Executive summary

Why we did this review

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 poverty.

The concept of poverty means different things to different people. This makes it difficult to define and measure. Despite this challenge, it is important for central and local governments to understand and address the nature of poverty in the areas they serve.

The Department for Work and Pensions (DWP) and the Office for National Statistics (ONS) are the primary producers of official statistics on income-based poverty. However, there are a number of other official statistics producers working in this space, including the Northern Ireland, Scottish and Welsh Governments. For the purposes of this report, where we refer to ‘statistics producers’, this includes all of the producers who contribute to the income-based poverty statistics landscape. Where recommendations apply to specific producers, we will refer to them by name.

A Government Statistical Service (GSS) Income and Earnings Coherence Steering Group was established in 2020, aimed at addressing the coherence and accessibility of income and earnings statistics. The group is made up of statistical leaders across DWP, HMRC and ONS, as well as representatives from the devolved administrations and academia, who are striving to improve the evidence base on income-based poverty, as well as income more broadly.

There are also several prominent organisations outside of government that contribute to the wider evidence base on poverty. These include the Social Metrics Commission (SMC), which was formed in early 2016 with the goal of creating new poverty measures for the UK, as well as think tanks such as the Institute for Fiscal Studies, the Resolution Foundation and the Joseph Rowntree Foundation.

When poverty is discussed in the public domain, it is often painted as a single statistic or trend which can mask the complexity of the underlying issue. The fact that there are multiple approaches to measuring poverty also means that measures can be used selectively, to suit a particular argument or point of view.

We want to ensure that statistics on poverty provide a robust evidence base for national and local policy development and decision making. We champion the need for statistics to support a wide range of uses, including by charities, researchers and individuals.

What we found

Three strategic improvements are needed to support and deliver statistics that fully meet users’ needs. These would represent a step-change in the way the statistics on income-based poverty are produced and will require continued joined up, collaborative working, to be achieved.

• The GSS Income and Earnings Coherence Steering Group needs to continue to collaborate and demonstrate leadership of the income-based poverty statistics landscape, to move away from producing a series of individual outputs to a more coherent and comprehensive evidence base.
• Statistics producers need to better understand how the income-based poverty statistics are being used across policy and service provision and how the evidence base can be improved.
• Innovation is needed for the statistics to deliver their full potential and serve the public good. Opportunities for data linkage should be maximised and data gaps should be addressed, building on work already underway in the GSS to explore the use of administrative data and its integration with social surveys.

Information needs in the poverty space are multi-faceted and encompass a range of specialist interests and priorities. To meet these broad needs, poverty is most helpfully viewed as a basket of main measures. As such, one measure could not adequately meet all the differing needs that users have for poverty statistics.

The current landscape of income-based poverty statistics is difficult for many to navigate and there is scope for signposting between the different statistics to be improved. The accessibility of language used in statistical bulletins and guidance accompanying the statistics could also be enhanced to support users’ understanding.

The number of people falling under the headline poverty line, drawn at 60% of median income, has remained stable over the past few years at around 14 million individuals. Focusing on this headline measure of poverty can mask important insights into the different levels of poverty experienced by different groups.

Whilst this review is focused on income-based poverty, poverty is closely linked to many other aspects of people’s lives, from employment prospects to health outcomes. Users we spoke to felt that the best mechanism for understanding people’s ‘lived experience’ of poverty is through qualitative research. Such research is currently carried out by a number of organisations outside of government, including the Joseph Rowntree Foundation.

Material deprivation is often used as a proxy for understanding the lived experience of poverty. The existing material deprivation statistics could be enhanced to ensure the questions are reflective of essential items and services in society today, and that they are an appropriate discriminator of who is ‘deprived’ and who is not.

Household surveys, which underpin most of the income-based poverty statistics, contain a number of data gaps. Users expressed concerns about the exclusion of the homeless and under-coverage of individuals with no recourse to public funds. There is also a lack of robust, granular data on ethnicity or sub-regional breakdowns in the data.

There is untapped potential within administrative data to augment and improve existing income-based poverty statistics. Administrative data could be used to address historical issues with sample-based surveys such as timeliness and benefit-underreporting. The opportunities for greater use of administrative data are already being explored by DWP and ONS.

There remains a substantial role for sample-based surveys in this space to ask the questions that administrative data cannot capture. These include questions on family structure, housing costs, certain sources of income and lived experience. However, there are limitations to these surveys which should be made more visible for less-expert users.

Equivalisation scales are used in reporting on income-based poverty statistics to adjust household income, taking into account household size and composition. Many users told us that the current modified OECD scale used by official statistics producers in the UK is outdated and arbitrary. It also fails to account for a number of ’inescapable’ costs such as disability, childcare and commuting costs. Users told us that there could be value in developing equivalisation methods for income statistics which are tailored more specifically by age and other demographic characteristics. ONS have already conducted some initial research into alternative methods of equivalisation.

Statistics producers we spoke to as part of this review are engaged with the subject of poverty and understand how they contribute to the evidence base. Importantly, whilst they endeavour to provide clear briefing on complex data, the information is still sometimes misunderstood and misused by politicians.

There is a lack of transparent communication of DWP’s development priorities and plans for income-based poverty statistics. Decisions around development of the statistics need to be communicated openly to enhance confidence in the data. Government departments need to take a wider view of user needs and look beyond immediate policy needs.

The GSS Income and Earnings Coherence Steering Group provides a cross-GSS vehicle to help producers address the recommendations set out in this report. The group has developed a vision statement and coherence and accessibility improvement workplan for Income and Earnings statistics in general, which will highlight the steps taken by the producers already with regards to the user need we have highlighted in this report. The group had plans to publish these outputs around the end of May 2021 at the time of our review.

Our recommendations

The existing statistics on income-based poverty provide a good foundation for decision making but there are opportunities to improve the evidence base provided by official statistics. We have identified the following detailed recommendations for producers of poverty statistics:

Improve the accessibility of language and guidance

• Producers should look to provide clearer and more detailed signposting to other income-based poverty statistics in their bulletins.
• Producers should ensure supporting guidance is accessible to lay users and clear on the appropriate uses and quality of the statistics.
• Producers should consider the helpfulness of the language used in the poverty bulletins and accompanying guidance, to ensure that it does not risk confusing or misleading less-experienced users.
• DWP and ONS should ensure they are clear about the strengths and limitations of household surveys, particularly with regards to missing groups, and clearly set out the implicit and explicit assumptions that underline them.

Address data gaps to enhance insight

• Producers should do more to draw out the necessary insights to allow users to understand the nature of poverty and how this varies between groups at differing levels of poverty, as identified above.
• DWP and ONS need to understand why experts are funding their own data collections and analysis and consider whether this reflects weaknesses in the existing official statistics.
• To increase the public value of the existing statistics, DWP should:
  • review the current set of questions which underpin material deprivation and determine a way to compare material deprivation across groups, in collaboration with other producers across the GSS who use these questions.
  • increase the consistency in the way it reports material deprivation, as it currently reports material deprivation of children in households with less than 50% and 70% of median income but not at 60%.
• DWP and ONS should address the ethnicity data gap, as part of the wider GSS response to the findings of the Commission on Race and Ethnic Disparities’ report.
• DWP should consider the potential to extend the low-income families at a local area level analyses to working-age adults without children and pensioners.

Review existing methods and maximise use of administrative data

• DWP and ONS, building on existing work to explore the feasibility and potential of social survey and administrative data integration, should explore whether integration can help improve the timeliness and robustness of income-based poverty statistics.
• DWP and ONS should prioritise work to address under-reporting at the bottom end of the income distribution. They should consider a multifaceted approach to solving this problem, such as data linkage and making greater use of administrative data.
• DWP and ONS should look to understand and address concerns about access when introducing administrative data into the production of income-based poverty statistics.
• DWP and ONS should determine the user need for a single data source on household incomes by exploring the feasibility of consolidating the existing social surveys, as part of their existing plans in the new combined GSS Income and Earnings Coherence Work Plan. This could either be used to inform different publications, or to form the basis of a single set of statistics constructed from a consolidated data source, based on an understanding of user needs.
• DWP and ONS should look to better understand the non-response bias of their surveys, and ensure they are transparent with users about any potential bias.
• DWP and ONS should consider leading a review of equivalisation methods, in collaboration with other producers, building on the initial work conducted by ONS.

Command confidence in the statistics through trustworthy production

• DWP and ONS should assess how the SMC recommendations can be implemented in their own work to enhance the public value of their statistics. Any planned developments to the statistics should also be communicated in an open and transparent way.