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'GOVERNMENT NEEDS TO TAKE FURTHER ACTION BEFORE POVERTY TARGETS CAN BE MET'

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The government is making progress in tackling poverty, but extra measures will be needed each year to raise the inc...
The government is making progress in tackling poverty, but extra measures will be needed each year to raise the incomes of the poorest families before it gets within striking distance of its own, ambitious targets.

Three new reports, launched today by the Joseph Rowntree Foundation, highlight changes that have helped low-income households, such as falling unemployment, rising school achievement and better housing conditions. Out of 50 key indicators of poverty and social exclusion, 24 have improved over the past five years, while only six have grown worse. Increased spending on public services such as health and education has also tended to benefit the poor more than people on higher incomes.

Even so, there is new evidence that without further action the government will have difficulty meeting its commitment to reduce child poverty by a quarter by 2004 - a target requiring a reduction of around 1.2 million since 1996/7 in the number of children in families with relatively low incomes.

Monitoring poverty and social exclusion 2002

The annual monitoring report by researchers at the New Policy Institute brings together the latest available statistics for Britain to construct a comprehensive picture of trends in tackling poverty and social exclusion. This includes poverty figures for the government's term in office. Among the 50 key indicators, it shows that:

In 2000/01 there were 13 million individuals living in homes with incomes below the Government's main poverty threshold (defined as 60 per cent of the median household income after deducting housing costs). This was 1 million fewer than in 1996/7, but was still almost double the number 20 years ago.

The official figure of 3.9 million children living in homes below the poverty threshold was 500,000 lower than in 1996/7, but similar to the level throughout the first half of the 1990s. Children continue to be more likely to live in low-income households than adults.

The number of pupils leaving school without basic qualifications has decreased. In 2001, a quarter of GCSE students failed to pass any subject with grades A to C compared with a third ten years' previously. Similarly, one in four 11-year-olds failed to achieve the target 'Level 4' in English in 2001, compared with more than four out of ten in 1996. The improvement in primary schools serving high proportions of low-income children was at least as good as the national average.

Fifteen per cent of families on low-incomes live in homes without central heating, compared with 25 per cent in 1994/5. Poorer families are now more likely to have central heating than the population as a whole.

The number of families housed in bed and breakfast and other temporary accommodation has almost doubled since 1997, reaching 85,000 in 2002.

Despite government initiatives, one in five of the poorest households was without a bank or building society account in 2000/01: the same proportion as in 1994/5. Half of all low-income households lack household contents insurance, compared with a quarter of those with average incomes.

Unemployment, using the International Labour Organisation definition of people actively seeking work, has fallen below 1.5 million. They are outnumbered by the 2.3 million 'economically inactive' people (mostly sick and disabled, early retirees and lone parents) who say they want to work. There are around 2 million households where no adult has worked for more than two years: a figure that has also remained steady since 1996.

The number of adult workers paid less than the national minimum wage has dropped from 1.5 million before its introduction in 1998, to 200,000 in 2001. However, the numbers whose pay rates are just above the minimum (the equivalent of£4 an hour in 1998) has only declined by an estimated 300,000. Most of these low-earners are women.

Guy Palmer, co-director of the New Policy Institute and a co-author of the report, said: 'The message for the government from these latest indicators is that significant progress is being made in tackling social exclusion but there is a long way still to go. The government must keep its nerve. That means it must continue taking new measures to reduce the number of children and adults who do not receive their fair share of growing prosperity and simply cannot afford items and activities that most people treat as essential.

'With unemployment at its lowest level for many years, it becomes particularly important to look at ways of helping the much larger number of long-term sick, disabled and other working-age people who are economically inactive but would like to find work. The need to tackle low pay also remains pressing, given that almost half of all children in homes below the government's poverty threshold include at least one adult who has paid work.'

Changing poverty after 1997

An interim report published today analyses the reasons relative poverty has declined in recent years and uses policy modelling to assess the scope for further reductions. David Piachaud of the London School of Economics and Holly Sutherland, director of the Microsimulation Unit at Cambridge University, use data from the government's Family Resources Survey - the same source used to compile the official estimates of Households Below Average Income (HBAI). They find that:

Between 1996/7 and 2000/1 the number of children in households with incomes below the poverty threshold fell by between 540,000 and 450,000 depending on whether income was measured before or after housing costs. The largest decline was among larger and lone-parent families.

Most of the reduction in family poverty (around 300,000 children) was a result of rising employment and more parents obtaining paid work. Children in poor households with part-time workers appeared to benefit most from benefit changes and the introduction of tax credits for low-paid parents.

Although the situation of poor children improved, there was proportionately less progress in reducing adult poverty. Basic pensions, the Job-seekers' Allowance, Incapacity Benefit and Income Support for people without children all grew at a much slower rate than median household incomes.

Without significant changes in other factors such as employment rates, existing policies will achieve a reduction of around 750,000 in the number of children in households below the poverty threshold between 1996/7 and 2003/4. This compares with around 1.2 million needed to meet the government's target by 2004.

Holly Sutherland said: 'The government has set itself the tough but achievable target of reducing child poverty by a quarter by 2004 and halving it by 2010. Our analysis suggests that without increased resources it will be hard for ministers to achieve their goals. If it had not been for the improvements made to the tax and benefit system in recent years, things would be much worse. But more resources will be needed each year just to keep up with income levels generally, let alone make progress.'

Changes in distribution of the 'social wage'

A third report, by Tom Sefton of the Centre for Analysis of Social Exclusion at the LSE examines how public spending worth£4,000 per household on welfare services, including the NHS, schools and subsidised housing, is shared out. He concludes that:

People with the lowest two-fifths of incomes receive around twice the value of benefits in kind (known as the 'social wage') of those in the richest fifth. Subsidies for social housing are especially 'pro-poor', but people with low incomes also benefit disproportionately from health care, social care and most education services.

The overall value of spending on public welfare services has increased 50 per cent in real terms since 1979. Such spending has accelerated since 1996/7 and the pro-poor bias has increased. Even so, the social wage did not grow as fast as household incomes - and, consequently, did not prevent relative inequality from rising.

Tom Sefton said: 'While people in lower-income households obtain more benefits in kind from welfare services, it is important to remember that their needs are also greater. Pensioners, for example, need more health care. The extra money the NHS spends on them does not make them better off than people with fewer health care needs - although they would, of course, be worse off if there was no NHS.'

Note

Monitoring poverty and social exclusion 2002 by Guy Palmer, Mohibur Rahman and Peter Kenway is published by The Joseph Rowntree Foundation and available from York Publishing Services, 64 Hallfield Road, Layerthorpe, York YO31 7ZQ (01904 430033), price£16.95 plus£2 p&p. Regularly updated information about poverty, social exclusion and the 50 indicators can be found at www.poverty.org.uk

A summary of findings from this report is available here.

Recent changes in the distribution of the social wage by Tom Sefton is published as CASEpaper 62 and is available, free of charge, from Jane Dickson, CASE, London School of Economics, Houghton Street, London WC2A 2AE (020-7955 6679).

A summary of findings from this report is available here.

Changing Poverty Post-1997 by David Piachaud and Holly Sutherland is published as CASEpaper 63 and is also available, free, from Jane Dickson at CASE (as above).

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