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Lone Parents (Employment Opportunities)

Volume 459: debated on Tuesday 1 May 2007

I am very pleased to have secured the debate, but I shall begin with some important caveats, because recent media coverage has demonstrated that the politics of parenting and of parenting and work remain highly contentious. Raising a family is one of the most important, rewarding and demanding roles that life has to offer, and raising children alone is equally challenging and even more demanding than raising children in a couple. Everything that the Government do should be geared towards helping families and supporting children. For that reason, work will not be the right answer sometimes, or it will be an answer that must wait. For all those caveats, however, poverty is one of the most damaging things that can happen to a family, and work is a central route out of poverty. The Government and employers must ensure in partnership that we strike the right balance financially, personally, socially and culturally.

Taken overall, the lone parent employment rate has been a success story for this Government. It has risen by 11 percentage points in a decade, largely thanks to a voluntary and supportive approach at a time of economic growth. However, there are serious challenges ahead, and some prescriptions on offer are wrong. They must be rethought if we are to deal with the problems of London, on which I shall focus most of my comments, and the problems of the most disadvantaged groups—the groups that are furthest from the labour market—elsewhere. The practical steps that could be taken would have a positive impact, but some of them deserve greater attention than they have received to date.

I shall concentrate on the London experience, not least because it is what I experience as a constituency MP with some of the most deprived wards in the country, despite the leafy sounding title of my constituency of Regent’s Park and Kensington, North. In the ward of Westbourne, 83 per cent. of children are growing up in workless households. That is the highest percentage in the country, despite the ward being only a couple of miles from the west end, with all the opportunities that the labour market has to offer there.

It is clear that the strength of London’s economy has demonstrably not spread fairly and equally among all sectors of the population. Child poverty is acute in London—especially inner London—and it can largely be explained by the issue of labour market access. In London, employment for parents in all families is low compared with that for non-parents. In the rest of the UK, lone parent employment rose from 45 per cent. to 58 per cent. between 1995 and 2005. The rise that took place outside London is even more impressive than the national figures that are usually cited. In London, there was a much smaller rise from a much lower baseline—38 per cent. to 43 per cent.

Children in London are more likely to live in households where no one works and less likely to live in households where someone works, compared with other regions. Indeed, disparities in employment among parents account for most of the London-UK employment gap overall, which is growing. If we take account of individual characteristics, the lone parent employment rate in London is 12 percentage points lower than the rate in other metropolitan areas—up from 10 percentage points in 1997-98. With individual characteristics accounted for, that labour market phenomenon seems to be specific to London, and the tax and benefit system is very much a part of the problem. The relatively low employment rate among lone parents in London is not a city phenomenon writ large, and it is not due to differences in characteristics, such as ethnicity, between lone parents in London and in other cities.

Returning to the national picture, there is a differential rate of job retention between parents and non-parents. In other words, it is less a question of a lone parent finding work than of them keeping it. Despite the popular image, which the media often support, the issue is not about the beloved stereotype of the teenager having babies on their own to obtain a council flat and enjoy 20 years on benefits. Lone parents, who can be alone for any number of reasons, are just as likely to try for employment as anyone else. Job entry rates for lone parents generally have converged with those for the rest of the working-age population.

The main employment problem for lone parents is that job exit rates remain much higher. They have come down a little, but they are still much higher. About 10 in every 100 employed lone parents leave a job each year, compared with about 5 per cent. in the rest of the population. The heart of the matter is that if lone parents had the same job exit rates as the rest of the population in the same way that they now have the same entry rates, the 70 per cent. lone parent employment target would have been hit by now. There is not any basis for assuming that lone parents are less likely to take up work than the population as a whole, but there is good reason to believe they have more difficulty staying in a job, which explains their relatively low employment rate compared with other groups.

That analysis challenges one of the key elements in the recent Freud review, which suggested—among many ideas—that lone parents should be moved off income support and on to jobseeker’s allowance when their youngest child turned 12. First, 69 per cent. of that group are already in work. Secondly and more importantly, the JSA regime is poorly designed for the more subtle purposes of supporting sustained employment among people facing complex barriers, providing care and support for adolescent and teenage children, and skill shortages.

Another Freud proposal seems to be aimed at addressing the job retention problem, but many of us are still deeply sceptical about it. On one level, it sounds sensible to reward contractors not only for getting jobseekers over an employer’s threshold for a week or so, but for keeping people in work for three years. However, the strategy would involve long-term, seven-year regional monopolies in which everyone who had been on benefit for more than one year in London, for example, would pass from Jobcentre Plus to the provider. The provider would then be paid on the basis of how many more clients went into jobs than would have done otherwise. There would be a monopoly rather than a competition, and large amounts of public cash would be determined by estimates of what might have happened in an entirely different and unpredictable set of circumstances. Among other things, it is not at all clear how one would avoid rewarding providers for what others have done: for example, lone parent rates could go up because of the availability of more subsidised child care, or because of changes to the tax credit regime.

Given what we already know about the complex needs of lone parents in the most disadvantaged groups throughout the country and particularly in London, such an approach would be insufficiently flexible and integral. We need instead to develop devolved models that can deliver to targeted groups and respond swiftly to changing circumstances.

What do we need to do? Basically, we have succeeded in improving access to jobs for lone parents, but we have failed to do enough to make employment sustainable. The strongest factor associated with job exit is low pay, especially for part-timers. Among lone parents leaving the new deal, it has been reported that 18 to 20 per cent. are back on income support within six months, 29 per cent. within a year and 40 per cent. within two and a half years.

The reason for the phenomenon is that compared with other regions, simply living in London reduces the chances of job entry for lone parents independently of other factors, and it slightly increases the chances of job exit. The phenomenon implies that, by London standards, part-time work is particularly low paid and keeps the entry rate down. The impact on job entry is compounded by higher living costs in London and the tax and benefit system.

If we assume, as it is surely reasonable to do so, that the gain from work has to be higher in London to compensate for higher prices, parents will need a higher income to be as well off as parents elsewhere. However, increased hourly earnings do not translate into higher incomes, because there are withdrawal rates for benefits and tax credits. To be as well off in real terms as lone parents in lower cost areas, lone parents in London must earn a great deal more. If the difference in living costs is 10 per cent., earnings need to be 33 per cent. higher—even without taking housing benefit into consideration. When housing benefit is factored in, the situation obviously becomes even more difficult.

Something needs to be done to equalise work incentives in London and elsewhere. In the past year or so, the Treasury and the Department for Work and Pensions have recognised the requirement in principle, and the in-work credit for London was increased to £60 in the recent Budget. That is great news, but it is demonstrably insufficient to bridge the gap that we have identified. I am not being in any way ungrateful, because the recognition in principle is a good step, but it must be regarded as one among many. We need to ensure that the tax and benefit system does not continue to freeze people—particularly those who do entry-level work—out of the job market.

We also need more specific measures to accommodate specific challenges; I know that my hon. Friend the Minister is aware of my views on that. I put in a further plea for extending measures to boost work incentives among such vulnerable groups as homeless families in temporary accommodation. I am very aware of the “Working Futures” model in Newham, and it is a sensible one. It treats the higher rents for families in temporary accommodation through block grants, as if they were paying a comparable rent in social rented housing, and thereby removes the benefits trap that catches people in high-rent accommodation.

Given that there are 3,000 households, many of them lone parent households, in temporary accommodation in my borough, and that research demonstrates that unemployment is at 90 per cent. among families in temporary accommodation—compared with 60 per cent. among social housing tenants as a whole—the case is made to extend “Working Futures” swiftly and extensively across the whole capital for households in temporary accommodation. I am completely baffled about why—I see no sensible argument for it—we should run merely one very small pilot in one low-cost area of London and wait for two years to evaluate the results.

We also need to consider how to boost part-time work opportunities at reasonable pay rates in London. Of course, our ability to influence that in the private sector is limited, but we do nothing like enough to examine job opportunities in the public sector, particularly in respect of contracted services, which provide us with a useful opportunity. In that context, we need to consider again the implications of the Gershon review and the movement of public sector jobs out of London. A recent story, linked not to Gershon but to some of the year-end pressures on the health service, revealed that part-time jobs in health care had taken the brunt of job losses in the health service. That is exactly the kind of thing that has a differential impact, particularly on lone parents and particularly on lone parents in London; they need such jobs to have any real prospect of entering and staying in the labour market.

Despite the achievements in improving employment rates for lone parents across the UK as a whole, there are still serious problems in London and in job retention rates generally. There are well documented examples of discrimination against parents in the work force generally. The recent report by the Equal Opportunities Commission demonstrated the impact of such discrimination. The situation demands yet more action from the Government and employers in getting real about the importance of the work-life balance and developing family-friendly employment policies. It is no one’s interests—not those of employers, taxpayers or the Government—to trap hundreds of thousands of people out of sustainable employment, with all the social and economic costs that such unemployment puts on the state. If further changes were made to make employment family-friendly, we would be able to draw such people back into employment.

As was devastatingly demonstrated in the Joseph Rowntree Foundation report released yesterday, there is plentiful evidence of discrimination against particular groups of black and minority ethnic communities. Bangladeshis were found by the report to be most discriminated against in employment terms and most likely to be trapped in poverty. It is reasonable to say that Bangladeshi women and Muslim women generally most need targeted support to help them come back into sustained employment. The work done by Jobcentre Plus and the contracted providers needs to continue to bear down on those hard-to-reach groups, and we need to continue to bear down on the discriminatory practices that lock people out of work.

Fundamentally, the issue for lone parents is one of making work pay, and that applies in London more than elsewhere. Without sustainable job opportunities, we have no chance of making inroads into London’s deplorable levels of child poverty, and without improvements in London, we cannot hit the target for the country as a whole. There have been real achievements country-wide and recognition of the special factors in London. However, I am afraid that, on the evidence so far, there is no sign of policies likely to lead to the breakthrough that we require.

The Government have a target of halving the rate of child poverty that they inherited by 2010, but we are simply not going to reach it unless we build on what we have achieved and take further radical steps—some small and modest such as “Working Futures”; others more radical such as changes to the tax and benefit system—to raise those employment rates.

I congratulate my hon. Friend the Member for Regent's Park and Kensington, North (Ms Buck) on securing this important debate. Her work on the London Child Poverty Commission means that she has a particular insight into the challenges facing families on low incomes. She has amply demonstrated that in how she has spoken this afternoon.

The report that my hon. Friend helped to launch in February stressed, among other things, the importance of increasing employment among parents on lower incomes as one of the essential measures for reducing child poverty in London. She raised important points about job retention among lone parents who have moved into employment and, rightly, she focused on the issue of the relative disadvantage in London in terms of costs and earnings. She also raised her concerns about the extent of the “Working Futures” pilot, on which she and I have already corresponded.

I particularly want to reassure my hon. Friend that when we consider broader issues of labour market reform and further steps in reforming the welfare system, we Ministers at the Department for Work and Pensions are fully apprised of the specific set of factors that bear on London. I assure her that we have clearly identified the London-specific issues that we must consider. If we are to succeed in meeting our child poverty reduction targets, as my hon. Friend wants us to, we have to think specifically about certain things that need to happen in the capital, where the problems are tough. We are very focused on that.

We all know that children in lone-parent households are almost twice as likely to live in poverty as those in couple households, and that they make up 40 per cent. of all children living in poverty. The best way to tackle that is to support lone parents into work, which we do through work-focused interviews and the new deal for lone parents, which has already helped more than 482,000 lone parents into work, including more than 55,000 lone parents in London. Furthermore, the vast majority of those who have gone through the new deal for lone parents and into work have moved into sustainable employment. None the less, we are realistic about the challenges that lone parents face in getting back to work—and, as my hon. Friend says, in staying in work once they get it. We know that those challenges can be even greater in London, given that, as she rightly pointed out, housing and living costs are higher.

The present set-up means that many lone parents can exist on benefits for many years without any experience of being in work or developing any of the new skills that they will require when they return to work. That makes it hard for them to compete for jobs and may mean that some of those who enter jobs do not have the skills base to sustain employment once they have made that move.

The UK is out of step with many other countries in what we expect of lone parents who claim benefits when they have older children. That is why we will consider whether a switch to jobseeker’s allowance for that group, with its increased focus on looking for work, will improve the chances of their getting back to work and of that work being sustainable. My hon. Friend mentioned the Freud report. Let me reassure her: Freud has suggested we ask lone parents to start looking for work when their youngest child is 12. We are considering that recommendation and will report our conclusions in the summer.

As my hon. Friend said, we have achieved a good deal so far. Ten years ago, more than 1 million lone parents nationally and around 190,000 in London were on benefit. Those figures are now down by 230,000 nationally and by more than 27,000 in the capital. Fewer than 700,000 lone parents nationally were in work 10 years ago; now more than 1 million are. In London, fewer than 85,000 lone parents were in work 10 years ago and now nearly 130,000 are.

The national employment rate among lone parents 10 years ago was about 45 per cent. It is now about 56 per cent. In London, that employment rate has risen from a much lower base—about 37 per cent.—to about 45 per cent. There is still a considerable gap between the rate of improvement in the country as a whole and that in London. That is why we have to address specific policy challenges in the capital.

Overall, there has been an achievement. However, we aim to increase the lone parent employment rate to 70 per cent. by 2010 and to do that we would need about 300,000 more lone parents in work across the country. We can do that only by helping to create conditions which make work pay, make it possible to attain and make it easier to sustain. We are rolling out more work-focused interviews for lone parents, which will give them the chance to talk to experienced advisers about the problems they face in getting back to work.

No parent is going to work if they are not certain that their child or children are in safe care. That is why Freud—and Lisa Harker in her report—highlighted the importance of wraparound child care provision. That is one of the most significant concerns for all working parents and it is raised continually with us by lone parents when we discuss what else needs to happen to reduce further the barriers to employment.

By 2010, there will be a Sure Start children’s centre for every community—3,500 in total. For parents with older children, we have the extended schools programme, which by 2010 will be available from 8 am to 6 pm throughout the year, including school holiday periods. We are also making work a more realistic financial option. From April last year, we increased to 80 per cent. the proportion we pay towards child care costs for parents on a low income That increases child care affordability for vulnerable groups, particularly lone parents. Support is available to meet the costs of child care at rates of £87 a week for one child and £150 a week for two children or more.

We have recently announced the continuation of in- work credit, which helps eligible lone parents to leave benefits for employment with the payment of an extra £40 a week for a year. More than 40,000 people have already taken up the in-work credit, including more than 12,500 in London. We are also rolling out our pathways to work programme across the country to give even more help to those on incapacity benefit—like lone parents, that group was not given the help that it needed in the past.

London has particular issues that need to be addressed and we have already begun to do that. The new deal for lone parents has helped more than 55,000 lone parents in London into work. In April 2004, employment zones for lone parents were introduced in Haringey, Newham, Brent, Southwark and Tower Hamlets. They have helped 3,300 lone parents in those boroughs back into work. However, as my hon. Friend says, there is still a great deal more to do. We will roll out the new deal plus for lone parents to all London districts by April 2008. That will test whether a package of measures combining good, affordable child care availability with a work focus and a strong financial incentive, like the in-work credit, will move lone parents closer to the labour market and into work.

From July, we will increase the in-work credit payment in London to £60 a week when lone parents leave benefits for employment, as my hon. Friend has mentioned. The Government will also contribute £11 million in funding to the child care affordability pilot to offer 10,000 new child care places across the city. The pilot is the largest region-specific initiative for a subsidised child care programme of its kind in the country.

In addition, London is benefiting from our city strategy of investing more in deprived areas to tackle worklessness and child poverty. I hope I can demonstrate to my hon. Friend that we agree with her about the challenges in London, particularly in some—albeit not necessarily all—of the boroughs. Those challenges include the cost of housing and living, and issues to do with skills and child care. We can see from the Department’s analysis of all aspects of the London labour market that London has distinct characteristics. We understand that that means that reforms designed for national application will not necessarily have the same bite or impact in the capital.

As we work through our assessment of the circumstances that pertain in the capital, we will take on board many of my hon. Friend’s points, which will inform our thinking on how we can go forward through our policies in London. We have seen the report that she helped to publicise in February, which raised many of the same points. The recent reports from Freud and Lisa Harker have also highlighted London-specific issues.

I hope that I have reassured my hon. Friend that the important issues that she has identified about London are on the Department’s agenda. The work that we are doing to reform welfare and the labour market needs to be combined with policies to ensure that we continue to have a strong economy, which will be important for the capital as well as the rest of the country, so that they result the continued creation of more employment opportunities for lone parents, more children being lifted out of poverty, and a prospect of ensuring that the cycle of deprivation that runs through generations is not extended any further than it has to be in London and the rest of the country.