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The New Child Poverty Measure

A new child poverty measure has been 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.

In April 2002, the DWP launched the 'Measuring Child Poverty Consultation' in order to develop a long term measure of child poverty. The details of this consultation were published in December 2003 (please see www.dwp.gov.uk/consultations/consult/2003/childpov/final.pdf).

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 consists of 3 tiers:

Tier 1, Absolute low income: Number and proportion of children in households whose equivalised income before housing costs is below 60% of inflation adjusted median ¹ 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% of median ¹ 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% of the median ¹ in the current year. This is to provide a wider measure of children's living standards.

Figures relating to the first two tiers (absolute and relative low income) are provided in table 1. In order to estimate material deprivation under tier three, 21 new questions have been added to the Family Resources Survey. The exact methodology for combining the results from these questions and calculating the third tier has not yet been published by the DWP / HM Treasury. For more information and summary results for each of the material deprivation questions please see ' Material deprivation analysis'.

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. For consistency, from this year onwards all low income poverty estimates are published using this methodology. To allow comparisons to be made, detailed low income tables showing low income poverty estimates under the previous methodology (McClements equivalence scale and 1996/97 base year) can be found in Annex 2.

For more information about equivalence scales and absolute and relative low income measures please see ' Notes, definitions and further reading'.

Results for tiers 1 and 2

Tier 1 represents children in absolute low income and is a measure of whether the poorest families are seeing their incomes rise in real terms.

In Scotland, the proportion of children in tier 1 is down from 28% (300,000) in 1998/99 to 12% (130,000) in 2005/06. This is a decrease of 58%.

The number of children in tier 1 has not changed since last year.

Tier 2 represents children in relative low income and is a measure of whether the poorest families are keeping pace with the growth of incomes in the economy as a whole.

In Scotland the proportion of children in tier 2 is down from 28% (300,000) in 1998/99 to 21% (210,000) in 2005/06. This is a decrease of 28%.

The number of children in tier 2 has not changed since last year.

Table 1: New child poverty measures tiers 1 and 2 (Scotland)

Tier 1: ABSOLUTE low income
Tier 2: RELATIVE low income
Please see the notes for a full explanation of the methodologies used.

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