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Recent trends in poverty. David Phillips Institute for Fiscal Studies 11 th 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. - PowerPoint PPT Presentation
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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
0%
5%
10%
15%
20%
25%
30%
1979 1984 1989 1994 1999 2004
60% AHC Median 60% BHC Median
Source: HBAI Data (FES and FRS)
Poverty rose in 2005-06..
0%
5%
10%
15%
20%
25%
30%
1979 1984 1989 1994 1999 2005
60% AHC Median 60% BHC Median
Source: HBAI Data (FES and FRS)
..And again in 2006-07
0%
5%
10%
15%
20%
25%
30%
1979 1984 1989 1994 1999 2006
60% AHC Median 60% BHC Median
Source: HBAI Data (FES and 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
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
2006-07 Rate 29.5 22.2 15.2 9.4
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
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 EntitlementsNon-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)
0%
5%
10%
15%
20%
25%
30%
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
1.5
2
2.5
3
3.5
1998 2000 2002 2004 2006 2008 2010
Ch
ild
ren
(M
illi
on
s)
1998-99 2010-11 Target Child poverty
Progress to date Required path
Source: HBAI Data (FRS) and authors’ analysis
2010 target looks very challenging
1.5
2
2.5
3
3.5
1998 2000 2002 2004 2006 2008 2010
Ch
ild
ren
(M
illi
on
s)
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 200000
Full-time
Part-time
Workless
All Lone Parents
Self-employed
Two FT
One FT, One PT
One FT
One or Two PT
Workless
All couples with children
Composition Effect Risk Effects Total Change
Lone Parents
Couples with children
All children
Source: HBAI Data (FRS) and authors’ analysis
Pensioner poverty
0%5%
10%15%20%25%30%35%40%45%
1980 1985 1990 1995 2000 2006
Pensioners AHC Pensioners BHC
Source: HBAI Data (FES and FRS)
Pensioner poverty
0%5%
10%15%20%25%30%35%40%45%
1980 1985 1990 1995 2000 2006
Pensioners AHC Pensioners BHC
rises
Source: HBAI Data (FES and FRS)
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
0%
5%
10%
15%
20%
1980 1985 1990 1995 2000 2006
60% of AHC Median 60% of BHC Median
Source: HBAI Data (FES and FRS)
Absolute poverty falls up to 2004-05
0%5%
10%15%20%25%30%35%40%
1979 1984 1989 1994 1999 2004
60% AHC Median 60% BHC Median
Source: HBAI Data (FES and FRS)
Rises in 2005-06 and 2006-07
0%5%
10%15%20%25%30%35%40%
1980 1985 1990 1995 2000 2006
60% AHC Median 60% BHC Median
Source: HBAI Data (FES and FRS)
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.
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