WEDNESDAY 29 NOVEMBER 2000

MS S MIDDLETON

  122. Good morning, ladies and gentlemen. May I declare the public session of evidence open and welcome Sue Middleton from Loughborough University? Some time ago the Committee spent a very productive day just listening to some of the work which was being done up at Loughborough and we are very grateful as a Committee for the support we get from the academic community. We are particularly grateful that you have managed to give us some written evidence.[1] We know that you have been working in this area for some time, particularly the work you did on the Small Fortunes survey which is extremely valuable for us, and also as a contributor to the Rowntree Foundation study on Poverty and Social Exclusion in Britain which was recently published and which we noted with great interest. By way of setting the scene, the more we get into this inquiry the more we are becoming focused on the adequacy or otherwise of the support which children get. You have done a lot of work on this. Could you just start by telling us a bit about the work you have done on what parents spend, what the average spend is on their children? It came up with results that prima facie you would not necessarily expect. Certainly the results in the existing benefits, as they are devised in the current system for the support of children, do not reflect some of the expenditure patterns which your work discovered. If you could spend a moment or two talking round that, it would be a very good introduction to the questions we should like to ask you.
  (Ms Middleton) There are two questions there: one is about structure of benefits and one is about adequacy and what spending told us about these things. Talking about structure, looking at average spending on an individual child in a family, that is, regular spending not all the extras, such as the capital goods you need to have a baby and all the rest of it, what we found, to summarise, was a remarkable similarity in average weekly spending on children in different family types, children of different ages, children of different birth orders. In terms of age, there was this view enshrined in the benefit system that younger children cost much less than older children. That seems from spending data to be true, but by nowhere near as much as had been imagined; younger children cost more, especially if you took into account child care costs. I can return to that and what the reasons were for those expectations later, if you wish. In terms of birth order, Child Benefit assumes that a first born or an only child is going to cost a lot more than a subsequent child. Presumably the reasoning behind that is that there are savings from being able to pass on goods from one child to the other. What the spending evidence suggests is that those savings are not that great in regular spending terms; they are relatively small. The average a second child in a family has spent on it is something like 17 per cent less than an only child, which is not vastly different. Yet if you think of the structure of Child Benefit, a second child in a family is assumed to cost something like 50 per cent less than an eldest child. We also found, at first sight strangely, that average spending did not vary greatly with income of a family; about 20 per cent from the bottom quartile to the top income quartile. If you think about it, those of us who are parents know that that actually makes sense. What happens in a family is that you put the roof over your head, you pay the basic utility bills and the next priority is the kids. For those at the richer end like me, you tend to say you are not spending any more because then you are heading towards spoiling or you have higher housing costs or whatever. The differences were not phenomenally large and that was the fundamental conclusion in terms of structure.

  123. Fascinatingly it poses the question: if that is happening—and I should be interested to know whether your research work can inquire into the "Why?"; that might be an entirely different set of questions—if across the income distribution range children are getting more or less the same spent on them—which may be a bit of an exaggeration and putting words into your mouth—is it a problem? Why are we all so worried about it? If you are looking at the adequacy of income devoted to children and you are saying that even the poor families manage somehow to find enough expenditure not to prejudice them that much, what is the problem? Why should Government be bothered about any of this?
  (Ms Middleton) The problem is where that money is coming from. What is happening is that parents are sacrificing their own consumption in the interests of their children. We all do that. If you look at the proportion of disposable income which is spent on a child in a lone-parent family, it is something like one third of disposable income. If you look at the proportion of disposable income in a two-parent family which is spent on a child, it is something like one tenth. Obviously that income has to go round two adults in a two-parent family, but what we found was that it was more to do with the fact that the lone parent is getting a lower income than that the two-parent family has to spread income around among two adults instead of one. I have said flippantly on more than one occasion recently that it is not going to be a lot of good if we abolish child poverty at the expense of being left with a nation of poor parents. That is of major concern. If you look at the evidence about the extent to which poorer parents are going without, in recent work I have done associated with the "Poverty and Social Exclusion Survey of Britain" we are finding significant proportions of mothers in particular who are going without food in order to provide food for their kids and that cannot be healthy. The short answer is that it is about making sure that families remain healthy as much as kids.

  124. Could you be tempted into the "Why?" question about why the difference in averages is so little or is that something the research does not attack?
  (Ms Middleton) It lies in the priority which the vast majority of parents give their children whatever their circumstances. The things we covered were food, clothing, all the basics and things like holidays and Christmas and birthdays. We found, not surprisingly, that where there were differences in spending, most of them were on things like spending on birthdays and spending on holidays. For the rest of it, there was very little difference. It is about the way people prioritise.

  125. Do you think it is sensible to try to disaggregate to the extent that the Government are thinking in 2003 of having an Employment Credit and a Child Credit? Is it realistic to try to isolate what you are spending on a child versus what you are spending on the rest of the family budget? Is this a game that is worth playing?
  (Ms Middleton) We did it. That was exactly what Small Fortunes did and I have to say I spent a lot of time being told it could not be done. It can be done. Whether it is desirable to do it is more the point and yes, it probably is. In general, both for children, for families and for society, it is probably a good thing to have a portable benefit which ringfences amounts for children. The evidence from other research about how mothers use Child Benefit suggests that they appreciate the fact that there is an area of income which is ringfenced for the child and that they make very great efforts to ringfence for the child. Yes, it probably is sensible.

  126. Following on this central point about how the benefits accommodate different structures of families, you say that if the Integrated Child Credit (ICC) is paid at a single rate there would inevitably be some winners and losers. The first crucial question is: who would win and who would lose?
  (Ms Middleton) There would be some winners and losers in the sense that if you paid it at a level according to current rates, at the moment the only child or the oldest child in a family would lose out but the second and subsequent children would benefit. That is within current costs. The Government has moved a very long way in redressing the age issue since it came into power, but there are still some discrepancies and within existing spending limits older children would miss out slightly, but younger children would perhaps still win.

  127. In your article, accepting that the variation is not that huge, you say that the child who does best at the moment would be the single child in a two-parent family and the worst would be three children in a single-parent family. Is it your view that the levelling out impact of an equalisation would be insignificant?
  (Ms Middleton) It depends on what the policy is trying to do and that was what I was trying to get at in the article. We need to think about what we are about here. Are we into poverty relief, are we into assisting large families, are we into support for families more generally, are we into work incentives? If we are actually about poverty relief, there would be a case for assisting larger families because that seems to be where the big drop comes, where you have three or more children. If you look at the Australian and Canadian systems, both systems provide some extra for larger families and throughout Europe that is the way things work. Our system has not worked like that. If Government feels it is not its place to intervene in how many kids people have or thinks it might encourage larger families, well then you do not do that.

  128. Is it your impression that there is a muddle in the thinking about what it is about, or is it that people are attempting to try to reconcile at least two of those objectives and can they be reconciled?
  (Ms Middleton) I am not sure that they can. I am not sure there is a muddle, there is just a very, very laudable aim to abolish child poverty and at the same time to provide seamless systems of support through tax credits. I am not really expert enough to say whether those two can be reconciled, but there is confusion in other systems. If you look at the Australian and Canadian systems they have part of their benefits which do differ according to age and parts which do not. They have parts of systems which actually pay more for first children and then parts which are all the same. It does come back to what you are trying to achieve.

  129. Would you agree from your evidence that the poverty issue is most intensely concentrated upon families with more children?
  (Ms Middleton) Yes.

  130. What would your view be about how the ICC should be structured? Let us assume for a minute the objective is tackling that problem. How should it be structured to deal most effectively with that problem?
  (Ms Middleton) It should be structured to pay more for more children in the family, if you are going to do that. If you are going to go away from any simple flat rate, I would say that would be far more important than structuring by age.

  131. You could not then say whether doing that, in your opinion, would significantly undermine a work incentive issue for parents of larger families.
  (Ms Middleton) One of the joys of taking benefits for children out and paying them separately is, I would argue, that all the work I have done with families would lead me to conclude that it would not have any effect on work incentives. I do not think families spend like that. Families meet the needs of the children and it does not matter whether you are in work or out of work. In the context that I have a little bit of a problem with work incentives anyway, I cannot honestly see that it really is going to have much effect one way or the other. There is no evidence from Australia and Canada that it reduces child poverty. There is also no evidence that it does impact negatively on work incentives.

  132. Following the same logic, if you could represent to the Chancellor any changes to Child Benefit which will continue to parallel the ICC, would you recommend that he should abolish differentials and just pay a single rate?
  (Ms Middleton) Yes.

  133. I am slightly nervous about the size of family issues. In dull days in the Daily Mail Features Editor's room they find some unfortunate family with 11 children who have had two council houses knocked together and they calculate the amount of money this is costing the taxpayer and it causes an awful lot of heartache. We all get letters about it. It is a very sensitive issue. I guess that is just a fact of life you have to deal with. If the Government went wholeheartedly and openly, transparently, down that route, the Daily Mail Features Editor would have a field day, would he not? Would that worry you?
  (Ms Middleton) As you have just pointed out, with respect, the Daily Mail Features Editor has a field day anyway. We can all find examples of fecklessness and whatever. It is the difference between legislators and the Features Editor of the Daily Mail.

  134. Moving on now to talk about the level of ICC, in their discussion document the Treasury gives an illustrative example of rates of ICC, using April 2001 benefit and tax rates.[2] Do you think what they are proposing is enough?
  (Ms Middleton) "Enough" assumes that the benefit is intended to be enough. We are getting onto issues of adequacy. If we again go back to average spending as a definition of enough, no, it is not. I have not recently uprated the Small Fortunes figure for prices but I think I worked out that at 1998 prices it would meet about 75 per cent of average spending on a second or subsequent child.

  135. What you are saying basically is that the Treasury is not proposing the rates to be high enough to achieve what they say they want to achieve.
  (Ms Middleton) It depends again what you mean by "enough".

  136. Presumably your research shows some level that you think is adequate.
  (Ms Middleton) Yes. No, it is not enough according to the average spending level. No.

  137. Why will it not be enough? Are you suggesting that somebody might want to argue that level you are suggesting is too high or is inflated for some reason?
  (Ms Middleton) The level I am suggesting based on that piece of research on average spending?

  138. Yes, based on that research.
  (Ms Middleton) If you wish children to have a reasonable standard of living, that is the sort of level you might wish to look at. The problem we have is that we have not actually ever had any serious review of the structure and level of adequacy of benefits for children in this country. My definition of what is enough might possibly be contested by other measures. What is interesting about the method is that it is a new way of looking at it. It gets away from this very, very arbitrary notion of incomes of 50 per cent below the average, which really does not help us much.

  139. A lot of the rates have been arrived at, figures seem to have been plucked out of the air, a long time ago and then they get changed by percentages.
  (Ms Middleton) Interestingly, as I understand it, a lot of the structure of benefits for children goes back to work that Seebohm Rowntree did on budget standards for poor families in York in the very early years of the twentieth century.

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