The Abbey Centre
Speech by the Rt Hon Iain Duncan Smith MP, Secretary of State for Work and Pensions.
Introduction
Thank you all for coming today.
Tackling poverty and social breakdown is an issue that has been important to me for many years now.
It was the reason I set up the Centre for Social Justice back in 2004: to better understand the drivers of social breakdown, and to find effective solutions.
We spent a great deal of time travelling up and down the country, taking evidence from community groups and voluntary organisations.
And we documented the evidence in our key reports, which laid bare the extent of social disadvantage and breakdown across Britain - even before the recession started.
So having spent many years engaged in how poverty affects our poorest communities, I am not altogether surprised by today’s statistics.
Today’s statistics
The figures published this morning confirm that the last Government missed the target they had set themselves to halve child poverty by 2010.
In 2010/11, 18% of children - some 2.3 million children - were growing up in households under the relative poverty line…
… meaning overall, the previous Government missed their target by 600,000 children.
It is sad that in our wealthy society, such a large number of people remained stuck on the margins, trapped in poverty throughout a period of unprecedented growth.
Government spending
Yet that’s not to say this went unnoticed.
The last Government spoke about the need to tackle poverty, and poured vast amounts of money into the pursuit of this ambition.
Looking back at their track record, we can see the earlier and easier successes on child poverty being made between 1999 and 2001 - when the rate of relative child poverty fell from 26 percent to 23 percent.
The next significant drop occurs between 2002 and 2005…
… but coinciding with rise in spending on tax credits from £13.2 billion to £22.9 billion - an increase in expenditure of around 75%, with much of it targeted at families with children.
From then until the 2009, the last Government just about managed to keep the poverty rate flat…
… but at a cost of over £300 billion in working age welfare and tax credits.
In 2009/10 alone, around £90 billion was paid out in welfare payments to working age people and their families - about the same as the entire education budget.
The welfare bill increased by some 40% in real terms, even in a decade of rising growth and rising employment.
Overall, spending in the years when the last Government’s child poverty reductions went flat was remarkable.
£171 billion on tax credits and an almost £30 billion net increase in welfare spending in the years from 2003/04 to 2010 just to sustain their position.
Of course big spending is attractive because it brings big media headlines.
But today’s statistics clearly show that over the course of the last Government, the money failed to have the impact it was supposed to.
I’ll say it again: 2.3 million children still live in poverty.
‘Poverty plus a pound’
I believe the problem lay to a large extent in the common discourse around child poverty - which, in recent years, has become overwhelmingly focused on relative income.
If a family has less than 60% of the median income it is said to be poor, if it has 60% or more it is not.
By this narrow measure, if you have a family who sit one pound below the poverty line you can do a magical thing.
Give them one pound more, say through increased benefit payments, and you can apparently change everything - you are said to have pulled them out of poverty.
Yet moving someone from one pound below the poverty line to one pound above it might be enough to hit a target.
But what about the people stuck at the very bottom?
Looking beyond the headline statistics, we also find that in 2010 there were 600,000 children living severe poverty and 1.4 million in households suffering from absolute low income.
These are the families hardest hit, with the lowest incomes, and unable to afford essential day-to-day items.
But - equally importantly - even when someone is lifted above the 60% relative income line that isn’t enough.
There must be some kind of change in their life or they will risk slipping back.
Fuelling dependency
Of course money is important.
But increased income from welfare transfers is temporary if nothing changes.
Just take the example of a poor family where the parents are suffering from a drug addiction. Giving the parents extra money moves them over the line and out of ‘poverty’ on paper.
Yet because much of the money will almost certainly go on drugs, the family still lives in poverty. Coming off drugs is a therefore a vital step for them getting out of poverty and staying there.
Or take a family where no one has ever worked. Simply increasing the household’s income - while taking no other proactive action - will only push the family further into dependency and weaken the incentive to take up work.
So while income is important we should be clear that the source of that income can have very different effects.
Income through benefits maintains people on a low income and can risk feeding social problems.
Whereas research shows that work and the income it brings can change lives - boosting confidence and self-esteem, providing a structure to people’s lives and giving them a stake in their community.
What today’s figures make clear is that as the years rolled by, the ‘poverty plus a pound’ approach did not do enough to transform the lives of those in need.
Treating symptoms
On coming into Government, we could have continued on this path.
The Institute for Fiscal Studies estimated in 2009 that the 2020 child poverty targets could be hit through an extra £19 billion in welfare transfers.
But that would have been £19 billion spent as a one-off, without hope of transformation for those living in poverty.
For although income transfers might treat the symptoms, maintaining people just above the relative income line…
… all too often, the root causes remain unchecked.
Root causes
This Government is committed to eradicating child poverty, and across departments our aim is to tackle the problem at its source.
Whether it be worklessness and welfare dependency… addiction… educational failure … debt … or family breakdown…
… these are the multiple and overlapping problems that underpin social disadvantage - and if we are to make real inroads to tackling child poverty we need to address them.
Government strategy
In March, we published the Social Justice Strategy - which establishes new principles for ensuring the most disadvantaged families and individuals can put a foot on the first rung of the social ladder.
This strategy concentrates on two major principles. Early intervention - preventing people from falling into difficulty in the first place.
And providing second chances for those whose lives do go off track, with a focus on recovery and independence as the ultimate outcome.
This builds on last year’s Social Mobility strategy, in which we set out our commitment to making sure people are able to move up that social ladder and realise their potential.
Together, these combine as our strategy for ending child poverty - supporting parents and their children to overcome the barriers that trap them in poverty, and setting them on the path to an independent life beyond the state.
Culture change
But we won’t improve children’s life chances on paper - real change comes through reforming the whole culture of government interventions…
… getting to the root causes of problems early, instead of waiting to manage the symptoms.
That’s why we’re investing in the Pupil Premium, ensuring that pupils from the most disadvantaged backgrounds have fair access to a decent education.
It’s why we’re providing relationship support, ensuring that the most vulnerable families receive the support they need to provide a stable home life for their children.
Family breakdown is too often the scourge of the poorest in society. Children from broken homes… underperforming at school… and mothers unable to ‘cope’.
At the CSJ, we found that the Government was spending £20 billion a year on the results of family breakdown and too little on support for families in difficulty.
That is changing.
And so too elsewhere in government.
Wherever we see a maintenance culture, we will replace it with a transformational one.
That’s why we’re protecting the role of the money advice service and supporting Credit Unions, to make sure people can get the advice and help they need to manage their finances, to help get them clear of the loan sharks.
It’s why we’re abolishing the National Treatment Agency - which spawned an industry soaking up government money to maintain people on drugs and alcohol, rather than using rehabilitation to get people free from a life of addiction.
And it’s why we’re introducing the Universal Credit, which will support more people into work, which we know is the best way for families to lift themselves out of poverty.
Universal Credit
This last point is particularly important.
For some people, such as those with severe disabilities, income from the state will always play a vital role - and this Government has promised to protect the most vulnerable.
However, for those who are able to work, this has to be seen as the best route out of poverty.
For work is not just about more money - it is transformative.
It’s about taking responsibility for yourself and your family…
… playing a productive part in your community…
… creating an environment where success through hard work is celebrated, so that children can aspire to even more.
So we also have a simple message for those who can work: we will make work pay more than a life on benefits.
Under Universal Credit, by stripping away the complexity of the current system, we will make the journey into work smoother and more rewarding…
… and in doing so, make a real difference to people’s lives.
It is estimated that Universal Credit could lift 350,000 children and 550,000 adults out of poverty.
And our latest analysis suggests that Universal Credit will ensure the vast majority of children will be lifted out of poverty if at least one parent works 35 hours a week at the minimum wage - or 24 hours if they are a lone parent…
… which is why we are placing such a high priority on work incentives.
If people take steps with us to find and stay in employment, they will see the rewards.
We are investing £2 billion to make work pay - and together with the other programmes we are delivering across Government, this has the potential to completely alter a child’s future.
Because getting a family into work…
… supporting strong relationships, getting parents off drugs and out of debt …
… all this an do more for a child’s wellbeing than any amount of money in out of work benefits.
With the right support a child growing up in a dysfunctional household, who was destined for a lifetime on benefits could be put on an entirely different track - one which sees them move into fulfilling and sustainable work.
In doing so they will pull themselves out of poverty.
Economic climate
I could stand here today and claim that today’s statistics are good news for the Coalition in the first year of government.
For at a first glance, that is what they show.
The decrease in child poverty by 2% points looks like a step in the right direction.
But the reality, like poverty itself, is more complex.
In 2010/11 the economic downturn brought with it the largest drop in median income since 1980, dragging the relative poverty threshold down with it.
But even as relative poverty fell, absolute poverty remained flat at 11%.
So these figures make the powerful point that while some families may have crossed an arbitrary threshold, real incomes did not rise and the lives of the poorest did not change.
How perverse that the simplest way of reducing child poverty is to collapse the economy.
When in fact, deficit reduction is vital if we are to generate sustainable growth and job creation - which in itself is a pre-requisite for ending child poverty.
Gone are the days when taxpayers’ money could be poured into politicians’ pet projects in the pursuit of short term goals.
Resources are incredibly tight.
In such economic circumstances we must focus our actions where they will be most effective and long lasting.
That is why our reforms are about changing the culture of welfare, so that it acts as a springboard rather than a trap…
… reducing the costs of treating poverty further down the line, and changing lives at the same time.
A new measure
Today I have published a practical guide on what we know works - the Government can’t tackle child poverty on its own and we need the support of local providers, and community and voluntary organisations.
But alongside dynamic interventions to tackle poverty, it is important that also look more closely at the effect they have.
We remain committed to the targets set out in the Child Poverty Act but it is increasingly clear that poverty is not about income alone.
Today, I am pleased to announce that the Government is very interested in developing better measurements of child poverty - which include income but do more to reflect the reality of child poverty in the UK today.
We will be seeking a wide range of views in the autumn as part of a consultation on how best to measure child poverty.
This is not an easy task and we will need help from experts in the field.
But it is vital work, for unless we find a way of properly measuring changes to children’s life chances…
… rather than the present measurement of income alone…
… we risk repeating the failures of the past.
Conclusion
The decade from 2000 to 2010 saw a huge amount of money transferred to meet a poverty target increasingly more difficult to achieve.
However what become clear was that all that spending failed to meet its objective…
… because the process failed to understand that unless something changes in the lives of the recipients then they become more dependent not less.
The objective should be to show that life change is the key to moving people out of poverty…
… helping them to effect the change they need to rise above the dependency which has so reduced the quality of their lives.
Today’s figures show that we must bring an end to the tick box culture that cost so much and progressively failed to achieve its aim.
What we need is a system that understands that government policy should be measured by the effect social programmes have on changing lives…
… not just counting how much money is put in.