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Lord Freud: How Labour have failed on child poverty - and what a Conservative Government would do to tackle the problem

Picture 13 Lord Freud was formerly an adviser to the Labour Government on welfare reform before quitting to join the Conservatives in February 2009. Since ennobled, he is now shadow minister for welfare reform and is leading for the Conservatives on the Child Poverty Bill, which has its Committee Stage in the Lords next week.

After over twelve years of New Labour, child poverty is rising. It has been doing since well before the financial crisis struck in 2009. Indeed, the turn for the worse started in 2004-5. Despite near doubling the payments of credits and benefits to families with children, New Labour is failing on one of its key targets.

Remember Tony Blair's soundbite pledge to 'abolish child poverty?  In fact, it is getting worse. In 1997-8, 4.2 million children were in households with income below 60% of the median, a standard definition of the poverty line.  The figure did fall to 3.6 million in 2004-5.  But since then it has been rising - and the latest figures show it standing at over 4 million again.  Why?

It is not because Labour did not want to help. It is simply that, as is so many other fields, their Big State prescription has failed.

Clearly the slowdown in earnings growth in recent years has had an effect. But that has been magnified by Labour's sharp redistribution of income in favour of the richest in the country.  Under Blair and Brown the conventional measure of income inequality - the Gini Coefficient - rose to its highest level since records began in 1961. Few realise that New Labour is quite so much the party of the rich.

Nevertheless, these factors alone are not enough to explain the disturbing trend in child poverty.  Perhaps child poverty has not turned up despite the money being transferred to the poorest sections of our community. Maybe the financial transfers are themselves the cause of the rise.

We can learn a lot from the formidable analysis of 'the iron triangle of benefit reform' by the Centre for Social Justice and Oliver Wyman.  The triangle establishes a mathematical relationship between three key factors: the level of benefit, the earnings break-even point, and the rate at which benefits are withdrawn.

The analysis throws up a grim warning: "Constraints on the design of the benefits system mean that simply pouring money in will make little difference - and indeed is massively inefficient." The authors say we must make a choice based on our particular vision: a society mostly on benefits or off benefits.

I know which a Conservative government will choose.

The Government's new Child Poverty Bill offers more of the same. It confuses two approaches - the failing drive towards income transfers and interventions via improvements in public service provision. The first has been the hallmark of Gordon Brown. The second is the route David Cameron will choose. Our strategy will concentrate on tackling the causes, rather than the symptoms of poverty.

Two ideas are at war within Labour's 'abolish poverty' sound-bite.  The first concerns general poverty and minimum standards of living for citizens. The second is about child well-being. It is dangerous to put the two together in the unthinking way that New Labour has.  We will end up with unbalanced support for the poor, which will be ultimately unsustainable.  And we risk undermining the strategies that matter most for child well-being.

We urgently need to get those two strands sorted out. According to UNICEF, we are ranked at the bottom of 21 rich countries in terms of child well-being. In spite of spending more and being richer than most of them we are bottom. The very worst.

The drive to meet targets has had a negligible impact on child well-being.  As the Child Poverty Action Group observes: "Increasing income alone will not eradicate poverty." It recommends a holistic approach to tackling the problem, like approaches being developed in welfare to work.

This mirrors our strategy. Let me emphasise the Conservative belief in the importance of tackling poverty. This goes to the roots of One Nation Conservatism. Poverty is a relative phenomenon.  We should ensure the poor are not excluded from the mainstream of society: that means strategies to tackle problem areas which have been increasingly well documented in recent years.

I particularly want to emphasise the importance of stable families - a central Conservative policy. The Child Poverty Action Group found that "the effect of separation on a couple (whether married or cohabiting) in terms of increasing the risk of poverty was much greater than for any other triggers, including job loss." Yet we have been adding to the number of Lone Parent households - those most likely to be in poverty - by 40,000 a year for the last quarter-century.

The Government now claims it has become a late convert to the importance of stable relationships and marriage. But policy is led by Harriet Harman, whose mission in life is a desperately outdated, ideological egalitarianism, which refuses to recognise the value of any household formation.

A Conservative Government will have no hesitation in targeting four problem areas:

  1. Family breakdown. Our commitment to ending the couple penalty in the tax credits system is just one of a series of measures to tackle this critical issue.
  2. Addiction, to drugs and alcohol. We will put rehabilitation at the forefront of efforts to tackle this problem.
  3. Education and skills. We will introduce a pupil premium to ensure that extra funds follow the poorest children to the school that educates them.
  4. Work strategy. We will push ahead aggressively to establish outcome based financing to help all those who are economically inactive back into the work-force.

Gordon Brown's answer is yet more targets - indeed, he and his acolyte, Ed Balls, cling to this failed approach, like the bullet-headed managers of a Yakutsk rivet factory who haven't heard the Berlin Wall has fallen.

Worse than that. The financial targets in Gordon Brown's new Bill are poor proxies for achieving the eradication of child poverty. According to Save the Children and the IFS the number of children in severe poverty had been growing even before 2004 as policy concentrated on pushing those just under the 60% line to just over it. This is exactly opposite to what most voters appalled by child poverty actually want.

The IFS found that the families with the lowest incomes did not have the lowest living standards.  A substantial number  managed to remain out of hardship even during prolonged periods of poverty, in some cases by the working of the black economy.

The IFS say a more reliable picture of who is genuinely poor may be obtained from an examination of spending, rather than income, distribution.  One target in the Bill we do support is material deprivation, which may capture the spending dimension.

But central to Brown's targeting is the OECD reference point of 60% of median income. Yet how genuinely comparable is the figure across countries? It does not include benefits in kind; it does not adjust for the benefits of free healthcare. There are apples and pears in the basket. These discrepancies really matter if we have statutory targets.

We could devote resources to the wrong people. The laws of the iron triangle are inexorable. If we wish to reduce numbers in poverty we need to look at strategies that consider all three sides of the triangle, not set one side at an arbitrary level that will inevitably cramp outcomes.

The purely financial nature of measurement is a real danger. Interventions in early childhood need to be both in cash and in kind. Yet such effective interventions will wither under this homogenised regime. So, too, will flexibility. Yakutsk Man has doubly failed. We have the lowest child well-being of 21 rich countries. The Government's child poverty targeting regime has failed, broken on the iron triangle. The next government must urgently set out an alternative approach.

We will concentrate on the causes of poverty and inadequate child welfare, focusing on those four main drivers: family breakdown, addiction, inadequate education and skills, and work. We will use poverty targets as a guide and spur, not a mechanism of manipulation.

Labour have failed the poorest. We will tackle its causes. All an increasingly out-of-touch Gordon Brown can offer are busted targets and Walter Mitty sound-bites. Those in need in our country deserve, and can achieve for themselves, far, far better. It is high time to give them a hand up, not just a hand out.


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