Recent trends in poverty
David Phillips
Institute for Fiscal Studies
11th June 2008
What’s coming up?
• Poverty fell during Labour’s first two terms
• Most for pensioners and children
• Longest sustained fall in poverty of recent times
• Poverty rose between 2005-06 and 2006-07.
• Pensioner poverty increased most (by 300,000).
• Child poverty needs to fall by 300,000 a year for 4
years to meet 2010-11 targets.
Defining Poverty for HBAI
• GB up to 2001-02, UK from 2002-03
• Focus on rates rather than numbers
• Relative notion of poverty
• Individuals in households below 60% of the
contemporary BHC and AHC median
• No account of depth of poverty
Poverty fell in Labour’s first two terms
30%
25%
20%
15%
10%
5%
0%
1979
1984
1989
60% AHC Median
1994
1999
2004
60% BHC Median
Source: HBAI Data (FES and FRS)
Poverty rose in 2005-06..
30%
25%
20%
15%
10%
5%
0%
1979
1984
1989
60% AHC Median
1994
1999
2005
60% BHC Median
Source: HBAI Data (FES and FRS)
..And again in 2006-07
30%
25%
20%
15%
10%
5%
0%
1979
1984
1989
60% AHC Median
1994
1999
60% BHC Median
Source: HBAI Data (FES and FRS)
2006
Across all thresholds?
1996-97 Rate
70% of
AHC
Median
60% of
AHC
Median
50% of
AHC
Median
40% of
AHC
Median
31.9
25.3
16.9
8.8
Source: HBAI Data (FRS)
Across all thresholds?
70% of
AHC
Median
60% of
AHC
Median
50% of
AHC
Median
40% of
AHC
Median
1996-97 Rate
31.9
25.3
16.9
8.8
Labour 1 Change
-1.8
-2.1
-1.6
(-0.3)
Source: HBAI Data (FRS)
Across all thresholds?
70% of
AHC
Median
60% of
AHC
Median
50% of
AHC
Median
40% of
AHC
Median
1996-97 Rate
31.9
25.3
16.9
8.8
Labour 1 Change
-1.8
-2.1
-1.6
(-0.3)
Labour 2 Change
-1.8
-2.6
-1.9
(-0.2)
Source: HBAI Data (FRS)
Across all thresholds?
70% of
AHC
Median
60% of
AHC
Median
50% of
AHC
Median
40% of
AHC
Median
1996-97 Rate
31.9
25.3
16.9
8.8
Labour 1 Change
-1.8
-2.1
-1.6
(-0.3)
Labour 2 Change
-1.8
-2.6
-1.9
(-0.2)
Change in 2005-06
+0.8
+1.1
+1.0
(+0.4)
Source: HBAI Data (FRS)
Across all thresholds?
70% of
AHC
Median
60% of
AHC
Median
50% of
AHC
Median
40% of
AHC
Median
1996-97 Rate
31.9
25.3
16.9
8.8
Labour 1 Change
-1.8
-2.1
-1.6
(-0.3)
Labour 2 Change
-1.8
-2.6
-1.9
(-0.2)
Change in 2005-06
+0.8
+1.1
+1.0
(+0.4)
Change in 2006-07
+0.4
+0.6
+0.7
+0.7
Source: HBAI Data (FRS)
Across all thresholds?
70% of
AHC
Median
60% of
AHC
Median
50% of
AHC
Median
40% of
AHC
Median
1996-97 Rate
31.9
25.3
16.9
8.8
Labour 1 Change
-1.8
-2.1
-1.6
(-0.3)
Labour 2 Change
-1.8
-2.6
-1.9
(-0.2)
Change in 2005-06
+0.8
+1.1
+1.1
(+0.5)
Change in 2006-07
(+0.4)
(+0.6)
(+0.7)
+0.6
29.5
22.2
15.2
9.4
2006-07 Rate
Source: HBAI Data (FRS)
Across all thresholds?
70% of
AHC
Median
60% of
AHC
Median
50% of
AHC
Median
40% of
AHC
Median
1996-97 Rate
31.9
25.3
16.9
8.8
Labour 1 Change
-1.8
-2.1
-1.6
(-0.3)
Labour 2 Change
-1.8
-2.6
-1.9
(-0.2)
Change in 2005-06
+0.8
+1.1
+1.0
(+0.4)
Change in 2006-07
+0.4
+0.6
+0.7
+0.7
2006-07 Rate
29.5
22.3
15.3
9.5
Labour-to-Date
-2.4
-3.0
-1.7
+0.6
Source: HBAI Data (FRS)
Growth in Benefit Entitlements
Non-working Couple, 3 kids
3.1%
Non-working Lone Parent, 1 kid
2.7%
Part-time working Lone Parent, 1 kid
3.0%
Single Adult on Job Seekers Allowance
2.2%
Single Adult on Incapacity Benefit
2.7%
Single Pensioner on Pension Credit
4.2%
Basic State Pension
2.7%
Poverty Line (AHC)
3.6%
RPI Inflation
3.7%
Composition of Poverty (AHC)
30%
25%
20%
15%
10%
5%
0%
1979
1984
1989
1994
1999
2006
Children
Working Age (with Children)
Working Age (without Children)
Pensioners
Source: HBAI Data (FES and FRS) and authors’ analysis
Child Poverty
• 2004-05 Target
• Cut number of children in poverty by ¼
compared with 1998-99
• Narrowly missed
• 2010 Target
• Cut child poverty by ½ compared with
1998-99
• Looks very challenging.
2010 target looks very challenging
Children (Millions)
3.5
3
2.5
2
1.5
1998
2000
2002
2004
1998-99
2010-11 Target
Progress to date
Required path
2006
2008
2010
Child poverty
Source: HBAI Data (FRS) and authors’ analysis
2010 target looks very challenging
Children (Millions)
3.5
3
2.5
2
1.5
1998
2000
2002
2004
2006
2008
2010
Child poverty
Progress to date
Required path
Projected poverty in 2010
Source: HBAI Data (FRS) and authors’ analysis
For whom has child poverty risen?
• Focus on number of children in poverty (BHC)
• Look at 125,000 rise between 2004-05 and 2006-07
• Can decompose the rise in child poverty into:
• A changing risk for specific family types
• The changing composition of families with children
Decomposing the 125,000 rise in child poverty
since 2004-05
-75000
-50000
-25000
0
25000
50000
75000
100000
125000
150000
175000
Lone Parents
Full-time
Part-time
Workless
All Lone Parents
Couples with children
Self-employed
Two FT
One FT, One PT
One FT
One or Two PT
Workless
All couples with children
All children
Composition Effect
Risk Effects
Total Change
Source: HBAI Data (FRS) and authors’ analysis
200000
Pensioner poverty
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
1980
1985
1990
Pensioners AHC
1995
2000
Pensioners BHC
Source: HBAI Data (FES and FRS)
2006
Pensioner poverty
rises
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
1980
1985
1990
Pensioners AHC
1995
2000
Pensioners BHC
Source: HBAI Data (FES and FRS)
2006
Pensioner Poverty
• Pensioner Poverty up by 200,000 AHC and 300,000
BHC.
• First time it has risen AHC since 1996-97
• First time it has risen BHC since 2001-02
• The rise is statistically significant and sizeable.
• Undoes about 1/6 of AHC fall since 1996-97
• About 2/3 of the BHC fall.
• Poverty risk up for all age groups (particularly older).
• IFS researchers predicted a rise but not this big.
• Supporting evidence from other surveys.
Factors underlying the rise
• Abolition of additional age-related payments
• Rising inflation eroded the value of benefits.
• Fall in benefit receipts captured in survey.
• But there was a rise in the private incomes of
pensioners in 2006-07
Factors underlying the rise
• Abolition of additional age-related payments
• Payments of £50 or £200 in Winter 2005 not
repeated.
• Added 100,000 to pensioner poverty.
• Rising inflation eroded the value of benefits.
• Fall in benefit receipts captured in survey.
• There was a rise in the private incomes of pensioners
in 2006-07
Factors underlying the rise
• Abolition of additional age-related payments
• Rising inflation eroded the value of benefits.
• The State Pension fell in real terms in 2006-07.
• Fall in benefit receipts captured in survey.
• There was a rise in the private incomes of pensioners
in 2006-07
Factors underlying the rise
• Abolition of additional age-related payments
• Rising inflation eroded the value of benefits.
• Fall in benefit receipts captured in survey.
• Could be partly under-recording of certain benefits
(e.g. the Pension Credit).
• There was a rise in the private incomes of pensioners
in 2006-07
Factors underlying the rise
• Abolition of additional age-related payments
• Rising inflation eroded the value of benefits.
• Fall in benefit receipts captured in survey.
• But there was a rise in the private incomes of
pensioners in 2006-07
• Mostly private pensions, with some investment
income and employment income.
Working-age adults without dependent children
20%
15%
10%
5%
0%
1980
1985
1990
60% of AHC Median
1995
2000
60% of BHC Median
Source: HBAI Data (FES and FRS)
2006
Absolute poverty falls up to 2004-05
40%
35%
30%
25%
20%
15%
10%
5%
0%
1979
1984
1989
60% AHC Median
1994
1999
60% BHC Median
Source: HBAI Data (FES and FRS)
2004
Rises in 2005-06 and 2006-07
40%
35%
30%
25%
20%
15%
10%
5%
0%
1980
1985
1990
60% AHC Median
1995
2000
60% BHC Median
Source: HBAI Data (FES and FRS)
2006
Summing up
•
•
•
•
Relative poverty rise
Second year in a row for poverty rise.
Still lower than its 1996-97 level
Pensioner poverty rose the most
• 100,000 due to the abolition of age-related payments
• Need to find new money to achieve 2010 target
• Difficult with tight government finances.