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Recent trends in poverty David Phillips Institute for Fiscal Studies 11 th June 2008 What’s coming up? Poverty fell during Labour’s first two terms Most for pensioners and children Longest sustained fall in poverty of recent times Poverty rose between 2005-06 and 2006-07.

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recent trends in poverty

Recent trends in poverty

David Phillips

Institute for Fiscal Studies

11th June 2008

what s coming up
What’s coming up?
  • Poverty fell during Labour’s first two terms
    • Most for pensioners and children
    • Longest sustained fall in poverty of recent times
  • Poverty rose between 2005-06 and 2006-07.
    • Pensioner poverty increased most (by 300,000).
    • Child poverty needs to fall by 300,000 a year for 4 years to meet 2010-11 targets.
defining poverty for hbai
Defining Poverty for HBAI
  • GB up to 2001-02, UK from 2002-03
    • Focus on rates rather than numbers
  • Relative notion of poverty
    • Individuals in households below 60% of the contemporary BHC and AHC median
  • No account of depth of poverty
poverty fell in labour s first two terms
Poverty fell in Labour’s first two terms

Source: HBAI Data (FES and FRS)

poverty rose in 2005 06
Poverty rose in 2005-06..

Source: HBAI Data (FES and FRS)

and again in 2006 07
..And again in 2006-07

Source: HBAI Data (FES and FRS)

across all thresholds
Across all thresholds?

Source: HBAI Data (FRS)

across all thresholds8
Across all thresholds?

Source: HBAI Data (FRS)

across all thresholds9
Across all thresholds?

Source: HBAI Data (FRS)

across all thresholds10
Across all thresholds?

Source: HBAI Data (FRS)

across all thresholds11
Across all thresholds?

Source: HBAI Data (FRS)

across all thresholds12
Across all thresholds?

Source: HBAI Data (FRS)

across all thresholds13
Across all thresholds?

Source: HBAI Data (FRS)

slide15

Composition of Poverty (AHC)

Source: HBAI Data (FES and FRS) and authors’ analysis

child poverty
Child Poverty
  • 2004-05 Target
    • Cut number of children in poverty by ¼ compared with 1998-99
    • Narrowly missed
  • 2010 Target
    • Cut child poverty by ½ compared with 1998-99
    • Looks very challenging.
2010 target looks very challenging
2010 target looks very challenging

Source: HBAI Data (FRS) and authors’ analysis

2010 target looks very challenging18
2010 target looks very challenging

Source: HBAI Data (FRS) and authors’ analysis

for whom has child poverty risen
For whom has child poverty risen?
  • Focus on number of children in poverty (BHC)
  • Look at 125,000 rise between 2004-05 and 2006-07
  • Can decompose the rise in child poverty into:
    • A changing risk for specific family types
    • The changing composition of families with children
decomposing the 125 000 rise in child poverty since 2004 05
Decomposing the 125,000 rise in child poverty since 2004-05

Source: HBAI Data (FRS) and authors’ analysis

pensioner poverty
Pensioner poverty

Source: HBAI Data (FES and FRS)

pensioner poverty22
Pensioner poverty

rises

Source: HBAI Data (FES and FRS)

pensioner poverty23
Pensioner Poverty
  • Pensioner Poverty up by 200,000 AHC and 300,000 BHC.
    • First time it has risen AHC since 1996-97
    • First time it has risen BHC since 2001-02
  • The rise is statistically significant and sizeable.
    • Undoes about 1/6 of AHC fall since 1996-97
    • About 2/3 of the BHC fall.
  • Poverty risk up for all age groups (particularly older).
  • IFS researchers predicted a rise but not this big.
  • Supporting evidence from other surveys.
factors underlying the rise
Factors underlying the rise
  • Abolition of additional age-related payments
  • Rising inflation eroded the value of benefits.
  • Fall in benefit receipts captured in survey.
  • But there was a rise in the private incomes of pensioners in 2006-07
factors underlying the rise25
Factors underlying the rise
  • Abolition of additional age-related payments
    • Payments of £50 or £200 in Winter 2005 not repeated.
    • Added 100,000 to pensioner poverty.
  • Rising inflation eroded the value of benefits.
  • Fall in benefit receipts captured in survey.
  • There was a rise in the private incomes of pensioners in 2006-07
factors underlying the rise26
Factors underlying the rise
  • Abolition of additional age-related payments
  • Rising inflation eroded the value of benefits.
    • The State Pension fell in real terms in 2006-07.
  • Fall in benefit receipts captured in survey.
  • There was a rise in the private incomes of pensioners in 2006-07
factors underlying the rise27
Factors underlying the rise
  • Abolition of additional age-related payments
  • Rising inflation eroded the value of benefits.
  • Fall in benefit receipts captured in survey.
    • Could be partly under-recording of certain benefits (e.g. the Pension Credit).
  • There was a rise in the private incomes of pensioners in 2006-07
factors underlying the rise28
Factors underlying the rise
  • Abolition of additional age-related payments
  • Rising inflation eroded the value of benefits.
  • Fall in benefit receipts captured in survey.
  • But there was a rise in the private incomes of pensioners in 2006-07
    • Mostly private pensions, with some investment income and employment income.
working age adults without dependent children
Working-age adults without dependent children

Source: HBAI Data (FES and FRS)

absolute poverty falls up to 2004 05
Absolute poverty falls up to 2004-05

Source: HBAI Data (FES and FRS)

rises in 2005 06 and 2006 07
Rises in 2005-06 and 2006-07

Source: HBAI Data (FES and FRS)

summing up
Summing up
  • Relative poverty rise
  • Second year in a row for poverty rise.
  • Still lower than its 1996-97 level
  • Pensioner poverty rose the most
    • 100,000 due to the abolition of age-related payments
  • Need to find new money to achieve 2010 target
    • Difficult with tight government finances.