Measuring Child Poverty Using the FRS Laura Adelman Family Poverty and Work Division

Contents Background to the UK child poverty measure The new long-term measure Material deprivation Why the FRS? What has the new long-term measure meant for the FRS?

A historic pledge... March PM pledged to eradicate child poverty September launched Opportunity for all annual report and indicators SR set HMT/DWP child poverty PSA target child poverty consultation exercise 2003 – announced new long-term measure 2004 – new PSA target set

SR2000 target To reduce child poverty by one-quarter between 1998/9 and 2004/5 Poverty defined as below 60% median household income Missed the target –slightly on before housing costs measure –by some distance on after housing costs measure

The new long-term measure Announced December 2003, following extensive consultation Tiered approach: –Absolute low income (60% of median household income fixed at 98/99 level adjusted for inflation) –Relative low income (60% of median household income) –Material deprivation and relative low income combined Basis for SR2004 target to halve child poverty by 2010

Some details on income measures Consultation announced that the new long- term measure would use: –UK data –Modified OECD equivalence scale –Before housing costs However, committed to still publish statistics using McClements equivalence scale, after housing costs and on a GB basis

Material deprivation Direct measure of living standards –Asks families whether they have certain items and activities for their household and children –Enforced lack approach: want but cannot afford It is the suite of items that are important –Chosen through independent academic analysis to best discriminate between poor and non-poor families –Together contribute to the index Material deprivation combined with low income –Higher income threshold –To ensure reflecting low living standards rather than choice rather than

Why the FRS? Quite simply, all three tiers within the long-term measure include income The Family Resources Survey is the National Statistics source for UK income data and is used in the Households Below Average Income series.

What has the new long-term measure meant for the FRS? Data remains crucial to DWP and extremely high profile Since 2004, the inclusion of material deprivation and debt questions –For all adults –Additional questions for parents Has highlighted under-recording of tax credit receipt –Key reason for data linking project

Further information Consultation documents: Research papers: McKay and Collard (2004) Developing deprivation questions for the Family Resources Survey, DWP Working Paper Number 13. Berthoud et al. (2004) The dynamics of deprivation: the relationship between income and material deprivation over time, DWP Research Report Number 219. Willitts (2006) Measuring child poverty using material deprivation: possible approaches, DWP Working Paper Number 28.