Written evidence from the University of York (WSN0117)

UK child poverty gaps increasing[1]

Jonathan Bradshaw[2] and Antonia Keung[3]

Summary

The relative poverty rates are increasing and Ministers have switched their comments to the the absolute indicator based on 2010/11 thresholds which have not yet increased, though the Institute for Fiscal Studies suggest they will on present policies. The absolute and relative poverty rates are only two indicators. We have been studying child poverty gaps for the last three years and this analysis for the Work and Pensions Committee shows that on all measures child poverty gaps have increased since 2010 and this is evidence that the welfare safety net has been becoming less and less effective.

Poverty gaps and poverty rates

There has always been a debate in the world of poverty measurement about whether we should be more concerned about poverty rates (the proportion below a poverty threshold) or poverty gaps (how far people in poverty are below the poverty threshold). Is it better for a country to have many children a little way below the poverty threshold or few children below the poverty threshold, but a long way below it?

The UK has tended in the past to have comparatively high poverty rates but comparatively low poverty gaps. This has been thanks to a fairly comprehensive but quite low minimum income scheme.  But since 2010 our minimum income scheme has been undermined[4] by benefit caps, the two child limit, the bedroom tax, local rent limits, real-terms cuts to benefit levels, the failure to uprate child tax credits and child benefits, the localisation of council tax benefit and sanctions.

The most recent Households Below Average Income (HBAI) statistics for 2016-17[5] based on the Family Resources Survey (FRS) produced by the DWP show an increase in relative child poverty rates (after housing costs). However the HBAI series have never included poverty gap data, though the EU SILC database, which uses the FRS, has done.

Nevertheless poverty gaps are important, as they tell us about likely levels of hardship for those living below the poverty line. Poverty rates may be falling when poverty gaps are rising and vice versa.

There are a variety of possible measures of the poverty gap. In this analysis we have produced results using four measures:

A. The median gap in £ per week in the incomes of households with children below the poverty threshold and the poverty threshold.

B. That amount as a proportion of the poverty threshold.

C. The % of households with children 5%, 10% and so on below the poverty threshold. This the form of presentation of poverty gaps adopted by the Social Metrics Commission[6].

D. The number of households with children below that threshold multiplied by the average (mean) amount they are below the poverty threshold. This is an indication of the amount that they would need to be lifted out of poverty.

We have produced these estimates using two poverty thresholds

1. The contemporary 60% of median threshold – the relative threshold.
2. The 2010/11 threshold uprated by movements in the Consumer Prices Ondex – the so called absolute threshold.

1. The relative poverty gap analysis

We have analysed trends in the relative poverty gaps for households with children from 2010/11 to 2016/17.

Tables A.1 and A.2 and Figure A. 1 present the results of the poverty gap in £ per week before and after housing costs.

It is best to focus on the median poverty gap (because the distribution is skewed). There has been an increase in the £ per week poverty gap for households with children, both before and after housing costs. In 2010/11 the median poverty gap before housing costs was £42.80 per week, but by 2016/17 it had increased to £58.40 per week. After housing costs the increase was from £52.80 per week in 2010/11 to £67.00 per week in 2016/17.

In other words, not only is the number of children in poverty increasing but households with children are now living, on average, further below the poverty line than they did seven years ago.

Table A.1: Poverty gaps average £ per week before housing costs

Source: Own analysis of HBAI

Table A.2: Poverty gaps average £ per week after housing costs

Source: Own analysis of HBAI

Figure A.1. Changes in the poverty gap since 2010/11 for households with children before (BHC) and after housing costs (AHC)

Source: Own analysis of HBAI

Table B.1 and B.2 and Figure B.1 show the same results but as a proportion of the relative poverty threshold in each year. Again the relative poverty gap has risen as a percentage of the threshold both before and after housing costs.

Table B.1: Relative poverty gaps BHC of households with dependent children  expressed as % below the 60% threshold (weighted by gs_newhh)

Table B.2: Relative poverty gaps AHC of households with dependent children  expressed as % below the 60% threshold (weighted by gs_newhh)

Figure B.1: Changes in the poverty gap BHC and AHC households with dependent children % below the poverty threshold

Tables C.1 and C.2 give the distribution of those below the poverty thresholds, before and after housing costs. The analysis of the distributions here provides a quick overview about how deep the poverty these households generally experienced.  Table C1 shows that roughly two fifths of the poor households with children experienced at least 25.1% below the poverty line BHC. This figure rises to about 1 in 2 households when housing costs were taken into account (See Table C2).

Table C.1: Distribution of households with children below the relative poverty threshold BHC

Table C.2: Distribution of households with children below the relative poverty threshold AHC

Figure C1 shows that for those who were below the poverty threshold BHC, a generally higher proportions of them experienced poverty at the level of 10.1-25% below the line.  This followed by those at 25.1-50% below the line. The proportions of 50+% were the lowest in most of the observed years but there is a slight worrying sign that the proportion of 50+% below the line may be beginning to rise.

Figure C1: Changes in the distribution of households with children below the relative poverty threshold BHC

Figure C2 shows that after housing costs were taken into account, the proportions of those over 50% below the poverty line had significantly increased, from between 12%-18% risen up to between 21%-25%. Over the observed periods an increasing trend  can also be noted.

Figure C2: Changes in the distribution of households with children below the relative poverty threshold AHC

Table D.1 gives the total poverty gaps – that is the mean poverty gap x the number of households with dependent children below the poverty threshold in each years. The amount needed to lift those below the poverty threshold out of poverty has increased from £153.9 million per week to £201.8 million between 2010/11 and 2016/17. Note the gap between the BHC and AHC figures indicating the proportion of the poverty gap that is due to housing costs.

Table D.1: Total poverty gaps in £million per week BHC and AHC. Not adjusted for inflation

2. Absolute poverty gaps

The analysis of the relative poverty gap produced in a previous version of this analysis[7] was criticised by DWP because it failed to take account of inflation – the argument being that a gap of £x in 2016/17 is the not the equivalent of a gap of £y in 2010/11. It is a relative indicator just as the 60% of contemporary median is a relative threshold. (Though the relative threshold is the one Eurostat uses for its estimates of the poverty gaps based on EU SILC). However, as it is arguable whether a relative or so called absolute poverty threshold is to be preferred for poverty rate calculations, so it is arguable whether an absolute or relative poverty gap figure is to be preferred for poverty gap analysis. In our opinion they both have merits  and for that reason both were included for poverty rate measurement in the Child Poverty Act targets.

So to meet this criticism we have estimated absolute poverty gaps between 2010/11 and 2016/17 using the CPI deflators used in the HBAI User Guide 2016/17 page 3.

Table A.3 gives the absolute poverty gaps before housing costs. It shows that despite the absolute poverty rates falling between 2010/11 and 2016/17 the gaps have grown.

Table A.3: Absolute poverty gaps (average £ per week BHC), CPI adjusted based on the 2010/11 median income (dependent child weights ‘gs_newhh’)

The same is true for the after housing costs absolute poverty gaps shown in Table A.4.

Table A.4: Absolute poverty gaps (average £ per week AHC), CPI adjusted based on the 2010/11 median income (dependent child weights ‘gs_newhh’)

Figure A.2 shows this graphically for all families with children. The poverty gap before housing costs has increased from £43 to £57 per week and after housing costs from  £53 to £63 even after taking account of inflation.

Figure A.2: Absolute poverty gaps. £ per week. Families with children

Table B.3 and B.4 and Figure B.2 show the same results but as a proportion of the absolute  poverty threshold in each year. Again the relative poverty gap has risen as a percentage of the threshold both before and after housing costs.

Table B.3: Absolute poverty gaps BHC of households with dependent children  expressed as % below the 60% threshold of 2010/11, CPI adjusted (weighted by gs_newhh)

Table B.4: Absolute poverty gaps AHC of households with dependent children  expressed as % below the 60% threshold of 2010/11, CPI adjusted (weighted by gs_newhh)

Figure B.2 Absolute poverty gaps as a proportion of the poverty threshold

Tables C3 and C4 give the distribution of households below the absolute poverty threshold. Figure C1 shows that BHC the proportions of the poor households fell further below the poverty line have increased recently; increases can be seen in the  25.1%-50% and the over 50% groups whilst the proportions of less than 5% and 10% groups decreased. Taking housing costs into account, Figure C2 shows that the proportions of the over 50% group has increased quite markly between 2010/11 and 2016/17.

Table C.3: Distribution of households with children below the absolute poverty threshold BHC

Table C.4: Distribution of households with children below the absolute poverty threshold AHC

Figure C1 Distribution of households with children below the absolute poverty threshold BHC

Figure C2 Distribution of households with children below the absolute poverty threshold threshold AHC

Table D.2 gives the total expenditure needed to close the absolute poverty gaps. The amount needed to lift all households with children above the absolute AHC poverty thresholds, in real terms, has increased by nearly 11 per cent from £153.9 million per week in 2010/11 to £170.7 million per week in 2016/17. Although the numbers of poor households with children has decreased, for those who were below the poverty line there is evidence to suggest that the level of poverty they experienced has got worse. Thus, if they were to be lifted out of poverty, more expenditure would be required to close the absolute poverty gap.

Table D.2: Total expenditure needed to close absolute poverty gap £ million per week.

Conclusion

There can be no doubt that the poverty gap has increased for households for children since 2010/11. The poverty rate for households with children has only increased for the relative after housing costs measure. However the poverty gaps has increased using a relative and absolute threshold, before and after housing costs, and £ per week, as a perentage of the thresholds and in the total sum foregone by those in poverty. The picture is consistent. We believe that the poverty gap should take a place in any portfolio of poverty measures and the Social Metrics Commission agrees.

January 2019