This note sets out information on the levels and rates of poverty in the UK, including historical trends and forecasts for future years.Jump to full report >>
This note sets out information on the levels and rates of poverty in the UK, including historical trends and forecasts for future years. The focus here is on poverty defined in terms of disposable household income, although poverty may be defined in different ways and there is no single, universally accepted definition.
Various poverty measures based on disposable household income are in common use and the trend can look quite different depending on the measure used. Two commonly used measures are:
So the ‘relative low income’ measure compares the households with the lowest incomes against the rest of the population in that year, while the ‘absolute low income’ measure looks at whether living standards at the bottom of the distribution are improving over time. A low income measure can also be combined with an assessment of whether households have access to key goods and services, for a measure of low income and material deprivation.
Income can be measured before or after housing costs are deducted (BHC or AHC). Poverty levels tend to be higher based on income measured after housing costs, because poorer households tend to spend a higher proportion of their income on housing.
Looking specifically at children:
Source: DWP Households below average income, 2015/16
Over the longer-term, there has been a reduction in poverty rates since the late 1990s for children, pensioners and working-age parents, although the likelihood of being in relative low income has increased for working-age adults without dependent children.
The Institute for Fiscal Studies (IFS) estimates that if Government policy does not change, the proportion of people in relative low income after housing costs is likely to increase by 2% points between 2014/15 and 2021/22, to around 24%.
Most of the projected increase is explained by earnings growth benefitting middle-income households more than poorer households (thus widening the difference between their incomes), while around a third of the projected increase is attributed to the direct impact of tax and benefit reforms implemented or announced from 2015/16 onwards.
The rate of absolute low income after housing costs is projected to stay flat to 2020/21, although the Institute for Fiscal Studies estimates the proportion of children in absolute low income will increase by around 3% points to 30% in 2021/22. All of the increase in absolute child poverty is attributed to the impact of tax and benefit reforms.
Although this note discusses income-based measures of poverty, these have been criticised by government ministers since 2010 as failing to acknowledge the root causes of poverty and resulting in skewed policy responses that try to lift those just below the poverty threshold to just above it. The Welfare Reform and Work Act 2016 removed four child poverty targets previously set out in the Child Poverty Act 2010, and instead introduced statutory ‘life chances’ indicators relating to children in England living in workless households and educational attainment at the end of Key Stage 4 (age 16).
A policy paper published by the Department for Work and Pensions in April 2017, Improving Lives: Helping Workless Families, set out seven other non-statutory indicator areas, relating to parental conflict; poor parental mental health; drug and alcohol dependency; problem debt; homelessness; early years; and youth employment.
Commons Briefing papers SN07096
Author: Feargal McGuinness
Topic: Incomes and poverty