you are missing a huge opportunity, are you not?
  (Ms Ghosh) I thought that what Nick and I were saying is that we are not missing that opportunity. Ministers are taking all these sorts of debates into account. As I say, we are constructing a system, a scheme, into which we can feed figures in due course. As Nick says, the Government has made very clear its significant commitment to abolishing child poverty—and, indeed, family poverty—through all the money it has been putting in. I am always reminded of when I joined the DSS a year ago somebody said, "You have a good brand." What they meant is that this Government commitment to abolish child poverty in 20 years is an immensely political driving force. That is the context in which we will be judging the figures to feed into the scheme we are proposing.

Ms Buck

  243. But that is missing the point, is it not? I am the last person to be making a critique of the Government's approach to the abolition of child poverty, which I think is excellent, but the point is that we do not know what poverty is. We are approaching (and this is right) a basket of indicators because we know cash is not the only dimension of poverty, and inequality is not the only dimension of poverty, but at the heart of this, the idea that there can be some kind of an indicator—however approximate, however open to challenge—of what is an acceptable basic income for families, is missing as a part of policy. That is what I think.
  (Ms Ghosh) Yes. In a sense I think you have said all there is to say on that. Obviously that is something which Ministers can take into account when they are deciding what figures to feed into their model.

  244. There are a few more points. I also accept that there is a profound difference between coming up with a benchmark figure for pensioners and for children. That is much more difficult for families with children. One of the reasons why it is much more difficult for families with children is because, by definition, you are talking about a more complex household dynamic. We know from Sue Middleton's research and other research that parents have done a remarkable job on whatever level of income they have, (but particularly the low income families), at protecting their children and their children's interests, completely at their own expense, because something has to give. Is your thinking, at the moment, about looking at the wider issue of child poverty within a family context, and how the ICC relates to what we do to make sure that families, as a whole, are raised out of poverty?.
  (Mr Macpherson) First, I would emphasise that all our statistics on child poverty ultimately hinge around the family. We do not separate children from the rest of the family and just look at the costs associated with their upbringing. When we are looking at the four million children who live under one definition of the poverty line, they are part of households. You are looking at the households' relation to that poverty line. One is taking into account, through that calculation, the costs and income of the parents; so, to that extent, we do pick up the incomes of the whole family.

  245. Would you agree then that the progress which is being made on tackling the child dimension of poverty through this tax credit, needs also to be matched by a greater recognition of the costs of households with low incomes, the adults, if you are going to tackle child poverty?
  (Mr Macpherson) Clearly we have to look at the incomes of the whole household. You have to look at them in terms of identifying policy responses. You have to take a fairly multi-dimensional approach, both on the income tax and National Insurance side and through tax credits, and also through the residue of the social security system.

  246. Do you worry about the huge numbers of families living below Income Support level?
  (Mr Macpherson) In what sense?

  247. One of the things that worries me, and the Chairman is very conscious of, and the Committee, is that we have set Income Support as the level below which families should not fall, yet we have (I do not have this figure at my fingertips) a substantial number of households who, for reasons to do with Housing Benefit restrictions or for other reasons, are falling substantially below that level. Now if we are going to tackle child poverty and the serious problems, how are we going to do that?
  (Mr Macpherson) We have to look at those issues and we do look at those issues. Another area relates to pensioners, where people have been interested in the take-up of the Minimum Income Guarantee. One thing we are very concerned to ensure is that we get as high a take-up as possible.

  248. But this is not a take-up issue. This is an issue where there is this interaction of policies between local government, national government, whatever. We are quite consciously undermining what the Government is doing on the one hand and policies on the other, particularly in relation to housing costs.
  (Ms Ghosh) I was going to say, Housing Benefit is obviously an important part of that. Clearly we will have to look in the context of the tax credits programme and the inter-relationship between the two. We do not want to make marginal deduction rates worse than they are at the moment. There are curious relationships at the edge between these two things. Another aspect of that, of course, is the Social Fund, which might have an important part to play and which we are reviewing.

  249. Would you agree that we should be aiming for a system where all the policies of different Government Agencies are working together to ensure that no households are trying to survive below Income Support?
  (Mr Macpherson) We clearly need to focus on that. I do think that housing is a big issue. I do not think that anyone would claim that the existing system of housing support is the most brilliant and efficient system in the world. We continue to consider how we could change that. You raise an interesting point. Are you saying that if someone chooses to live in a house in Westminster, which has a rent of £1 million a year, somehow we should pick up the rental bill through the Housing Benefit system, so that that person's Income Support is fully protected?

  250. I think, with respect, you are choosing an example which could not happen. That is simply not the issue.
  (Mr Macpherson) I recognise that is not the issue.

  251. Living in North Wales and in the north west on very low income in sub-standard property, well below the level of Income Support.
  (Mr Macpherson) I accept that but it is by coming out with that rather ridiculous example that you begin to home in on what are the limits of this policy. If you were to guarantee everybody's Housing Benefit, what sort of Housing Benefit are we talking about? All I am saying is that there are issues around how you use resources in relation to housing.

  252. We are not discussing Housing Benefit. The point I wanted to put upon the table is that we do have a real substantial issue. Setting aside margins where people are clearly playing the system, (and we all accept that can happen), there are a substantial number of people who, through no fault of their own, are living below Income Support. I think if we are serious about eradicating child poverty that has to be tackled. On the question of the integration of child credit and Child Benefit, will there come a time in the foreseeable future when Child Benefit will be brought in and truly integrated into that system?
  (Mr Macpherson) The Government has made it very clear that the ICC will sit on top. It will be built on the foundation of a universal Child Benefit. Indeed, Child Benefit has been a key part of Government strategy on child poverty and has been increased quite considerably in real terms. Clearly, in terms of delivery, we need to ensure that the Integrated Child Credit and Child Benefit are working sensibly together. Ideally, it would be nice if they came in one income stream even though Child Benefit would still be readily identifiable as a universal payment. We want to make life easier for the recipients to access support from the Government but this will be built on a universal Child Benefit system.

  253. Obviously with the advantage of making them administratively connected. You are assuring us that there is not going to be a point at which Child Benefit will be tapered? That is the implication of what you are saying.
  (Mr Macpherson) That is, indeed, the implication of what I am saying.

  254. So putting them together as an administrative package could help you reach the take-up at the passport level?
  (Ms Ghosh) Which is already very high and something we would wish to achieve, yes.
  (Mr Macpherson) The critical thing is the gateway into the system. Why is there such high take-up of Child Benefit? This is because the mother has a baby and in hospital someone gives her a form to access the benefit. Clearly we must try to make the links here, so that as well as filling in the Child Benefit form, you can fill in your child credit form. You then have this simple entry point into the system.
  (Ms Ghosh) Of course, using the Working Age gateway for all Income Support applicants also means that we will achieve a very high level of take-up of ICC for that group with the lowest incomes. As you probably know from the figures published yesterday, there is something like 94 per cent take-up of Income Support from families with children, so we should be able to crack that one through using a single Working Age gateway.

  255. Just on the different benefits which have different passporting arrangements and different relationships with each other, things like Child Support, are you expecting the ICC to discount Child Support payments in the same way as Working Families Tax Credit does? How do you see issues like Income Support passporting, or Families Tax Credit? How do you see those?
  (Mr Macpherson) It is precisely those sorts of issues which we are considering at the moment. The maintenance disregard in Working Families Tax Credit does seem to have been quite successful, both in terms of enhancing incomes of lone parents but also from a work incentive perspective. So we need to look at that. We need to take it into account. Similarly, with issues like free school meals, NHS prescription charges and other things, this represents an opportunity to look at these again. I should say that a lot of these passports are not actually a function of the social security or tax system. There are more other Departments choosing to piggy-back onto our system in order to provide these benefits. It involves us working closely with the Department of Health, the Home Office, and so on, in order to get that right.

  256. That is a very interesting point. You are saying decisions have not yet been made, so obviously we will want to come back to this. In terms of joined-up thinking, what we do not want is a successful ICC instantly undermined by the small print on prescription charges.
  (Mr Macpherson) You are absolutely right. We fully share that objective and the Treasury is uniquely placed to draw out these connections. Some of my colleagues are working on these even as I speak.
  (Mr Orhnial) As it takes shape, clearly other Departments will need to know a little bit more about the detail before they can say whether or not the ICC is a suitable passport for their particular needs.

Mr Robertson

  257. Can I return to Child Benefit, which of course is higher for the first child than the second child, and there may well be very good reasons for that, particularly when one of the parents (usually the mother) stops work to have a child so there is a logic there. When we start to build the integrated Child Benefit do you think that logic remains?
  (Mr Macpherson) This is an important issue and it is one on which debate has gone on for a very long time. Child Benefit recognises that the first child carries greater costs and you get a higher level of support. It is also implicit in the Income Support system and the Working Families Tax Credit and it is also implicit in the new Children's Tax Credit that comes in from April. So my guess is that we would continue with that principle, but no final decisions have been taken, and if the view began to prevail that this is a bad use of resources and real life is not like that, then we would want to come back to it. I do not think it is a necessary design of the system but I think it is probably quite a sensible one.
  (Ms Ghosh) There are similar sorts of issues that some of the evidence to the Committee has pointed out about the disproportionate representation of larger families in the category below 60 per cent of median income.

  258. That answers the next question I wanted to ask. I was going to ask about the smaller families and larger families, but in the same way we are taking evidence from you now, how are you going to take evidence in order to decide whether smaller or larger families should be paid the same, or more, and on the position regarding first, second or third child? How are you going to take your evidence?
  (Mr Macpherson) Apart from listening to the views of this Committee we will continue our very successful—at least I think it is successful—dialogue with academics but also with groups who spend a lot of time thinking about this: for example, the Child Poverty Action Group. So we will have a fairly active dialogue. Another angle on this is age. In the old system you tended to get more support as children got older and we have had a big debate about that. People argue that younger children carry a higher cost than older ones and other people take the opposite view. In the end we have tended to split the difference and tried to create a single rate of Child Support simply because that is simpler and gives that level of support a higher profile and makes debate about it easier. I think this debate will run and run and we will look at any evidence.
  (Ms Ghosh) Obviously we do also have access to our own internal analytical tools in forms of things like the Family Resources Survey, including households of below average income. For instance, being published early in the New Year is the Survey of Low Income Families (which I think the Inland Revenue put money into) which is looking particularly at all those sorts of dynamic and spending issues and indeed hardship issues with a statistically significant group of families and that will come out in time to feed into this.[7]

  259. It will be a broadly-based consultation exercise rather wider than Mr Macpherson referred to?
  (Mr Orhnial) I think that what is not always appreciated are the communities of interest that we have managed to establish since 1997 and early 1998 when we first got involved in the debate about WFTC and the like. We are in constant contact with the main interested parties and it is more than a question of simply asking, "Have you any ideas?"

7  Will be published in late February early March by the DSS Analytical Services Division. Back

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