Evidence of meeting #38 for Human Resources, Skills and Social Development and the Status of Persons with Disabilities in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fuel.
A recording is available from Parliament.
9:10 a.m.
Liberal
The Vice-Chair Liberal Michael Savage
Good morning. I'll call the meeting to order.
Pursuant to Standing Order 108(2), we will resume our study of the federal contribution to reducing poverty in Canada.
Can our witnesses hear us in the U.K.?
9:10 a.m.
A voice
Yes, I can hear you from London.
9:10 a.m.
A voice
I can hear you from Bristol.
9:10 a.m.
Liberal
The Vice-Chair Liberal Michael Savage
Thanks. That's great. We very much appreciate the fact that you've taken time to talk with us today.
This is, as you know, the human resources, social development, and status of persons with disabilities committee of the House of Commons of the Canadian Parliament, and we are doing a study on the federal contribution to reducing poverty in Canada.
We heard last week from some colleagues in Ireland about the work they are doing in this area, and we're delighted that you are here with us today.
We're going to ask you each to perhaps give us about ten minutes, and then we will have questions. The way it works here is that we have the four parties of Canada—the governing Conservatives, the opposition Liberals, the Bloc Québécois, and the NDP—who will take turns asking you questions after you have given us your presentation.
I want to thank you both; we received a copy of some of the highlights of your presentation. Canada is proudly a dual-linguistic nation, and we can't pass these out to members until we have them translated. I would ask you, if you would, to speak slowly, because we will be translating your comments into both official languages.
With that, I want to thank you again for coming.
Perhaps we'll start with Professor David Gordon, director of the Townsend Centre for International Poverty Research at the School of Policy Studies of the University of Bristol.
Professor Gordon, you'll have ten minutes, please.
9:10 a.m.
Professor David Gordon Director, Townsend Centre for International Poverty Research, School of Policy Studies, University of Bristol
Good morning.
I'd like to thank you for giving me this opportunity to talk to the Parliament of Canada and this very important committee in its important inquiry.
I had hoped to be able to show you slides, but unfortunately, the powerpoint system where I am at the moment is not working. You have a copy in English available, and I'm sorry I didn't have time to get them translated into French.
When talking about a U.K. strategy, it's important to realize that a lot of the details are devolved to the four countries that make up the United Kingdom: England, Wales, Scotland, and Northern Ireland. Peter and I are currently on the advisory committee for the National Assembly for Wales, which is designed to help implement the eradication of child poverty by 2020. It is, however, a U.K. government policy, which is agreed to by all four components of the U.K., to attempt to eradicate child poverty by 2020.
The main plank the U.K. government has pursued to do this has been a policy of full employment via active labour market interventions, by trying to get people into work they have not been in before. Attached to this is a policy of trying to make work pay through a whole tranche of mechanisms, such as a minimum wage, tax credits, a form of negative income tax, child care vouchers, and training and education of people who need it in order to be able to get paid work.
These policies have been pursued very rigorously since about 2000. By about 2005-2006, they succeeded in reducing child poverty as measured by low income by about a quarter, which was quite an achievement, given the high levels of children in poverty we had in 1999.
You'll see on one of the slides I've given you that in the 1980s and early 1990s, child poverty as measured by low income increased threefold. Since about 2000, it has gone back by about a quarter. However, recently, in the past year, those policies have stalled. In fact, by some measures child poverty has been increasing for the past year, and maybe in the previous year as well.
It is unlikely, given the academic research we have in this area, that pursuing full employment policies alone will be sufficient to eradicate child poverty forever. There will always be some people who need to receive welfare benefits because they cannot work because of caring responsibilities for children and adults.
In order for the government to make its target, it needs to do more than it is currently doing to increase the levels of incomes of families who for various reasons cannot work. The simulation models that have been done by some of my colleagues at the University of Cambridge and the London School of Economics and Political Science have shown that full employment and active labour market intervention policies alone would at best reduce child poverty by about half. To get the other half, you would need to do something about the welfare benefits.
The U.K. government had a wide-ranging consultation a few years ago about how child poverty should be measured. Much of the debate and a lot of meeting of targets depends crucially on the way you measure these things. After this extensive consultation, they came up with a three-tiered approach. There are now officially three measures of child poverty. The government argues that it will know it's meeting its targets if all these measures are going in the same direction. They all need to be declining, not only one or two.
The first one is an EU relative income measure, which is children and families below 60% of the median income across all 27 member states of the European Union.
The second measure is a fixed measure that takes the level of income that would have been needed in the mid-nineties and upgrades it only for inflation rather than for changes to income in society as a whole.
The third measure is one that comes out of academic research by my colleagues Peter Townsend, Joanna Mack, Stewart Lansley, and others, and is very similar in concept to that measure used in Ireland--consistent poverty. It is low income and multiple deprivation combined. So you measure both the resources that people and families have and also the outcome of low resources in terms of material deprivation.
All those measures need to be declining for the government's policies to be effective, and they are targets for the first and the third measure.
There are also European Union-level measures of poverty. The first is the one I talked about, the 60% of median, and the second is the number of children in households where no one is working--workless households.
It's important to understand that this is just the broad picture of how it is being measured in terms of income poverty and low resources. But the U.K. government also has other policies, which I was told you are interested in, to do with fuel poverty. These use slightly different definitions, and unfortunately the measures of income poverty used for the targets for eradicating child poverty and the measures of income used in fuel poverty are not currently aligned. Basically, the idea of fuel poverty is that households should not have to spend a disproportionate amount of their income in order to adequately heat their houses.
This is important in a country like the U.K., and also I guess in a country like Canada, where heating your house, particularly in winter, can have long-term health consequences, and short-term health consequences if it's not adequately done. And it's particularly important at the moment with the rapid increase in fuel prices.
The government's main policy for eradicating fuel poverty, which it has a statutory obligation to do--and is very likely not going to meet because of the recent rises--has been to deregulate the market in an attempt to reduce the cost of electricity and gas. That was effective in the past but is not effective at the moment. But it was also to identify a vulnerable group of population--the elderly people receiving welfare benefits--and to then provide free energy efficiency measures to improve the energy efficiency of their houses, i.e., lagging the lofts, providing new boilers, and improving central heating systems.
The government has also, every winter, given an increasing amount of money as a one-off payment to pensioners in order to help them meet the cost of their fuel bill over winter. That's equivalent to about £200 U.K., depending on various criteria.
So there are these central government planks, but the details of how the anti-poverty policy and to a greater degree social exclusion and social inclusion policy are implemented with regard to service delivery and health, education, and housing depends crucially on which country you live in within the U.K. So like Canada's federal system and provincial system, we have a U.K. government system and then a lot of responsibilities devolved to the individual country level.
The details of how this has been done vary from country to country, and I'll be happy to answer questions about the individual details. But that's just to give you a kind of overview.
Thank you very much.
9:15 a.m.
Liberal
The Vice-Chair Liberal Michael Savage
Thank you very much, Dr. Gordon. We appreciate that.
We'll move to Dr. Peter Kenway, director of the New Policy Institute in London.
Dr. Kenway.
9:15 a.m.
Dr. Peter Kenway Director, New Policy Institute (London, U.K.)
Thank you very much.
I will just say a little bit about what the New Policy Institute is, since we're not within academia. We are an independent think-tank that has been around for more than ten years now. Over that time we have worked a lot, not exclusively, on poverty and social exclusion, usually funded in this work by the Joseph Rowntree Foundation.
In the first instance, our role here has been monitoring progress, using almost exclusively the official data sets, and I think this has meant we've probably done two useful things. One thing we have done slightly is to contribute to keeping the public discourse honest, and the other thing we have been able to do through that is to shape the way in which certain issues are seen, sometimes in advance of them becoming mainstream.
One thing I would particularly mention, because I think it's central—I imagine it's central to you too—is the point that while most people in work are not in poverty, in the U.K. at least half the people in poverty belong to working households. So the simple story that work is the route out of poverty is not in accordance with the facts.
Let me briefly divide my contribution into two parts. Firstly, going over some of the history, I don't in any way disagree with anything that Professor Gordon has said, though I perhaps might be colouring it slightly differently. I then want to make one or two remarks about where I think the U.K. is at with its anti-poverty policy that I hope may be relevant to you too.
As David said, really the first significant act in this move to deal with poverty took place in about 1999. There was an explicit focus on children and an implicit focus on pensioners. Since children live with adults, the adults who live with children also in some sense were both the object of the policy and also the beneficiaries. The great group that was left out and remains left out is those working-age adults without dependent children, and we would say that is important.
As David told you, really for the first five or six years of the government's policy, child poverty measured on the low-income measure was falling steadily, perhaps not quite as quickly as was wanted, but it was certainly coming down. I think at that stage the target was expressed in terms of a desire to remove a million children—that's about a quarter of the children in poverty—from poverty by 2004-05.
In the best year, which was 2004-05, I think something like 800,000 children had been removed from poverty, moved above that income poverty line. That was short of the target but was nevertheless a substantial achievement. We now have two more years' worth of data, and I think they show a very different story. It's not always clear that these things are statistically significant, but the headline figure is that since then, child poverty has slipped back up again by about 300,000. That means, compared with the objective two years ago of reducing child poverty by a million, we have actually now reduced it by only 500,000. We are only halfway to a target of two or three years ago.
The way we sum that up, and I think it is very important to get both parts in, is that this was a policy that clearly was working. The polices that have been pursued have not in any sense been a failure. But it's a policy that, having worked, has now stalled. Perhaps it's exhausted. It certainly seems to have very little momentum. Why is this, and where does this leave the U.K.?
David also very clearly explained that this policy, of course, is heavily dependent upon increasing employment, particularly among lone parents, where there are very high levels of worklessness in the U.K., and that was deemed to be a significant concern.
In the early years of the Labour government, post-1997, the employment rate was rising. It rose by about 1% in three years, which is quite significant, I think. Since then, it has struggled to rise very much further. I think that is part of the difficulty of a strategy that emphasizes work so much.
Nevertheless, I think what you can see there--an employment policy, income supplements to people in work through tax credits--was a policy wherein the instruments were well matched to the target. I think the difficulty with it, however, certainly as far as the tax credits and the use of the tax and benefit system is concerned, is that it was not addressing the deep causes, if you like, of poverty, whether that be in the labour market, whether it be to do with the levels of human capital, qualifications, and so forth, or whether it be to do with discrimination.
It also singularly failed to recognize, never mind address, this problem of in-work poverty. As I say, it is now the case that half the children in poverty belong to working families. Almost all the working families are paying tax. There are all sorts of areas that have not perhaps been addressed that might have been if in-work poverty had been recognized as a problem in its own right.
So where have we reached? I think the conclusion we draw is that the way the Labour government of Mr. Blair began its anti-poverty policy in the late 1990s was arguably the only way to begin, which was by focusing on children and by using very direct measures to try to boost incomes. It did work. It continued to work for several years, but it seems to have run out of steam. I think we've therefore reached the point at which you can't assume that these direct measures, these direct income transfers from the state to individuals and families, can go on working forever, unless you address wider problems. They have always been part of the anti-poverty policy here, but I don't think they've been a coherent part of it. I don't think they've been integrated within it properly.
Our challenge now is to ask how many of these other things are intended and are supposed, exactly, to affect poverty. I think the going from now on will be much harder. It will be much harder to see evidence on a year-by-year basis. Nevertheless, it is almost certainly the case that you have to, in the end, engineer fairly deep changes in society if you want to end poverty. You can't eradicate it. Perhaps you can't even reduce it substantially while in some sense the rest of society carries on the way it has and the way it does.
I think there are very big challenges ahead. I think the fundamental distinction that now lies with other policies is whether you are going to have policies that are targeted at low-income households or other disadvantaged groups--you've had a number of those suggested to you--or whether you are going to try to do things that perhaps alter society as a whole. I noticed in your list the suggestion someone put to you of having universal child care. I think that falls into that category, and I think there could be an interesting discussion about that if it's something that is of interest to you.
Thank you.
9:25 a.m.
Liberal
The Vice-Chair Liberal Michael Savage
Thank you very much.
We appreciate both of those presentations.
We're going to move to questions from members. The first round will be seven-minute questions, then we'll have a round of five-minute questions. Then we will see where we are.
We'll start off with the opposition, the Liberal Party, and the Honourable Judy Sgro.
9:25 a.m.
Liberal
Judy Sgro Liberal York West, ON
Thank you both very much, Professor Gordon and Mr. Kenway, for being with us this morning as we continue to work to find answers to our role in government, in society, when it comes to dealing with poverty in our countries.
You talked about altering society as a whole. One of the goals from my perspective is to start at zero in making sure that our children are prepared right at the very beginning, so that they have exposure to the things that stimulate their young minds and flow right into our education system. We keep trying to deal with what we're having to deal with today, which is the working poor or those who, for many reasons, are never going to get beyond the numbers required, as you said earlier.
So given the fact we would have to have two approaches, one from zero on and the other trying to deal with the people who we're all trying to deal with today, at least we should have a long-term vision as to where we need to be going and where we're going to start. If we had started in 1999, making sure we were all investing in the right things at that time, maybe we wouldn't be dealing with the numbers we have today.
But turning to the specific instruments the government is using to try to eradicate poverty now, we're talking about child care, increased minimum wages, and guaranteed income. All of those are ideas. What should the government have done differently and what should it do differently now?
9:30 a.m.
Prof. David Gordon
Right.
You've asked some very key questions there. The U.K. government's focus on child poverty was in part due to an ideological shift within the Labour Party from a socialist focus on equality of outcome based on need to one more concerned with equality of opportunity.
If you're interested in equality of opportunity, you have to invest heavily in children from year zero in order to try to level the playing field and increase the chances of social mobility. The government invested a large amount of money and is still investing a large amount of money into children from the very earliest ages. It made free nursery places available to four-year-olds in school. It introduced vouchers for children for nursery care under three for two and a half days a week and introduced a whole range of new benefits in order to try to raise the incomes of families with very young children.
This was based on good scientific research as well. The families who had the deepest poverty were those with the youngest children. This was in contrast to what the statistics showed at the time. They showed it was older children, but that was an artifact of those statistics. So the government responded to the idea that you need to start at zero, and maybe those policies will work in 10 to 20 years' time, but they are long-term policies.
There is also a crucial need to deal with the problems of today, and the government, as I said, tried to do that through active labour market intervention. It needed, really, to try also to raise the benefits that are available to families with children. Britain is half-way in the European league in the generosity of the tax and benefits system to families with children. Britain does not have as much redistribution across individuals' life forces as, say, the French system or the Swedish system, where money is taken from people when they're middle-aged and given to them when they're children or when they're pensioners, in terms of family benefit or pension benefit. In Sweden, 80% of the redistribution is like that, not from rich to poor. That is a very effective way of ending child poverty.
The system in the U.K. and Ireland is a much more means-tested one, where money is targeted at the poor, the pensioners, and children. It means it spends less, is able to spend less because it has more specific targeting. But if you want to eradicate child poverty forever, there's a limit to the effectiveness of means-testing.
9:30 a.m.
Director, New Policy Institute (London, U.K.)
Thank you very much.
It may very well be that in 20 years' time we'll look back and decide that the greatest contribution our government has made to fighting child poverty was the measures that it took, which David has just referred to, to help children from zero, as you were saying. I think our program assures staff at children's centres of the education for three- and four-year-olds. It might very well be that when you take the long view these little income supplements seem to have been the second order of importance.
However, let me draw your attention to another very important gap in what the U.K. government has done or not done. It has quite rightly looked at children from zero, but the group that has been ignored in practice and where there is no sign of any progress is late teenagers and young adults. To give you a specific example, we look particularly at measures to do with the number of 19-year-olds without what's called a level two qualification. In some sense for these purposes the precise level doesn't matter; the key point with this statistic is that about a quarter of 19-year-olds fail to reach that minimum level. That was the case a decade ago, and it is still the case.
The number of young adults who are out of work, the number of young adults who are in poverty, remains a real blot, if you like, and a gap in what's been done.
The point about those people is that when we first pledged to do something about child poverty these people were children. I don't think that's just a piece of empty rhetoric. It's very important, if we're going to say we're going to have a child poverty strategy, that we have a strategy that addresses the interests of all children, not just those at zero, even though they are very important, but all the way up.
I think the reason why we might have to wait a long time to see second-stage effects, if you like, from the government's strategy is precisely that it has not succeeded, possibly not even really tried, to come to grips with the oldest children, who then become the youngest workers. So that cycle of deprivation is in grave danger of being repeated, at least for the next generation, even if the stuff for very small children does something about it for the generation hence.
9:35 a.m.
Liberal
Judy Sgro Liberal York West, ON
To follow up on the late teens, what work is being done today with that group of late teens to prevent them or their families from being the working poor later on? Is anything being done specifically now for the late teens?
9:35 a.m.
Liberal
The Vice-Chair Liberal Michael Savage
I'm going to have to ask you to hold that thought and come back to it in answer to another question. We're a bit over time.
I'm going to go to Monsieur Yves Lessard of the Bloc Québécois for seven minutes.
9:35 a.m.
Bloc
Yves Lessard Bloc Chambly—Borduas, QC
Thank you, Mr. Chair.
I would also like to thank Professor Gordon and Dr. Kenway for sharing their experience and expertise with us this morning. I find your experience very interesting and helpful, in the sense that the approach you take to fighting poverty is employment first. Create employment and make sure that people who are able to work have a job to go to.
My question is in two parts. First, I would like to know what causes the optimism that allows you to set the goal of eradicating poverty by 2020. I understand that the results obtained in the first five years are quite extraordinary. But, as you said yourselves, the point has come where you have reached a plateau, and, for some groups, such as single-parent families and the elderly, the figures are heading in the other direction. That is my first question.
Second, Mr. Gordon tells us that your experience is showing you that about 50% of people in poverty are going to stay poor if we do not change our approach completely, because that 50% is working. That is what I think you are saying.
I would like to know what steps you have taken to support the working poor. Are there government initiatives that require businesses to provide better working conditions, or, for those that cannot, to support them so that they can? How do you handle that?
I also understand—correct me if I am wrong—that all labour issues are matters for Parliament. Are the other three Parliaments, those in Scotland, Wales and Northern Ireland, committed to the same extent as the Parliament of the UK as such?
9:40 a.m.
Bloc
Yves Lessard Bloc Chambly—Borduas, QC
Yes. I was talking to both of them. They can both have a turn.
9:40 a.m.
Prof. David Gordon
Thank you very much for those intelligent questions.
First, I want to deal with the late teens. The government has done much less for this group and for working-age adults than it has done for younger children and the elderly. To a certain extent, the ideology of the poor law still prevails, in that it is easier politically to consider the young and the old as deserving and maybe late teenagers and young people as undeserving, and therefore the government is much more cautious about investing more money in that group.
However, it has made some investment in improving training, particularly for the group it calls “NETE” in British terms--not in education training or employment. It has a minimum wage policy that is very important for this group, but unfortunately for the age group under 25 the minimum wage is less than it is for over 25, so again, there's a limit to the effectiveness of that policy.
One idea it is thinking of pursuing is to raise the school leaving age from 16 to 18, so there are not 16-year-olds or 17-year-olds who are not in school but not in jobs, and are not even in training. Those are the kinds of policies it's pursuing, but there is a whole range of policies under which they tend to have only limited investment compared with the policies for younger children.
One of the reasons the government is optimistic that it can eradicate child poverty is that if you look at the costs of eradicating child poverty in terms of the amount of income that would need to be transferred from people who aren't below the poverty income line to those who are below the low income line, it's a little less than 1% of gross national product.
The U.K. has a very large economy, so that means that relatively small income transfers in terms of the size of the economy would effectively eradicate child poverty, if you can pursue policies that allow these income transfers. That's not an insignificant amount, 1% of GNP, but nevertheless it is a feasible amount. It does not mean restructuring the whole of society as we know it.
The government's policies for the working poor, as Peter rightly points out, have not been as effective as the government hoped. Again, minimum wage is on tax credits that support people on low incomes. There have been problems with integrating the tax benefits systems. Tax authorities are used to taking money; they are not always effective, especially at first, at giving money back to people, so there has been a lot of confusion with those policies. They are working a bit better now, but more needs to be done.
The policies the government has pursued have been effective, but they haven't been effective enough, particularly for the working poor. There have been other trends in society, such as a declining family wage. In the 1950s, one person worked, usually the man, and could afford to support his family. Now you have a big working rich and working poor household divide, in which you have families where two people are working, and that tends to protect against poverty almost universally. But if only one person is working, particularly in a low-wage job, then that family falls beneath the poverty threshold. It may not be a long way beneath it, but nevertheless, even with the benefits available, they tend to fall below the poverty threshold.
There are policies in place that, if invested in more and if they were more effectively delivered, could deal with the problem of the working poor and still relieve those who have so much care and responsibility that it's not really feasible for both parents to go to work. It would not necessarily even be desirable from other policy objective points of view, and certainly not desirable from that family's point of view, for both adults to go to work. That problem the government hasn't really tackled yet.
9:45 a.m.
Liberal
The Vice-Chair Liberal Michael Savage
Thank you very much.
Thank you, Mr. Lessard.
For the information of our witnesses, we would normally go to our third opposition party, which is the New Democratic Party. Our representative on this committee from the NDP is in Ireland now, meeting with some officials and getting ready for the basic income conference later this week, so we'll go to the government party.
We'll start off with the Parliamentary Secretary to the Minister of Human Resources and Skills Development, Lynne Yelich, and she may be splitting her time with Mr. Gordon Brown.
You have seven minutes.
9:45 a.m.
Conservative
Lynne Yelich Conservative Blackstrap, SK
Thank you very much for being with us here today.
I'm sharing my time with Mr. Brown. We'll go back and forth because we find there is never enough time to ask questions when we're trying to make some comparisons.
My main question is to David Gordon. How did your government come up with the definition of fuel poverty? We've heard about a lot of poverty, but that interests me. Tell us a bit about it, please.