This item was published during the term of a previous administration that ended in April 2007
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Progress on child poverty
09/03/2006
The latest statistics show Scotland has met its first target towards eradicating child poverty by 2020, according to Communities Minister Malcolm Chisholm.
Households Below Average Income data for 2004-05, released today by the Department for Work and Pensions and the Executive, shows the number of children in absolute and relative low income households has fallen over the last decade, meeting the target of reducing the number of children living on low incomes by 25 per cent.
Mr Chisholm said:
"We want everyone in Scotland to have the best opportunities throughout their lives. Poverty can take away those opportunities and while there are no quick fixes to ending poverty, we are determined to tackle poverty and disadvantage right across Scotland.
"These figures show that, across Scotland, more people are being lifted out of poverty. We have met our initial target to reduce the number of children living in low income by a quarter.
"Between 1998 and 2004, 100,000 fewer children were living in relative low income households - that's 100,000 fewer children held back through lack of opportunities.
"We will continue to work with the UK government as we focus on our challenging target of ending child poverty by 2020.
"Pensioners are also better off as a whole, with 120,000 fewer pensioners in relative low income households since 1997. Our free central heating and bus travel programmes are also having a positive impact on the daily lives of thousands of older people in Scotland.
"The figures show, however, there is much more to do to tackle low income among working age adults. Work is the best route out of poverty, and we need to help more people get into work - and to stay in work.
"Our targeted Closing the Opportunity Gap approach, backed by action and significant investment across the Executive, will enhance the ambitions, education and job prospects of the most deprived individuals and communities in Scotland.
"We are giving people training in essential skills for working, through Modern Apprenticeships and the Sector Skills Councils. We are also developing an Employability Framework to help the most disadvantaged move towards and into sustained work.
"For families with children, our Childcare Strategy continues to provide affordable, accessible, quality childcare across Scotland. We've also set up the Working for Families Fund, ensuring that childcare is not a barrier to parents in deprived areas entering education, training or employment.
"Working Tax Credits have helped put more money into pay packets of low-income workers, and we'll keep working with the UK Government to maximise benefit uptake in Scotland.
"We are moving in the right direction, but ending poverty takes time. This Executive remains committed to making sure we have the policies in place to give everyone the best opportunities in life."
Background information
The Department for Work and Pensions' (DWP) Households Below Average Income data are published annually and are used to provide the official snapshot low income estimates for individuals, children, working age adults and pensioners for GB and Scotland. This publication notice provides the headline estimates for Scotland only.
For GB estimates (and some regional analysis) please see the DWP publication Households Below Average Income: An analysis of the income distribution 1994/95-2004/05.
Income definitions and measures
The income used in the 'low income' estimates is called 'net disposable household income'. It is simply income from all sources, for all members of the household but after deductions for income tax, National Insurance contributions, council tax, pension contributions, maintenance payments and insurance premia. Due to changes in the questions on the FRS, from 2005/06, disposable income to estimate official low income figures will include insurance premia, this change will have very little effect.
Equivalisation
In order for the net disposable household income to be used as a proxy for living standards it has to be adjusted. This adjustment is called 'equivalisation'. This equivalised income allows the comparison of living standards between households that vary in size and composition. This adjustment reflects the fact that a family of several people requires a higher income than a single person in order for both households to enjoy a comparable standard of living.
The key assumption is that all individuals in the household benefit equally from the combined (equivalised) income of the household. There are several different equivalence scales. The current low income figures use the McClements equivalence scale. The new child poverty measure, uses the modified OECD scale. Next year, all low income figures will be based on the modified OECD scale. The DWP have published a paper with further details about the changes to equivalisation scales.
How is low income measured?
Individuals are defined as being in low income if their equivalised net disposable household income is below 60 per cent of the GB median. The median is the income value which divides a population, when ranked by income, into two equal sized groups. Since the mean is influenced significantly by the highest incomes, median income thresholds are widely accepted as a better benchmark when considering a derived measure for low income. 60 per cent of median is the most commonly used low income measure, however additional 50 per cent and 70 per cent of median figures are also published in support of Opportunity for all and to give an idea of the depth of low income.
Before housing costs (BHC) and after housing costs (AHC) This publication provides low income estimates on a before housing costs basis and on an after housing costs basis. Since some people choose to spend more of their income on housing costs, an after housing costs measure would understate the relative standard of living of those individuals who were actually benefiting from a better quality of life by paying more for better accommodation. Conversely, any income measure which does not deduct housing costs (i.e. the before housing costs measure) will overstate the living standards of individuals whose housing costs are high relative to the quality of their accommodation.
Absolute and relative measures
There are two further measures that are used to describe trends over time: absolute low income and relative low income. In essence, the absolute measures whether individuals in the lowest income households are seeing their incomes rise in real terms. The relative measures whether those in the lowest incomes are keeping up with the growth of the economy as a whole.
Absolute low income: individuals living in households whose equivalised income is below 60 per cent of inflation adjusted GB median income in 1996/97. This is a measure of whether those in the lowest income households are seeing their incomes rise in real terms.
Relative low income: individuals living in households whose equivalised income is below 60 per cent of GB median income in the same year. This is a measure of whether those in the lowest income households are keeping pace with the growth of incomes in the economy as a whole.
The New Child Poverty Measure
This year sees the launch of a new child poverty measure. These long term measures were developed by the DWP in response to the Prime Minister's 1999 announcement that the UK Government is committed to eradicating child poverty within in a generation. The Executive shares this vision. In April 2002, the DWP launched the Measuring Child Poverty Consultation in order to develop a long term measure of child poverty.
The new measure forms the basis of a joint DWP/HM Treasury child poverty target of halving child poverty by 2010 and eradicating child poverty by 2020. The measure will consist of three tiers:
- Tier 1, Absolute low income: number and proportion of children in households whose equivalised income before housing costs is below 60 per cent of inflation adjusted GB median income in 1998/99. This is a measure of whether the poorest families are seeing their incomes rise in real terms.
- Tier 2, Relative low income: number and proportion of children in households whose equivalised income before housing costs is below 60 per cent of GB median income in the same year. This is a measure of whether the poorest families are keeping pace with the growth of incomes in the economy as a whole
- Tier 3, Material deprivation and low income combined: Number and proportion of children that are both materially deprived and are in households whose equivalised income before housing costs is less than 70 per cent of the GB median in the current year. This is to provide a wider measure of children's living standards.
The third tier (material deprivation and low income combined) will be published later in the year. In next year's HBAI Statistical Publication Notice, all three tiers will be published at the same time. To allow better international comparisons, the new child poverty measure uses the modified OECD equivalisation scale and, to reflect the year in which the commitment to eradicate child poverty was made, the base line year for the absolute measure (tier 1) is 1998/99. The modified OECD equivalisation scale gives more weight to 0-4 year olds and to 14-15 year olds than the McClements equivalisation scale and less weight to children of other ages. This results in slightly more children being in low income under tiers 1 and 2 than under the current methodology (McClements equivalisation scale, absolute and relative, before housing costs). The trends will remain the same which ever scale is used.
Other points to note
The percentages show the proportion of the population that fall below the threshold in the year in question. Therefore, due to changing demographics, the same number of persons one year may represent a different proportion to the same number in a previous year.
The figures are estimates based on a sample survey - The Family Resources Survey - and are therefore subject to sampling variation. Extreme caution should be exercised in the interpretation of small year-on-year fluctuations. Identification of trends must be based on data for several years. As the Scottish Executive has funded a doubling of the Scottish sample since 2002/03, the Scottish figures from 2002/03 onwards should be less prone to fluctuation within key trends than those for earlier years.
The Household Below Average Income data are grossed up to produce estimates for the overall population. Following a review, the Department for Work and Pensions announced a new grossing regime in February 2005. This new grossing regime, which came into effect last year, improves the accuracy of regional-level counts drawn from the Family Resources Survey (from which the HBAI is based). The full HBAI series from 1994/95 was revised last year in line with the new grossing regime. Further information about the new grossing regime is available at the DWP website: www.dwp.gov.uk/asd/frs.