Written evidence from Legatum Institute (CPM0011)



About the Legatum institute

The Legatum Institute is a London-based think-tank with a bold vision: to create a global movement of people committed to creating the pathways from poverty to prosperity and the transformation of society.

Our events, reports, and publications aim to advance education in the fields of economic, political, and social policy. We are not party political and do not promote any particular party policies; we remain open to all ideas and policies that will help move people from poverty to prosperity.

In disseminating our work, we aim to reach the widest possible audience and we actively engage with individuals from the business community, politics, academia, as well as the general public. Our engagements with political figures span all of the major political parties and we welcome constructive dialogue with people from all political persuasions. All policy recommendations stemming from our research are grounded in and shaped by the evidence we uncover in our research and are designed to educate the public and further our charitable objects.

Given the Legatum Institute’s goals, we have a strong interest in poverty measurement, reporting and policy. Baroness Stroud, our CEO, is Chair of the Social Metrics Commission (SMC) and, in 2020 we developed a Policy Simulator that uses the SMC measurement framework to understand the impact of policy and socio-economic changes on poverty in the UK. The first report from this was published in November 2020.[1] This produced a “nowcast” of poverty in Summer and Winter 2020, through which the impacts of the Covid-19 pandemic and the Government’s responses could be measured. We now plan to publish quarterly reports on poverty in the UK, using the Social Metrics Commission’s poverty measurement framework.


Question 1: How should child poverty be measured and defined?

Question 2: The measures of child poverty changed in 2016. What has the impact of those changes been?

[Note: question 1 and 2 are taken together]

The Legatum Institute strongly endorses the Social Metrics Commission’s approach to poverty measurement.[2] This provides a comprehensive way of identifying who is in poverty (including children and adults in families in poverty) and how the experiences of families in poverty differ from those families not in poverty. Understanding across each of these areas is essential in ensuring that, as a country, we can develop a comprehensive strategy for supporting those currently in poverty or at risk of poverty in the future to move towards prosperity.

The framework’s comprehensive nature is important for a number of reasons:

1)      Previous measures that focussed on incomes right identify income as a key component of understanding poverty. However, it is not the only factor. A better understanding comes from considering a family’s resources (including savings) as well as the debt repayments they face and the costs they cannot escape like housing, childcare and the costs of disability. Each of these issues points to the fact that simply considering incomes provides a misleadingly narrow focus, that risks misidentifying those least able to make ends meet. As a result, the Social Metrics Commission’s approach is better able to identify the poverty experience of different families and can be used to more accurately direct policy in ways that will reduce poverty.

2)      The framework also includes measures of poverty depth and persistence and Lived Experience. Again, these are central to understanding the experiences of families in poverty today, the drivers that led them to poverty and the consequences of poverty on their lives today and chances for the future. This means that the Social Metrics Commission’s approach allows for a clearer assessment of the changes that would make the biggest difference to families experiences of poverty.

3)      In each of these areas, taking a broad view of the nature of poverty that families face provides policymakers with a range of levers to tackle poverty. In short, rather than simply focussing on redistribution through the tax and benefits system (as was incentivised through previous measures of poverty), policymakers are incentivised to use policy on education, housing, health and family to tackle poverty. Alongside policies focussed on tax and benefits, these interventions stand a better chance of delivering meaningful reductions in poverty, which have failed to materialise over the last two decades of anti-poverty action.

4)      As well being able to inform a wide-ranging anti-poverty strategy, the Commission’s framework also draws support from across the political spectrum. This is essential if we are to stop the pointless debate on poverty measurement that has existed for many years and distracted policymakers from actually taking action to tackle poverty.

This latter point is vital in understanding the importance of the SMC’s poverty measurement framework. As a result of the ongoing debate on poverty measurement, the UK’s official measure of child poverty and associated targets were abandoned in 2016. They have not been replaced since then, meaning that the UK does not have an official measure of poverty for either children or adults.

This is a significant problem. Without effective and collectively agreed measures of poverty, it is impossible both for Government to develop a comprehensive anti-poverty strategy and for external organisations to hold Government to account in reducing poverty. The consequence is a policy debate that is taken forward in a vacuum, without an understanding of the impacts on policy.

A key example is the Covid-19 pandemic. Over the last year, the Government has been walking blind in its response. All of the external indicators suggest that the pandemic has hit those on the lowest incomes the hardest, for example including health,[3] labour market and wellbeing impacts.[4] However, without a robust measure of poverty, the Government has not been unable to quantify either the impacts of the pandemic on poverty, or how the protection it has provided families has mitigated these effects.

In contrast, Legatum Institute’s recent work on these issues shows the importance of measuring poverty and, in particular, the Social Metrics Commission’s approach. Table 1 and figure 1 demonstrate results from the Institute’s November 2020 nowcasting of poverty. Using the SMC’s poverty measurement framework, and the most up-to-date projections of the labour market (including the furlough and self-employment support schemes), the report produced a range of scenarios for the likely level of poverty.

Overall, it suggested that between 30,000 and 120,000 more children were in households in poverty in Winter 2020 than would have been the case if Covid-19 had not occurred.


Table 1: Overall change in number of people in poverty, Winter 2020, compared to the situation where Covid-19 pandemic had not occurred


Low unemployment, low furlough

Low unemployment, high furlough

High unemployment, low furlough

High unemployment, high furlough

Net difference in poverty





Net difference in poverty by age





Working-age adults










Pension-age adults






Figure 1: Changes in poverty in Winter 2020, compared to no-Covid-19 scenario

Source: Legatum Institute, Family Resources Survey and HBAI dataset (1998/99 – 2018/19), IPPR tax and benefit model.

A clear benefit of the SMC’s approach here is the fact that, unlike previous measures of relative-income poverty, recessions do not lead to reductions in poverty. This problem with standard relative-income measures stems from the fact that reductions in median incomes lead to the poverty line falling and, as a result, poverty also typically falls.

This might make statistical sense, but when trying to understand the actual experience of families, it makes no sense at all. This is because in practical terms, the implication is that, as median incomes fall as a result of an economic shock, the amount families need to be above the poverty line also falls. This is clearly unrealistic; they are faced with the same housing costs, needs to feed their family, go to school and work and undertake activities to engage in society. In short, over such a short period of time, there is no reason why we would assume that families would need less money to be above the poverty line.

In contrast, the Commission’s work uses a stabilised poverty line (averaging over three years) which means that families’ needs are much more constant over this time scale, and the poverty impacts of macro-economic shocks are much more accurately demonstrated.

Legatum Institute’s work also considered the extent to which Government choices on benefits policy have insulated people from poverty during the Covid-19 crisis. To do this we assessed each of the scenarios under the assumption that increased generosity in Universal Credit and Working Tax Credit and the suspension of the MIF in Universal Credit had not taken place.

Figure 2 compares the results of this analysis to the previous projections, which include the increased generosity. It clearly shows the significant reduction in the increase in poverty that has resulted from the increase in generosity of these benefits. In each Winter 2020 scenario, these choices have insulated more than 600,000 people from poverty. For the high unemployment, high furlough scenario in Winter 2020, some 690,000 fewer people are in poverty as a result of the changes introduced to benefits and have been protected at a time of crisis.

Figure 2: Comparison of increases in poverty under each Winter 2020 scenario, with and without increased generosity in Universal Credit and Working Tax Credit and the suspension of the Minimum Income Floor in Universal Credit

Source: Legatum Institute, Family Resources Survey and HBAI dataset (1998/99 – 2018/19), IPPR tax and benefit model.

Of course, it is encouraging that the Government’s action has protected these families from poverty. However, without a systematic and comprehensive approach to poverty measurement, the Government will never be able to approach these issues strategically. As we look to the future, and how the recovery from Covid-19 can strengthen and level up the UK, this strategic approach will be essential if we are to reduce poverty for both children and adults.


Question 3: What were the advantages and disadvantages of having a set of targets for reducing child poverty?

Question 4: What has been the effect of removing from law the targets in place between 2010 and 2016?

[Note: question 3 and 4 considered together]

Targets for reducing poverty amongst children (and, indeed, amongst adults) have merit, in that they focus policymakers’ (and politicians’) minds on the issue. By setting stretching targets, the scale of ambition can clearly be signalled. However, by creating an overtly political situation, legislating for targets creates significant challenges that undermine the advantages.  

It is also clear that targets are only as good as the measure that underpins them. For a target and associated measure to make sense, the Government, and others, must have the appropriate policy instruments at their disposal to be able to influence the movement of the measure and hit the target. As such, if targets are to be set, we would recommend that they are based on the Social Metrics Commission’s poverty measurement framework. Within this, any targets should not focus in on any one aspect of this framework. Instead, they should focus broadly across the framework so that Government is incentivised to take action to tackle poverty, poverty depth and persistence and Lived Experience of poverty. Doing so would give Government the incentive and levers to develop a comprehensive anti-poverty strategy, which could deliver meaningful and sustained reductions in poverty.

Question 5: What is the impact of child poverty and how can it best be measured?

Question 6: What links can be established for children between financial hardship, educational under-achievement, family breakdown and worklessness?

The Social Metrics Commission estimated that 4.5million children were in poverty in 2018/19. The Legatum Institute’s work using the SMC framework suggests that this rose to as many as 4.8million children in families in poverty in the Winter of 2020.

A wide range of evidence exists on both the impacts of poverty in childhood and the linkages between financial hardship, educational under-achievement, family breakdown and worklessness. For example, the Centre for Social Justice covered this extensively in their Breakthrough Britain reports.[5]

Building on this evidence, the Legatum Institute believes that the best way of measuring the impacts, implications and drivers of poverty (including for children) is through the Social Metrics Commission’s poverty measurement framework. In particular, the Lived Experience Indicators provide vital insights into pathways in to as well as out of poverty, and the resilience gaps that exist between families in poverty and those living above the poverty line.

Importantly, the Commission’s framework provides a way of considering all of these issues alongside measures of poverty, poverty depth and poverty persistence. This means that policymakers seeking to tackle poverty (either for adults or children) have a ready-made set of indicators against which they can track success and understand what works.


Joint working

Question 1: How effectively does the Department for Work and Pensions work with other Government departments, particularly the Department for Education and the Treasury, to reduce child poverty?

Question 2: How effectively does the Department for Work and Pensions work with local authorities and with support organisations to reduce the numbers of children living in poverty and to mitigate the impact of poverty on children?

Question 3: What would be the merits of having a cross-government child poverty strategy? How well has this worked in the past?

[Note: questions 1 -3 considered together]

There are currently no nationally agreed measures of poverty for children or adults. This makes it impossible for Government departments to work effectively together to reduce poverty (amongst either adults or children).

Even when there were measures in place (prior to 2016), these were too narrowly drawn around income. Whilst income plays a vital role in understanding poverty, this singular focus of previous poverty measures meant that the only way for policymakers to announce policy that would lead to modelled reductions in poverty was to change taxes and benefits. This meant that poverty-tackling policies were largely confined to consideration by HM-Treasury and DWP, with little regard the long-term structural factors (like poor education / skills, worklessness and health) that play such a major part in driving poverty outcomes.

Looking to the future, it is clear that tackling poverty will require a comprehensive strategy that is agreed and delivered across Government and with local authorities and support organisations. The first stage of this will be to adopt a poverty measure that allows for a comprehensive anti-poverty strategy.

As we have already highlighted, the Legatum Institute believes that the Social Metrics Commission’s poverty measurement framework provides the ideal starting point for this. By providing policy makers with policy levers that cover incomes, costs (including housing, childcare, disability), assets, debt, mental and physical health, education and skills, family and community and financial resilience, the framework will naturally require cross-departmental working.


February 21

[1] https://li.com/reports/poverty-during-the-covid-19-crisis/ Accessed 23/02/21.

[2] https://socialmetricscommission.org.uk/measuring-poverty-2020/ Accessed 23/02/21.

[3] See https://covidrecoverycommission.co.uk/covid-and-deprivation-england-and-wales/ Accessed 23/02/21.

[4] See https://covidrecoverycommission.co.uk/neighbourhood-level-claimant-count-change/ and https://socialmetricscommission.org.uk/poverty-and-covid-2/ Accessed 23/02/21.

[5] See https://www.centreforsocialjustice.org.uk/about/the-five-pathways . Accessed 23/02/21.