Income-based poverty statistics

Summary

Poverty is an important social and economic issue in the UK. Yet there is currently no universally accepted definition of poverty. The evidence base for poverty in the UK has largely been driven by international best practice and successive government strategies aimed at eradicating it. As poverty means different things to different people, it is difficult to define and therefore measure.

The most commonly used measures of income-based poverty are produced by the Department for Work and Pensions (DWP) in its Households Below Average Income (HBAI) statistics publication. These statistics are sourced from the Family Resources Survey (FRS). DWP also produces Income Dynamics (ID) Statistics sourced from the University of Essex’s Understanding Society survey.

DWP has also begun developing a new measure of poverty called Below Average Resources that is based on the approach proposed by the Social Metrics Commission and currently uses the FRS as the data source.

The Office for National Statistics (ONS) publishes Household income inequality statistics, Average Household Income statistics and the Effects of Taxes and Benefits on UK Household Income, all based on the Household Finances Survey (HFS), which support the statistics landscape on poverty.

Our blog on the trouble with measuring poverty provides more information on the different measures used to describe income-based poverty.

Things to consider in statements about income-based poverty:

Different measures of poverty capture different things. For example, some measures focus only on people’s incomes, others take housing costs into account, and some newer measures being developed are trying to bring in other costs and savings.

The point at which you define poverty can vary. Relative measures look at the resources people have and compare them to what everyone else has in any given year. For the HBAI and ID relative low-income measures of poverty, an income level is set under which people are considered to be in poverty in comparison to everyone else in that year. This measure can be estimated before or after housing costs. Absolute measures compare the resources people have in a given year to a fixed poverty line in time. For example, for the HBAI absolute low income measures of poverty, incomes are compared against a poverty level of 60% of median income in 2010/11 adjusted to take account of changes in the value of money since that financial year (inflation) and estimates are available before and after housing costs.

Given the range of measures available and the complexity of poverty, we consider that statistics on poverty, income inequality and material deprivation are most helpfully thought of as a basket of measures serving a broad range of needs. To focus on one measure risks masking a more nuanced picture of the nature of poverty in the UK.

What to look out for when hearing statements on this topic:

Statements that are unclear on what measure and time period are being referred to. As highlighted above, statements focusing on one measure can mask trends in other measures; when used in isolation, these statements have the potential to mislead. It is also important to consider longer-term trends in poverty to avoid too much weight being placed on latest year-on-year changes.

Unclear or no messaging around why a particular measure or statistic has been chosen. Understanding why a particular measure has been chosen can help users to understand whether it is appropriate for its use. For example, the HBAI statistics and Income Dynamics statistics are aligned to statutory reporting under Section 4 of the Welfare Reform and Work Act 2016. These statistics may be most appropriate to use when talking about the government’s progress on tackling child poverty i.e. children living in low-income households. Income Dynamics statistics are used when making statements about the characteristics of children in persistent poverty (defined as those in households in relative low-income for three out of four years).

Wider support

The Government Statistical Service (GSS) has been working together to improve income-based poverty statistics. This has included creating an income and earnings tool and publishes an income and earnings statistics guide that help to signpost users to relevant income-based statistics. More information on this work is available in a guest blog on the journey to improving income-based poverty statistics.

Several charities and research institutions also publish data and analysis concerning income-based poverty. This includes the Social Metrics Commission, which produces poverty statistics based on a wider definition (using FRS and Understanding Society data); the Joseph Rowntree Foundation, which produces poverty statistics using a variety of data sources including the FRS; and the Resolution Foundation, which publishes analysis on living standards.