What does this new child poverty research cover?

This research provides the latest update of child poverty indicators, after housing costs, by locality. This data covers the period of 2020/2021 – which covers the first year of the Covid 19 Pandemic.

Which sources of information does this report draw on?

The data in the report is based on calculations that build on the Department for Work and Pensions (DWP) and HMRC Children in Low Income Families dataset, published in March 2021. This DWP dataset estimates the percentage of children living in households with below 60% median income in each local area. These figures draw directly from tax and benefit records. Unlike surveys, they cover the whole population, not just a sample, and can therefore be considered at the very local level.

Using these data, the DWP has produced Before Housing Cost child poverty rates that track changes in child poverty across Britain, at ward, constituency and local authority level, in working and non-working families from 2014/15–2020/21.

The research in this report uses these DWP data alongside information on local rent levels from the Valuation Office Agency and income data from the Understanding Society survey to compile an After Housing Cost set of data.

What is the significance of ‘After Housing Costs’ data?

‘After Housing Costs’ shows the income available to a household once rent, water rates, mortgage interest payments, buildings insurance payments, ground rent and service charges are paid.

This enables a more accurate comparison of what households across the UK have available to spend on food, utilities, clothing and leisure, than looking at income alone, given the disparity of rents in different parts of the UK.

By contrast, a ‘Before Housing Costs’ model takes no account of the fact that, comparing incomes for households in different parts of the country where housing costs vary, does not produce a like-for-like comparison of disposable incomes. As a result, Before Housing Costs figures greatly understate the impact of low income in areas with high housing costs, such as London and Birmingham.

What data did the DWP use to compile Before Housing Cost child poverty data?

The local child poverty estimates compiled by DWP/HMRC are based on family income data.

What does the DWP mean by ‘family’ rather than household?

A ‘family’ is defined as a single person or couple plus any dependent children.

This is not the same as a ‘household’, which also includes people living together and sharing some costs and/or living space, who are not in the same family.

What has the DWP included when defining family income?

In this data, family income is considered using tax, tax credit and benefit data.

What is the definition of a child for the purposes of this data?

Unlike other child poverty data, which covers children up to the end of secondary school, these estimates are only for children under the age of 16. This is because in order to derive percentage rates, population data by age (mid-year estimates) have been used.

Conventionally, a ‘child’ over the age of 16 is one who is still in full-time secondary education, so not all 16-19 year olds are considered. The previous means of identifying the child population, Child Benefit, is no longer usable because the exclusion of some well-off families from eligibility for Child Benefit has made it an incomplete count.

What is the measure of poverty used in this data?

A child is deemed to be growing up in poverty if they live in a household whose income is 60% below the contemporary median income.

How much is 60% of median income?

These are calculations of 60% median income (the poverty line) for 2020/21 for types of families, after housing costs. A child is said to be growing up in poverty if their family income is below this poverty line.

• For a family of one adult and one child, 60% of median income, after housing costs in 2020/21 was £221 week
• For a family of one adult and two children, £278 week
• For a family of two adults and one child, £340 week
• For a family of two adults and two children, £396 week

Is this data a measure of absolute or relative poverty?

This data is a measure of relative poverty.

What is the difference between absolute and relative poverty?

The calculation of ‘absolute poverty’ is a measurement of levels of poverty in comparison with median income at a set time in the past. Current absolute poverty measures compare income today with 60% of median income in 2010, uprated by inflation. In other words, they track whether current incomes fall below the poverty level in 2010. As general living standards increase over time, we would expect absolute poverty to fall.

The term ‘absolute’ can be misleading as it wrongly conjures up images of destitution, or not being able to afford basic material essentials such as food, clothing and shelter. Instead, the ‘absolute’ measure used by the government is based on relative income at a fixed point in time.

‘Relative poverty’ can be a more useful measure as it compares a household’s income with the current incomes of other households within the UK. So, rises in relative poverty show that more households are falling below the UK average household income and are not able to meet the financial costs of a basic standard of living. Relative poverty measures give a more accurate picture of what life is like now. In other words, even if your weekly income has not gone down since 2010, it may no longer meet today’s living costs.

If After Housing Cost data is useful, why is this not produced by the DWP at Westminster Constituency and Local Authority level?

There is no way of directly looking at AHC incomes from information held by the tax and benefit authorities, since only some people (notably those claiming Housing Benefit or the rent element of Universal Credit) need to report housing costs.

How have the child poverty statistics changed over time?

Overall child poverty in the UK has fallen in the most recent year for which data are available (2020/21) but this is not the case in all local areas. Child poverty saw a particularly marked increase among areas in the North East and Wales.

Notes on how the data should be interpreted

The figures are based on the Department for Work and Pensions Children in low income families: local area statistics which estimates the poverty rate before housing costs. A statistical model is used to estimate child poverty after housing costs which draws on household survey data alongside local area statistics on private rent levels. The statistics are calibrated to regional 3-year averages from Households Below Average Income (HBAI) for the financial years 2018/19 to 2020/21. The HBAI figures for 2020/21 are less reliable than earlier years due to sampling issues related to the pandemic. This should be kept in mind when interpreting the statistics released today, but the impact is lessened by the use of three-year averages for regional figures. More information on HBAI is available here.

Users are advised that the data for individual local authorities and parliamentary constituencies are subject to small statistical fluctuations year-on-year and should be considered within the context of the regional or the longer-term local trend.