The journey to improving income-based poverty statistics

The Office for Statistics Regulation (OSR) recognises the important role that organisations play, both within and outside of Government, in seeking to understand poverty through data and statistics. In response to our ‘income-based poverty’ review published in 2021, in our latest guest blog, Ainslie Woods, the Income and Earnings Coherence Lead at the Office for National Statistics (ONS) discusses how government statistic producers are working together to improve poverty statistics.

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With the rising cost-of-living in the UK, there is an ever-growing public and policy interest in the effect this is having on poverty levels. Poverty is a term commonly used by the media, politicians, policy makers and the public – but what does it really mean and how do we measure it?

My role, as the Income and Earnings Coherence Lead, is to work with official producers from the Department for Work and Pensions (DWP), the Office for National Statistics (ONS) and HM Revenue and Customs (HMRC) to improve the coherence and accessibility of our statistics. Following OSR’s 2021 income-based poverty statistics review and related blog, the trouble with measuring poverty, we’ve been working with statistical producers to help build the bigger picture on poverty in the UK – so what has been done?

What do we mean by poverty?

Poverty can be defined in terms of household disposable income, which can be used to identify those on low income, commonly referred to as income-based poverty statistics. The statistics are one of many factors used to inform key policy decisions such as the recent increase to the National Living Wage.

Poverty, as defined in terms of disposable household income, is commonly measured using two approaches:

  • people in relative low income (households with less than 60% of median income)
  • people in absolute low income (households with less than 60% of the median income in 2010/11, held constant in real terms).

These approaches can both be measured before housing costs and after housing costs. The statistics are published annually by DWP in its Households Below Average Income (HBAI) publication.

Although low income is an important aspect of poverty, there are other facets of poverty too. The HBAI publication also includes data on ‘material deprivation’, which provides an indication of people’s ability to access or afford a range of everyday goods and services.

Measures of persistent low income (used as a measure of persistent poverty) are available in DWP’s annual Income Dynamics publication. It is widely agreed that the impact of long-term poverty on individuals is worse than when poverty is experienced only for a short time, therefore these statistics provide important additional information to the HBAI release.

The ONS has also historically produced income-based poverty statistics. Prior to the UK’s exit from the EU, this was mainly through Eurostat. The ONS is exploring the user need for these statistics with a view to re-introducing poverty statistics, possibly within an annual financial wellbeing publication. User views on the future of ONS poverty statistics are welcomed as part of the transforming the ONS’s household financial statistics consultation which closes on 23 February 2023. ONS continues to engage with a wide range of stakeholders on the use of poverty statistics, including the Social Metrics Commission (SMC) following its September 2018 report ‘A New Measure of Poverty in the UK’.

Improvements to our statistics

In late 2020, representatives from ONS, DWP and HMRC came together to form our cross-Government Income and Earnings Coherence Steering Group which provides the overarching direction, insight, and leadership needed to deliver improvements. We want to ensure we are producing high quality data and analysis to inform the UK, improve lives and build the future.

In response to OSR’s review, we have implemented a range of improvements, including;

Longer-term work is also progressing well as we continue to review methods and work to maximise the use of administrative data, including;

  • DWP’s existing long-term work to develop integrated survey-administrative datasets (see section 2.5 of DWP’s statistical work programme).
  • ONS’s transformation of its household financial statistics (including household income, expenditure and wealth). By combining current surveys into a single survey, in conjunction with alternative data sources, it will be possible to deliver higher quality, more timely and in-depth analysis of households’ financial well-being. The transforming the ONS’s household financial statistics consultation (and associated blog) closes on 23 February 2023. A consultation response will be published in Spring 2023.
  • ONS’s research on the potential use of administrative data to produce social statistics for a range of population characteristics, including ethnicity and income. Experimental admin-based income statistics (ABIS) provide a useful early prototype that demonstrates how administrative data sources can be used to measure occupied address (household) income. ONS has also started to explore the potential for administrative data to produce a measure of income by ethnicity by combining two admin-based datasets. ONS is in the early stages of exploring this, but it has released an initial case study on producing admin-based income by ethnicity statistics (ABIES) for England.

As part of our follow-up engagement with OSR, I have been regularly liaising with Vicky Stone, OSR’s Labour Market and Welfare Lead and it is very encouraging to hear that OSR are pleased with the improvements made so far.

Where next?

As the rise in the cost-of-living continues, more and more emphasis will be placed on these statistics by Government and decision makers. It is my role, in conjunction with relevant producers, to ensure that collaborative cross-Government work continues, and I look forward to continuing to work with users and the OSR. While many of the statistics are UK wide, statistical producers across the UK will continue to work closely with the Devolved Governments of the UK to understand their needs and priorities. For more information on our planned work and progress please see our collaborative plan which was updated on 18 January 2023.