30 January 2007

Rt. Hon John Hutton MP

Secretary of State for Work and Pensions

House Magazine

Building Sustainable Communities Through Partnership: Eradicating Child Poverty

Tuesday 30th January 2007

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A decade ago the UK had the highest child poverty rate in the industrialised world. Today it is falling faster than anywhere in the EU. Since 1997, 800,000 children have been lifted out of relative poverty, 2 million out of absolute poverty. This has not happened by accident. It has happened by design.

In stark contrast to the 1980s when increases in incomes were concentrated on the better off, by targeting financial support at low-income families we’ve achieved growth with fairness. Since 1997 incomes have grown strongly for all groups but the poorer two-fifths have seen the largest proportional increases.

Tax credits are benefiting around 6 million families and 10 million children. And from April this year, as a result of tax and benefit changes, families with children will be on average £1550 a year better off in real terms than in 1997 – while those in the poorest fifth will be on average £3450 a year better off.

But benefits and cash transfers can not, at least on their own, provide a sustainable route out of poverty. Even increasing benefits in line with average earnings will do little to help families escape poverty, if median income is increasing at roughly the same rate.

Ultimately, to lift people clear of the poverty line and to give them the tools they need to provide for themselves and their families in the longer term, we need to ensure that everyone who can work has the help and support they need to do so.

Because it is, in the end, the opportunity to work that provides the only long-term, sustainable anti-poverty strategy.

That’s why this Government’s approach to tackling child poverty hasn’t been simply about redistribution; it has been about maximising the opportunity for those who have been excluded from the labour market to find the quickest way back into it. It’s why we created a National Minimum Wage and tax credits to make work pay; why we’ve invested in Jobcentre Plus and the New Deal to help people find work; and maintained a strong economy that sees everyone sharing in the benefits of record economic growth.

Our success in extending employment opportunities to those that were previously left behind explains the progress we have been able to make over the last decade.

Then, nearly 6 million people dependent on benefits; now more people in work than ever before. Then, record unemployment; now long term unemployment down 70 per cent and youth long-term unemployment virtually eradicated.

Today the achievement of an 80 per cent employment rate and the eradication of child poverty are not seen as merely rallying calls for change – but real targets that people expect to be delivered. And rightly so – for that is what they are.

We can meet this target if we continue to make sure that people have the opportunity to work and to progress up the career ladder. Government can create the right conditions for this to happen. Our macro-economic policy can help ensure the right climate for investment, growth and new jobs. Our welfare policies can provide more help and support to those out of work. But people will need to take up these new opportunities that are on offer if we are to succeed in finally eliminating child poverty. It will be the choices that individuals make – to take up the help on offer and get back to work - that will ultimately determine whether we meet these targets or not.

Eradicating child poverty is not therefore an outcome that is not just down to what Government does. Of course, it does require Government action – but it also needs partnership – a sense of shared ownership between the individual and State; between the public, private and voluntary sectors; between families, schools and the communities in which people live.

For sure - Government needs to improve the support it offers. In particular, for example, we know that with 40 per cent of poor children living in couple households where only one person is in employment - we need to look at ways in which we can shift the focus of the welfare system towards the family as a whole – with new support for partners becoming a built in feature of the system going forward. To allow a greater opportunity to work – the bed-rock of our anti-poverty drive – to be balanced with the natural desire of families to care for each other.

But if we are to eradicate child poverty, then I believe we will also need to go further in challenging existing assumptions about who - and at what point - someone should be in work; and where the focus should be for the welfare state in helping people to find work and progress through the labour market.

The UK has one of the highest proportions of families headed by a lone parent in Europe. And yet despite the progress we have made in increasing the lone parent employment rate since 1997 – now up over 11 percentage points to 56.5 per cent - we still have the lowest lone parent employment rate of any major European country.

Coupled with this, we ask very little of lone parents on benefit – with a requirement to look for work that only begins when the youngest child reaches 16.

By contrast countries whose welfare systems are held up as beacons of progressive social values, such as Sweden and Denmark, make little distinction between lone parents and other benefit recipients in terms of the obligation to look for work. As a result, they have lone parent employment rates as high as 80 per cent.

Furthermore in the UK, when the youngest child reaches 16, there is evidence that as many as a third of lone parents move almost seamlessly onto Incapacity Benefit or make a further claim for income support within the following 12 months. None of this should come as a surprise. If a person has been out of the labour market for 10 or 15 years, during which time they have had little help or support, they are obviously going to find it difficult moving straight from Income Support on to JSA and being required to actively seek work. This just isn’t good enough.

We know that children of lone parents not in work are over five times more likely to be in poverty than children of lone parents in full time employment. And three times more likely to be in poverty than children of lone parents in part time work. Around 40 per cent of poor children live in lone parent households – the majority of which are non-working.

Yet we also know the difference that helping lone parents into work can make. A significant proportion of our progress so far in tackling child poverty is due to helping lone parents move into work. In Scotland, where even more people have come off benefits into work, they have already exceeded the target of reducing child poverty by a quarter. Child poverty in Scotland has already fallen by a third since 1997. And raising the lone parent employment rate to our target of 70 per cent would see a further 200,000 children lifted out of poverty across the UK.

One important aspect of this challenge is the lower level of job retention that lone parents tend to experience. Despite recent falls in the probability of leaving work, lone parents are still almost twice as likely to leave their job as non-lone parents.

Just under one in five lone parents who leave Income Support return within 6 months; over a quarter within one year; a third within two years and almost two-fifths within three years.

This is compounded by evidence of employment penalties for lone parents who have had spells out of the labour market – with one study finding that a previous period out of work more than doubled the probability of leaving a subsequent job compared with those continuously employed over the previous year. It also found that low pay, especially when linked to part-time work; and ill-health were both likely to increase the employment penalty. And that the risk of leaving work is highest in the first year of a job.

Analysis suggests that a job retention strategy that decreased exit rates by just 10 per cent could lead to an increase in the employment rate of more than 1 percentage point.

So I believe a key part of our approach to tackling child poverty must be the support we provide to improve lone parents’ job retention; and especially the tailoring of support around the key stages when the risk of leaving work is greatest.

Our reforms to childcare will be one crucial part of breaking the down the barriers to work and helping lone parents to say in work for longer.
Today there are twice as many registered childcare places as in 1997. In total 1.28 million places – delivered by over 95,000 childcare providers. In 1997 there was a registered childcare place for one in eight children under eight; now it’s already one in four.

Today we have the Sure Start programme; the expansion of early years education, into which over £20 billion has been invested during our time in government; and free learning and childcare for three and four year-olds, which will be extended to an entitlement of 15 hours a week, for 38 weeks a year, by 2010.

In 2010 there will a childcare place for all children aged between three and 14, from 8am and 6pm each week day; including school holidays; with over 2 million sustainable childcare places and 3,500 children's centres offering education, health and parenting services all on the same site.

But as we develop wrap-around childcare and improve the support available – so we should be prepared to look again at the way we help lone parents get ready for a return to the labour market. And the steps they need to take to get back into work and so lift their family out of poverty.

In doing so, we should never go back to the time when lone parents were routinely blamed for being poor. Neither should we permit lone parents to be at the receiving end of the noisy moralising of right wing politicians. Lone parenthood is rarely a lifestyle choice. We should never forget this.

Let me be clear about one other thing. There is absolutely no case for cutting lone parent benefits – this would be wrong in principle and damaging to the health and well-being of children in lone parent families. But politicians and campaigners on the progressive left risk failing future generations of children if we are not prepared to learn from other progressive countries, and assume instead that a childhood spent on benefits is good for children and their parents; It isn’t. Or that somehow this represents the limit of our aspirations. It doesn’t.

We must raise our aspirations for every family in Britain. The best way we can do this for lone parent families is by helping all those who can work to get work. That is why I have asked David Freud, as part of the Prime Minister’s wider review, to look at how the welfare system can more effectively tackle entrenched poverty and promote social mobility.

This is the next big challenge for the welfare state; not tackling unemployment in the traditional sense – because here we have already made huge progress - but tackling economic inactivity.

Those of us here today don’t need persuading about the scale or importance of this challenge. But all of us have a crucial role to play. We need now to discuss the next steps in welfare reform, to see if there areas on which we can agree, and to help drive forward the changes needed on the ground.

The affluent in our society have always had choices. We say that everyone should have that chance to choose a better deal for themselves and their children– regardless of wealth. That every generation deserves the opportunity and support to raise and fulfil their aspirations; every individual the support to lift themselves and their families free from poverty and dependency.

That is our ambition. Nothing less. We’ve come a long way in a decade; but where we go in the next decade will determine the long term success of welfare reform. Right now, the opportunity to eradicate child poverty is within our grasp. Together I believe we can rise to this challenge – and in doing so, take another a giant step towards our ultimate goal of genuine equal rights and opportunities for all.