Relative absolutes

There’s a ritual in the House of Commons when it comes to debating poverty. It goes along the lines of Jeremy Corbyn challenging Theresa May about the huge weight of evidence showing rising poverty in this country. May always answers by quoting figures for ‘absolute poverty’, which she claims is declining, whereas Corbyn’s questions are always about relative poverty, which is rising. For the public, a pointless exchange has taken place.

The difference between the two is very important.

Absolute poverty describes when household income is below a necessary level to maintain basic living standards (food, shelter, housing). It can be used to compare different countries and different eras but the criteria are not amended by economic growth. In the normal course of events it would be extraordinary for absolute poverty not to fall over time. The United Nations says absolute poverty is characterised by “severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information.” In recent years the fall in the UK has been driven by rises in basic incomes of pensioners, many of whom were previously defined as being in absolute poverty.

Relative poverty however describes how household income relates to the median income being achieved in the society as a whole. This is normally measured as a percentage below that median, normally 50% or 60%. It therefore moves along as the society gets richer. It is more meaningful because it describes the extent to which the poorest share (or don’t) in the growing wealth of the country as a whole.

Answering questions about relative poverty by referring to absolute poverty is disingenuous to say the least. It serves to dismiss concerns by obscuring the real debate.

Now, why would the government wish to obscure the debate and confuse people in the process? The explanation comes in the Joseph Rowntree Foundation’s comprehensive analysis of poverty trends and figures, UK Poverty 2018.  The report uses the definition of poverty that a household has an income of less than 60% of median income for their family type, after housing costs. Like most respected commentators, but not the government, it sees poverty as being directly related to the normal standards of living being experienced in the country and not absolute basics.

On relative poverty, the report’s conclusions are stunning; here are just a few:

• Fourteen million people are in poverty in the UK – that is over one in five of the population (22%).
• Eight million of these people live in families where at least one person is in work.
• Eight million working-age adults, four million children and two million pensioners are living in poverty.
• In 2017 one-and-a-half million people lived in destitution in the UK, which means they could not afford to have what we all need to eat, stay warm and dry, and keep clean.
• And 365,000 of those destitute were children.

The JRF report makes the following conclusion about the trends:

“During the last 20 years, the UK dramatically reduced poverty among people who had traditionally been most at risk – pensioners and children. This progress has begun to unravel and now poverty overall is rising, and it is the rise in child poverty that is pushing this trend.”

The report also draws particular attention to the rise in poverty amongst disabled people in the last five years – the poverty rate for disabled adults in non-working households is exceptionally high at 67% of all households – and to the fact that poverty rates are higher among all ethnic minority groups but particularly high amongst families of Bangladeshi and Pakistani origin.

The huge impact that housing has on poverty is seen in the figures for housing costs. Traditionally, housing costs have risen for all income groups at a similar rate, and housing costs for all groups fell immediately after the 2008 financial crisis and recession. But after 2009/10, housing costs stabilised or fell for the richest three-fifths of the population but started rising again for the poorest two-fifths. This has been driven by the government’s policies in relation to tenure:

“Rising housing costs have been driven largely by changes in the proportions of families living in different housing tenures. In particular, the fall in home-ownership and expansion of the private rented sector have affected low-income families far more than those who are better off. The proportion of children in the bottom quintile living in the private rented sector rose from 17% in 2005/6 to 37% in 2016/17.”

In addition to rising rents, the report identifies the cause as being the fact that “eligible rents – the amount that Housing Benefit will cover – have been falling behind actual rents paid by low-income families. The reason is that there have been several changes to the rules governing eligible rents since 2010/11 which have had the effect of undermining the safety net provided by Housing Benefit. The result has been that low-income families have faced higher net housing costs, leading to increases in poverty.”

Low pay, reduced benefits, rising housing costs, rising utility costs. The reasons for rising poverty are clear and obvious. And the figures are so bad that it is no surprise that the Prime Minister hides behind irrelevancies whenever she is questioned on the scandal.