Published 04 February 2015 | Standard notes SN07096
Incomes and poverty
This note sets out information on the levels and rates of poverty in the UK, including historical trends and forecasts for future years.
Poverty may be defined in different ways. The official statistics discussed in this note describe poverty in terms of disposable household income, although there are still multiple ways that poverty can be defined on this basis. Various definitions are in common use but these can show different trends and, while each definition has its value, they can make for a confusing array of statistics. For example, disposable income may include or exclude housing costs. Income can be assessed against real-terms average income at some fixed point in time (for a measure of absolute poverty) or against average income in the same year (to measure relative poverty).
Between 2009/10 and 2012/13, household incomes in the UK have been growing more slowly than inflation. Consequently more people are in absolute poverty than in 2009/10, since the absolute poverty threshold moves according to inflation. Relative poverty, on the other hand, is lower than in 2009/10 because low-income households have seen their income fall by less in real terms than households at the middle of the distribution. This is true both when incomes are measured before housing costs are deducted (BHC), and when incomes are measured after housing costs (AHC).
Poverty levels are higher when household incomes are measured after housing costs, as households in the lower end of the income distribution tend to spend a larger share of their income on housing than higher-income households. Poverty trends on an AHC basis will also take into account changes from year to year in the housing costs faced by low-income households. There has been a smaller fall in relative poverty and a larger rise in absolute poverty since 2009/10 when incomes are measured AHC rather than BHC.
The latest poverty data are for 2012/13. Figures for 2013/14 are not expected to be published until May or June 2015, but the Institute for Fiscal Studies has warned they may show an increase in relative and absolute poverty following various benefit changes coming into force from April 2013.