John Hutton – 2006 Speech to Fabian Society

johnhutton

Below is the text of the speech made by John Hutton, the then Secretary of State for Work and Pensions, to the Fabian Society on 10th May 2006.

When Tony Blair announced in the first term of this Labour government that we would seek to end child poverty in a generation he set a target that encapsulated much of our ambition and aspiration for our country and its people.

Anger about poverty and the hope that it could be eradicated has driven progressive politics from the French Revolution to the foundation of the Welfare State. Our historic mission to eradicate child poverty by 2020 reflects the roots of our social democratic movement – and articulates a path to our ultimate aim of equal life chances for all.

So I want to begin, first of all, by thanking the Fabian Life Chances Commission for their excellent work in stepping up the debate on this crucial issue, culminating in their comprehensive final report to which I am very pleased to have the opportunity to respond today.

The Commission has made a number of recommendations, about which I want to say more shortly.

But while they are rightly pushing us to do more, I also welcome the fact that the Fabians have recognised the important steps we have already taken in both setting our goal of eliminating child poverty and making real progress towards it.

We are now close to the European average for child poverty – instead of bottom as we were in 1997 – and we’ve made the biggest improvement of any EU country. There are more people in jobs than ever before: 2.4 million more than in 1997. The numbers on benefit have fallen by around 1 million. And with around two-thirds of the working age population in work, our employment rate is the highest of the G8 countries.

Today we are achieving growth with fairness. Since 1997, incomes have grown strongly for all groups but the poorer two-fifths have seen larger proportional increases in incomes than the better off.

As a result of this progress there were 800,000 fewer children in low income in 2004/05 than 1997. The proportion of children living in workless households has fallen from 18.5% to 15.9% – a reduction of nearly 370,000. And the lone parent employment rate has increased from 46% in 1997 to over 56% in Spring 2005. These are encouraging statistics. And behind each and every one of them are families and children who now have a better chance of getting on in life than they had before.

As well as increasing employment rates, we’ve targeted financial support at low-income families. Tax credits are benefiting around 6 million families and 10 million children. And by October 2006, as a result of our reforms to the tax and benefit system, families with children will be on average £1500 a year better off in real terms than in 1997, while those in the poorest fifth will be, on average £3400 per year better off.

Compare that to the legacy left by our predecessors. A passive benefit dependency culture obstructed any hope of delivering equal life chances, with millions of people on benefit and with no expectation of a return to work.

Between 1979 and 1997 the poor did not share fairly in rising national prosperity.

The largest increases in incomes were concentrated on the most well-off. Inequality in the UK rose faster and further than in any other country. And while Britain got steadily healthier as a nation, the number claiming unemployment benefits rose by 50% and the number claiming lone parent and incapacity benefits more than trebled.

And, inevitably, with benefit dependency came poverty. By the mid-to-late 1990s, the UK suffered higher child poverty than nearly all the other European nations. Over a period of 20 years, the proportion of children in relative poverty had more than doubled and by 1997, one in every three babies born in Britain was born poor.

The Conservatives now say they have signed up to our child poverty target. I welcome this. But it will take more than words to deliver on it. All of the measures we have taken to tackle child poverty have been opposed by the Tories. Tax Credits; Sure Start; The Minimum Wage; The New Deal; the list goes on and on. It’s no good willing the ends if you remain opposed to all of the means. These kind of promises are simply empty and hollow.

It is true that we ourselves have not yet gone far enough, and equally true that as we deal with each successive challenge that confronts us, fresh challenges appear on the horizon. But the hallmark of New Labour is that we are a party that is prepared to dig deep to find new responses to new situations, and we will continue to do so. Policy renewal is not an event scheduled to take place at some time in the future. It is a process underway now.

When earlier this year, despite significant progress, we fell short of our interim target to reduce the number of children in low-income households by a quarter by 2004/05, we did not go quiet or try and re-define the target to make it easier to hit. The target is the right one. It’s our delivery mechanisms that have to improve.

Our challenge is now to accelerate our progress on tackling poverty, not sit back. And we know we must be bold in embracing whatever it takes to help us achieve our goal.

Ultimately child poverty is the principal determinant of life chances. Children born into poverty are more likely to be premature, have low birth weight, die in their first year of life or from an accident in childhood.

We know that an infant who grows up in a poor family is less likely to stay on at school, or even to attend school regularly; less likely to get qualifications and go to college; more likely to be forced into the worst jobs, or no job at all; and more likely to be trapped in a lifelong cycle of deprivation that prevents them from fulfilling their potential.

Worse still – there are strong associations between youth crime, parental crime and child poverty, with children born into poverty being far more likely both to be victims of crime and to offend themselves.

So Labour’s child poverty targets are not simply about responding to the moral imperative to act, though that is clear. Allowing children to grow up in poverty means storing up long-term problems which will ultimately undermine social cohesion and social progress. We cannot have a strong society and a strong economy unless we address the problem of child poverty. That is why it is a shared objective of both DWP and the Treasury.

And it is why I am making tackling child poverty the Department’s number one priority.

In every area of policy development and delivery – across the full range of functions and responsibilities in the DWP – Ministers will be asking the question – what will be the impact on child poverty?

When we’re delivering our welfare reforms – we must be clear about how we can best help those more likely to be in poverty – such as disabled people, where over a quarter of poor children are in households with at least one disabled adult.

When we’re considering reform options for the Child Support Agency – how many children can we lift out of poverty? We know that receipt of child maintenance currently helps to lift 100,000 children out of poverty. The successful implementation the changes I announced in February could lift a further 40,000 children above the poverty line. The redesign being led by Sir David Henshaw must take us even further.

Even our reforms to pensions and savings will be important. The way in which society recognises and rewards social contributions – such as the work of carers or the contribution made by many women who have given up work to look after children – doesn’t just impact on life chances today but affects the nature of the society we create for tomorrow.

And of course, promoting financial inclusion is crucial to overcoming poverty. Increasingly inequality in asset-ownership threatens to become the social divide of the future. That’s why the Child Trust Fund is important in ensuring all children have a financial asset at age 18. And it’s why we’re looking at how we can improve our use of the Social Fund – which together with the Growth Fund – is increasing the availability of affordable credit to low-income families and helping them to build their way out of poverty.

All these policies will play an integral part in the government’s wider drive to tackle every facet of social exclusion – a drive that will be led by Hilary Armstrong in her new role in the Cabinet Office.

This Autumn, alongside our annual “Opportunity for All” progress report, the Department will be setting out its new strategy for how we can make faster progress in reaching our goal of halving child poverty by 2010. We would welcome the thoughts of all those who share our goals as part of this work. The Fabians have of course given us much food for thought already, and the Life Chances Report will help fuel the debate that we will continue over the summer in the run up to outlining our strategy for the years ahead.

In the remainder of my remarks, I want to set out the direction on which we must now focus, and comment in more detail on some of the specific recommendations of the Life Chances Commission.

The Commission recommends a number of measures related to increasing benefit levels in order to lift people out of poverty – increasing child benefit, introducing a ‘pregnancy premium’ to income support, and raising out-of-work benefits across the board.

We will always consider raising benefit levels where it is appropriate and affordable to do so. Child Benefit for the first child has increased by more than 25% in real terms since 1997. And in this year’s Budget, the Chancellor announced a commitment to increase the child element of Child Tax Credit at least in line with earnings until the end of this Parliament. This will mean an additional £200 million for families in 2008-09 – and at least as much again each year until the end of the Parliament.

But at the heart of our work going forward must be an integrated approach that makes a sustained difference to child 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 prosper in the longer term, we need to ensure that everyone who can work has the help and support they need to do so.

This is the principle that has always underpinned the British Welfare State – from the its early days under Asquith and Lloyd George – to its full development under Clement Atlee’s Labour Government. It was conceived as an active, empowering force. The State would ensure there was a floor below which no person could fall. But the principle responsibility to do everything possible to support yourself and your family would rightly remain on the individual. Because it is, in the end, the opportunity to work that can provide the only long-term, sustainable pathway out of poverty.

That’s why New Labour’s approach to tackling child poverty hasn’t been simply about redistribution, but actually about promoting work as the best route out of poverty. 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.

The Commission suggested we should consider raising the top rate of tax as part of our anti-poverty drive. Matters of taxation are of course the responsibility of the Treasury. We have a progressive system of income tax. Since 1997 we have made reforms to the tax system that have increased help for those on low incomes – rightly so. But we have no plans to raise income tax in the way you have recommended. And I don’t believe it would send out the right signal to do so.

Our focus should, instead, be on doing more to get more people into work, breaking down the remaining barriers that people face in getting jobs so we can extend employment opportunity for all.

Around 40% of poor children live in lone parent households – and the majority of these are non-working. And yet we 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. And raising the lone parent employment rate further to our target of 70% would mean a further 200,000 children lifted out of poverty.

In the Welfare Reform Green Paper we proposed a measured increase in obligations on lone parents to come in and talk to a personal adviser about the options open to them. These proposals could lift many more children out of poverty and increase the lone parent employment even further. But we should be prepared to keep these arrangements under review, and potentially consider further support and incentives to help get more lone parents back into work – especially when by 2010 we will have the guarantee of universal wrap-around childcare in place.

But it’s not just policy change that can make a difference to employment rates – modern localised welfare delivery can transform our most disadvantaged communities.

The UK has a relatively small number of areas with an employment rate below the EU average – but nearly all of these are in major cities. 15 of the 20 local authorities with the lowest employment rates are in cities. Nearly one-fifth of the working age population in Glasgow, Manchester and Liverpool are on benefits as lone parents or incapacity benefit recipients. And, in total, our cities account for almost two-thirds of all those on benefits.

Take London, for example. The wealthiest city in Europe; productivity 25% higher than the rest of the UK; and a quarter of the workforce educated to degree level. And yet London now has the highest level of worklessness – and the highest level of child poverty in mainland UK. Nearly half of children in inner London are poor.

Yesterday I launched a new City Strategies initiative designed to tackle worklessness and poverty in our most disadvantaged towns and cities.

With the City Strategies, local partners form consortia and bid for seed-corn funding and new flexibilities by showing how they could deliver a stretching and measurable improvement in the proportion of local people in work. We’re inviting expressions of interest from the most disadvantaged towns and cities – and incentivising them to find local solutions to local problems with a deal based on shared outcome targets and maximum discretion to do whatever it takes to make a real and sustained difference.

I believe this has the potential to transform welfare delivery – pushing the boundaries of flexibility and devolution and helping us take a major stride both towards our aspiration of an 80% employment rate and the elimination of child poverty.

But getting people off benefit and into work can only be part of the answer. It is a striking fact that around half of the children living in poverty in Britain today live in a household where an adult is in work. These are largely couple families who do not work enough hours or earn enough to escape poverty. Analysis shows that at the minimum wage, typical couple families need a full-time and a part-time worker to move out of poverty.

We must never under-estimate the strain of trying to make ends meet and bring up kids alone. Yet it is clear that it can often take more for low-income couples to lift themselves out of poverty than it does for single parents.

It’s also the case that children with the very lowest incomes are more likely to be in couple families. Of children in households below 50% of median income, nearly two-thirds are in couple families.

So helping the in-work poor means that we must always be ready to look at new ways of encouraging second earners into work; continue to ensure that people will be better off in work than on benefit, and do more to improve skills and progression in the labour market.

This last point is particularly crucial when you consider that today our economy has 9 million highly skilled jobs – but by 2020 will need 14 million highly skilled workers. And whereas today we have 3.4 million unskilled jobs, it is estimated that by 2020 we will only need 600,000.

Conclusion

Ultimately, our ability to respond to the challenges of demographic and economic change hinges on the opportunities, skills and experiences of tomorrow’s workforce. And at a time when the integration of communities has perhaps never been more important – our social cohesion will depend on our social mobility.

So to eliminate child poverty by 2020 we need an effective cross Government approach – pushing forward with our reforms of public services to offer ever greater choice and flexibility to meet the specific needs of individuals; breaking the cycle of dependency and tackling discrimination and prejudice in our society.

Later this month we are publishing a research report which explores the characteristics of children from poor backgrounds who go on to escape poverty and achieve economic success as adults. It provides strong evidence for early interventions in making the biggest difference to life chances.

That means delivering accessible and high quality education, health and social care. It means improving the quality of housing and reducing the number of families living in all forms of temporary accommodation. And it means continuing to develop the provision of childcare, enabling people to balance their work and parenting responsibilities.

Our vision is of an opportunity society – enabled by a powerful new drive against the barriers that hold people back, with work at its core; targeted support for those who need it most and high quality public services that offer individuals and communities the kind of life chances that in the past have only been available to the wealthy.

Only by realising this vision can we offer every individual and every generation the opportunity and support to raise and fulfil their aspirations. But if we can do this – if we can break the cap on aspiration that traps people in poverty and unlock the door to social mobility – so we can realise the ultimate goal of our modern social democracy – an end to child poverty and equality of life chances for all.