Background
By the mid 1990s the UK had one of the
highest proportions of children living in
low-income households in the Organisation
for Economic Co-operation and
Development (OECD) and more than
double the level two decades earlier.
Reversing this trend, and hitting the target,
means ensuring that the incomes of
families in the bottom fifth of the income
distribution grow faster than average
between now and 2004-05.
Poverty and social exclusion are complex and
multi-dimensional problems that affect many
aspects of people's lives. Reducing the
number of children in low-income
households by 2004-05 is just one of the
targets the Government has set to ensure it
is on track to eradicate child poverty within
20 years. Further targets, including tackling
worklessness and improving the quality of
housing, education and health, are set out in
the Government's annual report into poverty
and social exclusion, Opportunity for all.
Measurement
The target is monitored by reference to the
number of children in low-income
households, compared with 1998-99.
The baseline is 4.2 million children in
low-income households after housing costs
are taken into account, and 3.1 million
before housing costs are taken into account.
Low-income households are defined as
households with income below 60 per cent
of median, as reported in the annual
Households Below Average Income
Statistics (HBAI). HBAI statistics cover GB,
and are published as National Statistics by
the Department for Work and Pensions.
HBAI outturn data for 2004-05 will be
available in early 2006.
HBAI uses household disposable incomes,
adjusted for household size and
composition, as a proxy for material living
standards or, more precisely, for the level of
consumption of goods and services that
people could attain given the disposable
income of the household in which they live. This is a relative measure of low income.
The low-income threshold - 60 per cent of
median - will rise in line with the median.
Earnings growth is a key driver of growth in
median equivalised* household income
(as used in HBAI) but there are other
influencing factors - in particular changes to
household size and composition over time,
and trends in employment and worklessness.
Additional background information to this
target is available in the PSA Technical Note.
Low income is an essential component of
any assessment of poverty, but it is not the
sole benchmark. Many experts expressed
the same sentiment, which is why the Department launched its consultation
exercise Measuring Child Poverty [PDF] in 2002
to engage in this debate. This has been very
positively received by many with an interest
in tackling poverty. Preliminary conclusions
from the consultation [PDF] were published in
May 2003. More details will be announced
by the end of 2003, once further
methodological work has been completed.
Work stemming from this consultation will
ensure that improvements to measurement
underpin better policy making and promote
greater accountability as the Department
progresses towards its longer-term goals.
Other government departments also have
targets with features that alleviate child
poverty. For example: tackling truancy and
exclusions from school, increasing literacy
and numeracy, improving services for
children in care, reducing teenage
pregnancies, and bringing both social and
private housing into good condition.
*Equivalised income is income which has undergone a process by which household income is adjusted to account
for variations in household size and composition. Income is divided by scales which vary according to the number of adults and the number
and age of dependants in the household.
Performance
Based on the latest outturn data, the Department is on course to meet
this target. Between 1998-99 and 2001-02
(the latest available data, published in March
2003 [PDF]) the numbers of children in
low-income households fell by 400,000
when measured after housing costs (AHC) and by 500,000
when measured before housing costs (BHC). On this basis, the
Department is making steady progress
towards the target, with the effect of the
new tax credits introduced in April 2003, and the increases announced in Pre-Budget report 2003, yet to show in the data. There are uncertainties
either way, but these increases now put the Government in a much stronger position for meeting this target.
Progress towards the target since 1996-97
is shown in Figure 2 for BHC and for AHC.
Figure 2: Percentage of children living in low-income households (GB)
View larger image in new window
The Department is delivering this target by:
-
improving the incentives for people -
especially lone parents - to escape low
income through work;
-
ensuring that financial support is
available for families and children,
especially the most vulnerable, and is
delivered quickly, responsively and fairly,
so as to extend choice and personal
responsibility;
-
working across Whitehall to ensure that
other Government policies contribute
effectively to the Department's poverty
eradication objective; and
-
concluding our measuring child poverty
consultation to ensure that measures of
child poverty promote effective policy
making and enable progress towards
eradication to be monitored, ensuring
the best start for all children.
To continue improving the living standards
of children and families, the Department
will continue to work towards increasing
overall employment and the employment of
the most disadvantaged groups while at the
same time working towards easing the
transition into work. The Department will
also strive to improve the incomes of those
families for whom work is not an option.
PSA target 2 - Parents with care who receive maintenance
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