Counting child poverty

Submitted by Matthew on 15 July, 2015 - 11:18 Author: Matt Cooper

The Conservative Minister for Work and Pensions, Iain Duncan Smith, recently declared that the latest figures on poverty in the UK (the DWP’s Households Below Average Income report for 2013/14) show the government is succeeding in tackling poverty and that inequality is falling. Both claims are based on a wilful misinterpretation of that report.

There are several measures of poverty used in the report, the most useful being one of relative poverty (set at 60 per cent of median net household income including benefits). After housing costs, this is currently £232 a week.

Using this measure, the proportion of people in the UK living in poverty in 2013-14 was 21 per cent, and higher for households with children (28 percent). For most groups there has been no (statistically significant) change in this rate of poverty since 2010-11. The underlying trend is one of relative poverty after housing costs inching up since their low point in 2005.

One group, however, have seen a sharp increase in rates of poverty — households where someone has a disability. Here poverty rates have risen by two per cent since 2011-12, most likely caused by cuts in benefits; it’s a squeeze that is set to get worse.

The government expected their report would show an increase in child poverty. When it didn’t the government claimed a success. But it was never likely that the 2013-2014 figures would show an increase in child poverty — for two reasons.

Firstly, the median income has fallen by eight per cent since 2010, and thus the threshold for relative poverty has also fallen by eight per cent. If an absolute measure of poverty is used (based on 60 per cent of median income in 2010-11) child poverty has increased by four percentage points since 2010.

Secondly, the main benefit cuts affecting children since 2010 have been below-inflation increases in out-of-work benefits and the benefits cap. Both affected those already in poverty. It is the cuts to come, particularly in tax credits to the low-paid, that will increase child poverty.

Nor is it true that inequality is decreasing. Duncan Smith has cherry picked the one measure of inequality in this report that shows a small (and statistically insignificant) fall over the year. This figure is not only before housing costs, but is based on an absolute measure of poverty (measured against the median income 2010-11) and is based the 90:10 ratio (that is the ratio of the income needed to enter the top 10 per cent of incomes, to the income needed to enter the bottom ten per cent).

The Gini coefficient is a more robust measure of inequality that takes account of all incomes, and on this measure there has been little change in relative inequality in income after housing costs over the last ten years. What neither measure picks up, however, is the increasing inequality in income, and more particularly increasing wealth, of the tiny plutocratic elite at the top of the scale, the top 0.1 or even 0.01 per cent.

The government did not chose to produce this report; it is required by legislation passed by the previous Labour government. The Conservatives know their planned £12 billion in welfare cuts will drive up child poverty and have signalled their intention to reform the law.

They will probably want to rely on absolute measures of poverty and related ideas of material poverty (e.g. not being able to afford food etc.) to more easily hide effects of their policy — a plutocracy built on low pay.

DWP report­

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