Economic Report #2: Defining poverty

17 Jun 2010, by Nicola Smith in Economic Reports, Economics

Download the 2nd Economic Report

Today we have published our second Economic Report. The first section provides a detailed overview of key economic indicators, including growth forecasts, public borrowing figures and labour market performance.

In the second section, given the Government’s recent announcement of a ‘Review on Poverty and Life Chances‘, we consider how poverty is defined, and how definitions of poverty impact on Government policy decision.

There is no single definition of poverty, and measuring and defining poverty is politically contentious. Under the Conservative Governments from 1979 – 1997 there was no officially defined relative or absolute poverty line – the Secretary of State for Social Security claimed that as most people in the UK were able to feed and clothe themselves poverty had been abolished. The lack of Government acknowledgement of poverty’s existence meant that policy rarely reduced policy and regularly exacerbated it – between 1979 and 1994 the number of children living in poverty had more than doubled.

In 1999, the Labour Government committed to eradicate child poverty within a generation, and embarked upon a significant consultation on how to measure progress and define poverty. The consultation concluded that income needs to be central to any long-term poverty measure, that a single index of child outcomes had little support and that a tiered system which supplemented core low-income and deprivation measures with data on different dimensions of poverty, would provide the most effective standard. These findings were reflected in the Labour Government’s poverty measurement standard, and in the four targets set out in its Child Poverty Act (which focus on reducing the proportions of children in low income households, in material deprivation, in absolute low income and living in persistent poverty).

Recent analysis of Labour’s impact on poverty rates has shown that the approach these targets led to had some considerable success, with real falls in the numbers of children and pensioners living in poverty (although poverty among working age adults continued to increase).

The current Government’s intentions on poverty (both on definitions and policies) remain unclear, although it looks likely that changes in what will be measured and where the poverty line is set may well be on the cards. Previous Conservative Governments have tried to abolish poverty by changing the definitions – it remains to be seen whether Government will be the same.

The TUC believe that there are several key questions that the Government needs to answer about its poverty policy:

• Will relative poverty and inequality still be measured? Income is not the only measurement of poverty, but it is the most important. Losing the 60 per cent of median income measure would indicate that relative poverty and inequality are not a concern of this Government.
• Will the relationship between economic policy and poverty be recognised? The Government’s poverty review commits to examine how public policy can reduce poverty ‘consistent with the Government’s fiscal strategy’. But spending cuts of the scale currently being discussed will inevitably increase poverty – the redistributive impact of public service will reduce, and the economic impacts of cuts will hit the poorest the hardest.
• Will some poor people be seen as more deserving than others? It would be extremely concerning if the Coalition were to prioritise poverty reduction measures for some families over others – but given recent rhetoric on lone parents and disabled people claiming incapacity benefits it seems likely that some will be judged to be more worthy of state support than others.

We look forward to more details of what the Government will actually propose – so far cuts to programmes including free school meals and funding to tackle unemployment and deprivation – suggest that the Coaltion may not see poverty as a central concern.