Income supplement: analysis of options
Analysis undertaken to inform the development of the income supplement policy, a flagship commitment in our Tackling Child Poverty Delivery Plan for 2018-2022.
2. Child Poverty in Context
2.1 Poverty Measures
The Child Poverty (Scotland) Act 2017 targets are based on four measures of child poverty that relate to different aspects of poverty. These are: relative child poverty; absolute child poverty; combined low income and child material deprivation; and persistent child poverty. These can be measured both before and after the housing costs of the household have been accounted for although the targets are based on after housing costs measures.
In addition, a measure reporting severe child poverty is published annually. Although severe poverty is not a target in the Act, it is nevertheless helpful to consider any impacts on those children living in deeper poverty. Box 1 sets out a brief definition of the different measures of poverty.
Box 1: Definitions of poverty measures
| Measure | Definition |
|---|---|
| Relative child poverty | Children living in households with equivalised net income[5] less than 60% of the UK median income. Relative child poverty is a measure of whether the income of the poorest families are keeping pace with middle income families across the UK. |
| Absolute child poverty | Children living in households with equivalised net income less than 60% of the UK median income in 2010-11(adjusted for inflation). Absolute child poverty is a measure of whether the incomes of the poorest families are keeping pace with inflation. |
| Children in combined low income and material deprivation | Children in households with equivalised net income less than 70% of the UK median and who cannot afford basic goods and activities that are seen as necessities in society. This is an additional way of measuring living standards. |
| Persistent child poverty | Children in households who have been in relative poverty for three or more of the last four years. This is an indicator of whether children live for a long time in poverty as opposed to experiencing brief spells of poverty. |
| Severe child poverty | Children in households with equivalised net incomes less than 50% of the UK median income. It is an indicator of the depth of poverty. |
2.2 Child Poverty Rates Based on the latest poverty statistics,[6] in 2017/18, 240,000 children lived in relative poverty after housing costs (AHC), a rate of 24%. This is the highest rate of relative poverty across population groups, with relative poverty rate for working-age adults and pensioners at 19% and 15% respectively. Table 1 presents the most recent rates of child poverty across all measures.
Table 1: Child poverty rates – latest estimates
| Relative poverty AHC (2017/18) | Absolute Poverty AHC (2017/2018) | Combined low income and material deprivation (2017/18) | Persistent poverty AHC (between 2013 and 2017)[7] | Severe poverty AHC (2015/16-2017/18) | |
|---|---|---|---|---|---|
| Rate | 24% | 22% | 14% | 17% | 17% |
| Numbers | 240,000 | 220,000 | 140,000 | 160,000 |
Some families are at a higher risk of poverty. The TCPDP identified 6 'priority families' that are at high risk of poverty.
- Lone parents
- Families with a disabled adult or child
- Larger families (3+ children)
- Minority ethnic families
- Youngest child aged <1
- Mother aged <25
These families are often faced with greater barriers to enter work or increase hours due to care responsibilities, lack of flexible working or supported employment, lack of affordable childcare and increased costs of living. The most recent rates of poverty for children living in families with high risk factors of poverty are shown in table 2.
Table 2: Families most at risk of poverty
| 2015/16-2017/18 | Lone parents | Disabled adult or child | Larger families | Minority ethnic families | Youngest child aged <1 | Mother aged <25 |
|---|---|---|---|---|---|---|
| Relative poverty | 41% | 31% | 32% | 40% | 32% | 56% |
| Severe poverty | 26% | 21% | 23% | 32% | 24% | 41% |
2.3 Child Poverty Targets A summary of the Child Poverty (Scotland) Act's interim and final child poverty targets, alongside the latest estimates of child poverty in Scotland, are provided in table 3. Looking at the headline figure of relative child poverty, the interim target requires the current rate of 24% to be reduced to 18% by 2023/24 and 10% by 2030/31.
Table 3: Child poverty interim and final targets
| Poverty measure | Latest estimate | Interim target 2023/24 | Final target 2030/31 |
|---|---|---|---|
| Relative poverty AHC | 24% | 18% | 10% |
| Absolute poverty AHC | 22% | 14% | 5% |
| Combined low income and material deprivation AHC | 14% | 8% | 5% |
| Persistent poverty AHC | 17% | 8% | 5% |
A number of child poverty forecasts have been produced over the past couple of years which vary depending on the baseline data, assumptions and approach to modelling. The more recent forecasts from Resolution Foundation[8] and the Scottish Parliament Information Centre[9] benefitted from using the most recent survey data while the Landman Economics[10] estimates are slightly older and include years of data where relative poverty was found to be particularly high compared to the longer term trend.
As a result, as figure 1 shows, there is a degree of uncertainty about the rate of increase in child poverty, but all of the projections show that there will be a rising trend in child poverty in the coming years which is largely attributed to the UK welfare reform.
Figure 1: Relative child poverty rate AHC 2023/24 – independent projections
Contact
Email: vana.anastasiadou@gov.scot
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