Poverty has been described by the government as the biggest problem facing Britain. A few years ago, a social security minister declared that poverty no longer existed here. Who is right? What do we actually know about the numbers and the types of people on the edges of society?
The closest thing we get to an official set of poverty statistics is the annual Households Below Average Income (HBAI) series produced by the Department of Social Security (DSS). There is no reference to poverty either in the title of the series or in the content of the report. These are simply statistics about the distribution of income, in particular about the lower part of the distribution. None the less these figures do provide the best snapshot of the numbers of people in Britain with relatively low incomes.
The most recent figures (which relate to 1993-94) indicate that 13.3m men, women and children live in households whose income?after they have met their housing costs?is less than half the national average, a common benchmark used in international studies of poverty. These represent almost one quarter of the British population. Of this proportion, nearly 5m are working age couples with children, about 2.5m are pensioners and about 2.3m are single parents and their children.
Although the official series of statistics only goes back to 1979, the Institute for Fiscal Studies has constructed results on the same basis for each year back to 1961. It is clear from the graph that the 1980s were very different from the previous two decades. The percentage of the population with income below half the national average fluctuated somewhat during the 1960s and 1970s; but these fluctuations are dwarfed by the upswing during the second half of the 1980s. Between the late 1970s and late 1980s, the number of people living on less than half the average income nearly tripled, before stabilising in the early 1990s. Yet statistics like these prompt more questions than they answer. In particular, can it really be the case that almost one in four people in Britain is living in poverty?
The answer is that these statistics, like all others, should (and do) carry a government health warning. Because of the way the figures are constructed and the concept of poverty derived from them, they give us only a partial picture of the pattern of living standards in Britain.
In its early years, the HBAI series was based largely on a single statistical source?a voluntary annual survey of household incomes and expenditures called the Family Expenditure Survey (the results in the graph are derived from this source). About 7,000 households were interviewed, giving details of their regular incomes from earnings, benefits and investments, keeping a diary of their spending over a two-week period.
One of the problems with such a survey is that it only covers private households. People living in institutions such as old people?s homes, or hostels, and those without a roof over their head, are excluded from the figures. Other sources of information exist about these groups, but no attempt is made to integrate them into the statistics on poverty.
A second problem with this survey-based approach is that of non-response. Each year, 25-30 per cent of households contacted by the Office of National Statistics refuse to take part in expenditure surveys. Those who decline are more likely to live in larger, multi-adult households, in inner city areas, than the rest of the population.
A great effort is made by the DSS to reweight the survey results in order to give an accurate reflection of the characteristics of the whole population. However, if particular groups of people simply do not respond to surveys of this sort, no amount of reweighting of those who do can give a true picture.
The problems of survey non-coverage and non-response would suggest that the figures quoted so far are, if anything, an understatement of the true level of poverty in Britain. So what other grounds are there for challenging the notion that one in four people in Britain is living in poverty?
what is poverty?
Poverty is a slippery concept. To use a threshold of half the national average income implies a highly relative notion of poverty. It suggests, for example, that if the richest person in the country were to inherit a fortune from an overseas relative, this would increase poverty by raising the national average income. Few people would subscribe to such a relative notion of poverty.
Indeed, this relative approach produces a somewhat perverse?and counter-intuitive?story about trends in poverty over recent years. According to this measure, poverty increased only slightly in the early 1980s, when unemployment doubled and manufacturing industry was shrinking, but apparently rose rapidly during the "Lawson boom" of the late 1980s when income tax was being slashed and average earnings were rising rapidly. It would seem from this that the best solution to poverty is a good dose of recession.
If the HBAI statistics are not the best guide for charting poverty in Britain, what other sources of information do we have? One obvious source is the number of people deemed to be so needy that the state steps in to supplement their incomes. At first glance these numbers appear even more frightening than those produced by the HBAI approach.
In 1993-94 just under 15m men, women and children lived in households receiv- ing one or more of the main means-tested benefits?income support, housing/council tax benefit and family credit. Not all of these people would be regarded (or would regard themselves) as living in poverty. For example, roughly 2m of them receive family credit?the main benefit available to low-paid working families with children?but this benefit is as much about encouraging people to take low-paid jobs as about poverty relief. A further 3m people on relatively low incomes?typically, pensioners?are deemed to have enough income to make some contribution to their rent or council tax, but get a top-up from the government.
None the less, almost 10m households were dependent on the basic standard of living offered by income support in 1993-94. This number has more than doubled since the late 1970s. The main reasons for this growth are the significant rise in unemployment over the period; the increase in the number of unemployed single parents; and a surprising rise in the numbers of long-term sick and disabled. (The latest figures also suggest that between 1.1m and 1.7m households, mainly pensioners, do not claim the income support they are entitled to.)
Whether we accept the 13m figure produced by the HBAI analysis, or the 10m on income support with an additional 1m-plus non-claimants, it seems that large numbers of people in Britain live on low incomes. But is this poverty?
One important limitation of these figures is that they represent only a snapshot of people on low income. However, the effect of low income on a person?s ability to participate in society depends on whether it is a short-term phenomenon?such as a brief gap between two well paid jobs?or a long-term fact of life. When weekly benefit income must be used not only for day-to-day living but also over time?to replace worn-out items, to buy new school clothes for children, or to pay for a holiday?a sustained period on low income can easily turn into social exclusion.
In the past, evidence on duration of low incomes has been sketchy. Surveys on which the HBAI statistics are based interview a new set of people each year, and thus provide no information about lengths of time spent by people on low incomes. Benefits statistics provide a better guide.
Among pensioners, most receipt of benefit is long term. The state and private pensions of most poorer pensioners are relati-vely stable over time, and once they start to claim income support they are unlikely to be floated off it. In the working age population the picture is more varied: only about one quarter of income support recipients in this group have received benefit for longer than two years.
Our understanding of the dynamics of low incomes has been helped significantly in recent years by the arrival of the British Household Panel Study (BHPS), based at Essex University. Unlike the cross-section Family Expenditure Survey discussed earlier, the BHPS interviews the same people every year. Its first wave of interviews took place in 1991 with about 5,500 households participating, a response rate of about 70 per cent. Since then interviews have taken place annually and although there is some drop-out, a substantial core of adults has now been tracked over a period of more than four years.
One of the BHPS?s findings is that there is significant turnover at the bottom of the income distribution scale. Of those individuals in the poorest 10 per cent of the population in a given year, roughly half will have escaped from the bottom group one year later. For some the escape is only temporary, but the findings show that the low income population is far from a homogeneous lump. The survey confirms, however, that for some people low income is a long-term phenomenon. More than one third of those who began in the poorest group at the start of the survey in 1991 had been there continuously when the 1994 wave of interviews took place.
rising expectations
The statistics examined have concentrated on income as a measure of poverty or social exclusion. A more reliable indicator of household living standards might be levels of expenditure or consumption. Unfortunately, because the Family Expenditure Survey data on spending derive from the short survey period of two weeks, they provide only limited insight into underlying living standards. None the less, this source indicates that inequality rose less rapidly in the 1980s than the income-based statistics suggest.
An alternative to using income or expenditure is to look more widely at what it is to participate in society and how many people appear to be missing out. One important study of this in the 1980s was the so-called "Breadline Britain" survey. The approach taken was to establish a set of "social necessities," such as having a warm, dry home or being able to go on holiday once a year. Survey respondents were shown a list of such items and asked to identify which of them were "necessities." Any which achieved a score of more than 50 per cent were included on the researchers? final list. The next step was to ask respondents which items from this list they themselves could not afford. Anyone lacking three or more of these necessities was deemed to be living in poverty. On this basis it was calculated that 7.5m individuals were living in poverty in 1983, of which 5.5m did not have five or more necessities.
The choice of three items to define a poverty line is somewhat arbitrary, and the decision on which items to offer respondents as "necessities" can influence the final result. But this study does identify many people who lack several items which most of us regard as essential to a decent life.
The follow-up survey, undertaken in 1990, suggested that there had been a big rise in poverty over the 1980s. By 1990, it was estimated, 11m people could not afford three or more "necessities," of whom about one third lacked seven or more such items. This was partly because the researchers had simply offered respondents a longer list of possible necessities to choose from. (One new item, the ability to save ?10 a month, was deemed a necessity by two thirds of the population and was lacked by almost one third.)
But where the two studies asked about the same items, the results are illuminating. In the case of almost every item offered as a possible necessity in both surveys, the proportion of respondents who considered these essential rose between 1983 and 1990. For example, 77 per cent thought a fridge essential in 1983; 92 per cent thought it essential in 1990. Expectations of what was acceptable had risen, but the proportion of people who possessed each of these items had also gone up. The proportion of respondents with a damp-free home rose from 93 per cent to 98 per cent; those with an indoor toilet from 98 per cent to almost 100 per cent; those with heating for living areas from 95 per cent to 97 per cent. These results show that when general living standards rise, so do people?s expectations. An accurate measure of poverty will take account of both.
So what is the answer to the question with which I began?has poverty been elimina-ted or is it still a big problem? It is complacent to regard the problem as solved. But to describe very large numbers of people as living in poverty almost certainly overstates the case, in spite of omissions from the statistics. For some, low income is a temporary phenomenon and does not correspond to any commonsense notion of poverty. Other people are included in the figures because of a rapid increase in average incomes at a time of economic prosperity, rather than by any dramatic deterioration in their circumstances. Part of the reason for the persistence of the perception of poverty, despite continued economic growth, is the rise in people?s expectations. But if people on low incomes in a transparent society do not benefit at all from the general increase in prosperity, they are bound to feel poorer.
