Lord Farmer
To ask His Majesty’s Government what assessment they have made of the impact on work incentives of lifting the two-child limit in Universal Credit.
The Minister of State at the Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, this Government are determined to lift children out of poverty, and removing the two-child limit is the fastest and most cost-effective way to do so. The benefit cap is still in place, encouraging parents to take responsibility and work towards financial independence. Our approach balances fairness and provides a strong safety net without undermining the incentives to work.
Lord Farmer (Con)
My Lords, recent international evidence found that unconditional cash transfers increase fertility. Families claiming health-related benefits are not capped, so even these workless families will get UC for every child, again affecting work incentives. Research by the Institute for Fiscal Studies found that money-per-child tax credits increased births by 15% and decreased contraceptive use among beneficiaries. Have the Government assessed whether lifting the two-child limit will incentivise more births in benefit-dependent households, and whether many of the 450,000 children this measure intends to lift out of poverty would not otherwise have been born?
Baroness Sherlock (Lab)
My Lords, the Government have seen no evidence that the two-child limit had an impact on family size. For example, 47% of households affected by the two-child limit were not claiming universal credit when any of their children were born. In other words, things happen; people set out, they have children and something happens. Maybe someone loses their job, they are bereaved, their spouse leaves them, or they get sick and cannot work. The welfare state should be there to support people, both into work and in work, but it is also there to support them when they cannot work. We already know that some 60% of households affected by this are in work. Our strategy is to make sure we do all we can to get people into work, get them to develop in work and support them, but we are there as a safety net when they cannot do so.
Baroness Lister of Burtersett (Lab)
My Lords, academic research has found that the two-child limit had no positive employment effect and that parents living in poverty are pushed further from the labour market because of stress, insecurity and the sheer hard work of struggling to get by. Does my noble friend therefore agree that a decent social security system can support effective job-seeking and plays an important role in tackling child poverty, as the child poverty strategy recognised?
Baroness Sherlock (Lab)
My Lords, my noble friend makes a really important point about the scarring effects of poverty. Our aim is to make sure that everyone who can work, does, with all the help they need to do that. That is what this Government have been doing. We are investing heavily in childcare to make it possible to work, making sure wages pay enough so that work is a good thing, and supporting children.
We know that when children grow up in poverty, things get worse for them. They are less likely to work as adults, and they earn 25% less at the age of 30. Even if some parts of the House are not persuaded on the grounds of the importance of the individual child, this is an investment in the future of our country. No other G7 country has a policy like this and there is a reason for it. We cannot compete on the world stage, grow our economy or create prosperous futures for our kids if we do not enable them to grow up thriving and healthy.
Lord Palmer of Childs Hill (LD)
Does the Minister agree that this is not about getting people back to work; it is about improving living standards and making sure children are safe, and that this Question, which tries to link people getting into work with this benefit, is completely ridiculous?
Baroness Sherlock (Lab)
My Lords, I think I have made my views clear on the impact of this policy. It is, in essence, a failed social experiment which has been pushing 100 children a day into poverty. We simply cannot allow that to happen. We want to support families. Most parents want to work to support their kids. Already, 84% of parents are in work—that is what people do. I used to work with single parents, who would say, “Even when it’s really a struggle, I want my kids to see this is what you do when you grow up”, but many people face barriers to work, and it is our job to make that possible. If you cannot afford childcare, how can you get to work? If you are not paid enough to be able to make life even bearable, how can you do that? The social security system should be there to support those who cannot work, but for those who can, to make it possible and to help them have a decent standard of living when doing so.
Baroness Deech (CB)
My Lords, around £450 million is owed to the Child Maintenance Service by absent fathers and some absent mothers. Some 160,000 children would be lifted out of poverty if the defaulting parents paid what they owed to the Child Maintenance Service. Does the Minister agree that is not right for the taxpayer to pick up the burden owed by defaulting parents and that the Child Maintenance Service must get that money from the parents?
Baroness Sherlock (Lab)
My Lords, the great advantage is not an either/or. The wonderful thing about child maintenance is that it does not impact on somebody’s social security, so if someone is working and getting some universal credit, maintenance tops that up further. The Child Maintenance Service does an astonishing job in many, sometimes very challenging, circumstances. Here is one simple statistic: since the Child Maintenance Service was set up in 2012, it has collected 93% of all the maintenance owed, but I am sorry to say that there are some parents who simply do not want to pay for their children. The Child Maintenance Service has astonishing powers. It will go after them, and it will keep after them, but we should encourage everybody to do the right thing: pay for your children, go out there and make it possible for them to have a decent life.
Lord Gove (Con)
My Lords, if this policy is such a good idea, why was the Whip removed from seven Labour MPs in the other place when they voted in favour of it last year?
Baroness Sherlock (Lab)
My Lords, perhaps the noble Lord knows more than I do about the state of the economy that this party inherited when we came into government. We have dealt with all the challenges that his Government left behind. Chief among those was the state of—not just support for children—the welfare state. We had huge numbers of people who had been abandoned. Under the last Government, the bill went up by £88 billion. This Government came in with a budget. We invested £1.5 billion in employment support; we have reformed Motability and universal credit. We are going to make a difference. We care about children.
Lord Winston (Lab)
My Lords, can we come back to the original Question? We have had some very spurious statistics about fertility and contraception. Does the Minister agree that contraception has been hugely important in getting women back to work and earning money?
Baroness Sherlock (Lab)
I am grateful to my noble friend for calling me back to order. The availability of contraception has been transformative for women, and we should all recognise that. Being able to have control over their fertility makes an enormous difference to the choices that women make. For many of them, it means they can work and manage family size most of the time. However, we want to enable mothers and fathers both to have children and to work. That is the job of the state. Mothers should not have to choose between having kids and having a job. Families should never have to do that. The job of the state is to make both possible for the sake of those families and those children.
Lord Londesborough (CB)
My Lords, child poverty is undoubtedly a serious issue, and the steep drop in the number of children being born in this country is perhaps even more serious. Last week, we learned that the average cost of raising a child has now risen to £249,000, according to research by Moneyfarm, which may explain why an increasing number of working parents choose to have just one child or none at all. Down the line, this means a shrinking workforce in an ageing population. What is the Minister’s view on this?
Baroness Sherlock (Lab)
My Lords, the noble Lord makes a really important point, which is that we need as a country to make sure that we prioritise the cost of living and enabling people to earn enough. It should be possible to go out to work and earn enough to support your family, but that is one reason why we think it is important to invest in appropriate levels of social security. Crucially, we have to help people to develop skills. We want people to get into work, but we do not want them stuck on the lowest-paid work. We have increased the national minimum wage and invested in childcare and free school meals—we are doing all the things to make it possible to do the right thing. However, we need to go further. We need to see people in this country in higher-skilled, higher-paid jobs that will help them, grow our economy, and create opportunities for their children in due course.
Viscount Younger of Leckie (Con)
My Lords, can I bring the House back to the original intention behind the two-child limit? It was to make the benefits system fairer to taxpayers who support themselves and their families solely through work. It encouraged parents on benefit to make the same financial choices about family size as those not on benefits. With the Government’s poverty argument in mind, the IFS has said that reversing the two-child limit is “not a silver bullet”. It said that the benefit cap will
“wipe out the gains for some children in the … poorest families”,
as 70,000 more households are affected by the cap. Surely supporting parents into work and into quality jobs is much more important for reducing child poverty. Finally, the IFS says that raising the employment rate to 80% from the current 75% would lift up to 350,000 children out of poverty.
Baroness Sherlock (Lab)
My Lords, that is why the Government have set that as their target. I say to the noble Viscount that the whole point about this is that it is not a choice. It is not a question of either supporting children or helping parents to go into work. Supporting families makes work possible. Most parents want to work. Our job is to make that possible, so we have done that. We have invested in expanding free school meals to everyone on universal credit, including those in work; we have raised the national living wage, and we have put in more help for childcare—30 hours a week for parents of preschoolers—and more help for childcare in universal credit. Children deserve the best possible start in life and their parents deserve the best chance to have a decent life. We want to do both.