Child Poverty Bill: consultation

Child Poverty Measurement and Targets

Section 5: The income-based measures of poverty that the targets should use

Our ambition to eradicate child poverty will be underpinned by statutory targets. We propose setting targets based on the same four income-based poverty indicators as in the Child Poverty Act 2020, namely:

• Relative poverty: the percentage of children living in households with equivalised ^[5] , net incomes of less than 60% UK median household income, in the same year.
• Absolute poverty: the percentage of children living in households with equivalised, net incomes of less than 60% of UK median household income, in the base year (2010/11), adjusted for inflation.
• Combined low income and material deprivation: the percentage of children living in low income households that lack certain basic necessities. Low income here is defined as an equivalised, net household income of less than 70% of the UK median household income.
• Persistent poverty: the percentage of children living in a household in relative poverty for at least three years out of a four-year period.

Further information on these measures and performance can be found at Annex A.

Rationale:

These four measures are well-known and understood amongst stakeholders, and retaining them would provide a degree of continuity. These measures were chosen following extensive consultation and were designed to complement each other, with each capturing different aspects of poverty.

They are also strongly supported in Scotland and across the UK. Analysis of responses to a Department of Work and Pensions consultation on the targets in 2012 concluded 'There is very strong support for the existing measures, and near universal support for keeping income poverty and material deprivation at the heart of poverty measurement.' ^[6]

As the table below sets out, there is no single indicator that can adequately measure poverty. Each on its own has advantages and disadvantages. The combination of the four set out above is understood to give the best overall picture.

QUESTION 5

What are your views on the income-based measures of poverty proposed for Scottish child poverty targets? For example, are there any additional income-based measures you think we should also use (and if so, why)? Are there any alternative approaches to measuring income - for example, as used in other countries - that you think could apply in Scotland?

Measure	Strengths and weaknesses
Relative poverty	Simple, and produces a number that can be easily tracked over time. Recognises that individual and household needs are relative to societal standards of living (as proxied by median household income). Enables international comparisons (as do other measures of income poverty). BUT Does not enable assessment of the extent to which households are able to make use of their resources. Does not take account of the cost of meeting basic needs and how this changes over time. Does not capture aspects of poverty other than access to income as a resource. May not reflect changes in living standards when median incomes fall or rise rapidly.
Absolute poverty	Enables an assessment of whether living standards at the bottom of the income distribution are rising or falling irrespective of those elsewhere in the income distribution. Provides a further check against which to assess real living standards in a situation in which median income is falling. BUT As we would expect absolute poverty to fall in periods of normal economic growth without government action, this is not an adequate measure alone of whether those at the bottom are keeping pace with the rest of society.
Combined low income and material deprivation	Enables an analysis of a household's ability to use resources to buy essentials, as well as of the income coming into a household. Households who, for example, are required to spend a greater proportion of their income on health or education costs, on issues connected to a disability, or on servicing debts, are less likely to be able to access the essentials identified on the list used for measuring material deprivation. Likely to pick up real changes in living standards, for example when median incomes fall. Reflects the changing cost of buying basic items in terms of the prices faced by people on low incomes. BUT It is more difficult to provide a consistent time series using this measure: the 2012 edition of HBAI, for example, includes four new items because of changing social norms. [7] Explaining how the material deprivation indicator is constructed is complex, although the basic concept may command broad support.
Persistent poverty	Avoids the problems inherent in taking a 'snapshot' of income at one time only. We know that living in poverty for a significant period of time is more damaging than brief periods spent with a low income.

Source: Adapted from https://www.jrf.org.uk/report/measuring-child-poverty-consultation-better-measures-child-poverty

Section 6: The levels (percentages of children in poverty) the targets should be set at

The Scottish Government proposes that the Scottish targets should be set at the following levels:

1. Fewer than 10% of children are in relative poverty

2. Fewer than 5% of children are in absolute poverty

3. Fewer than 5% of children are in combined low income and material deprivation

4. Fewer than 5% of children are in persistent poverty

Rationale:

Our ambition is to eradicate child poverty and we will strive to deliver that ambition. We know that the UK Government's austerity programme and the economic uncertainty caused by the EU Referendum result make this an increasingly difficult challenge. We also recognise that we do not hold many of the necessary levels for change under the current constitutional settlement. Nevertheless, we want to be bold in our direction of travel. We want targets that are stretching and ambitious, but realistic, to ensure that all parties can sign up to playing a part in achieving them.

These levels are the same as the 2020 target levels, with the exception of the persistent poverty target. This was set at 7% by the UK Government, but stakeholders and the Scottish Government argued that a 5% target was more ambitious.

However, the extent of the ambition depends in large part on whether targets are set before or after housing costs, as discussed in the next section.

QUESTION 6

What are your views on the Scottish Government's proposals for the levels of child poverty that the targets will be set at?

Section 7: Whether the targets should be set on a before or after housing costs basis

The Scottish Government proposes that its targets should be set on an after housing costs basis.

Rationale:

The measures set out above consider poverty in two ways - before and after housing costs:

• Before Housing Costs ( BHC) measures the disposable income households have - from employment, benefits, savings etc - before they have paid for their housing.
• After Housing Costs ( AHC) measures the disposable income households have once they have paid their housing costs.

Housing is an essential expense for most people, and those on a low income have to compete in the same housing markets as their peers, which tends to result in more people being in poverty AHC than BHC. So whether targets are set on a AHC or BHC basis makes a big difference in terms of how ambitious the targets are, as this table shows.

2030 TARGET	2014/15 BHC LEVEL	2014/15 AHC LEVEL
Fewer than 10% of children are in relative poverty	17%	22%
Fewer than 5% of children are in absolute poverty	16%	21%
Fewer than 5% of children are in combined low income and material deprivation	10%	12%
Fewer than 5% of children are in persistent poverty	Awaiting data [8]

There are advantages and disadvantages for both BHC and AHC. The targets in the Child Poverty Act 2010 use a BHC measure of income and it is possible to draw international comparisons on this basis. The BHC approach is well understood and would enable us to retain consistency with the current set of targets.

However, there is increasing agreement that AHC better reflects the amount of disposable income households have to meet basic needs; and therefore that AHC offers a more realistic assessment of the extent of poverty than BHC.

Nevertheless, AHC measures do not take into account that some people may have higher housing costs than they need - for example, if they choose to pay more for better quality accommodation or to live in a more expensive area.

Adopting AHC targets is significantly more ambitious than BHC targets, and we recognise that, in the current political and economic climate, they would be very challenging to meet. However, AHC targets also represent a real ambition that should inspire action and that, if met, would represent a huge step towards eradicating child poverty.

QUESTION 7

What are your views on the Scottish Government's proposal to set targets on an after housing costs basis? For example, are there any disadvantages to this approach that we have not already considered?

Section 8: When the target date for achieving the targets should be

The Scottish Government proposes that the targets should be achieved by 2030.

Rationale:

The Scottish Government is clear that income targets are central to child poverty legislation. That is why we opted out of the UK Government approach, and are now consulting on our commitment to reinstate those targets - despite our limited powers and the clear challenges ahead. Eradicating child poverty will be a key priority in deciding how to take forward the new powers that are being devolved to Scotland as a result of the Smith Commission and the Scotland Act 2016 ^[9] . For example, we have already committed to using our new social security powers to expand the existing Sure Start Maternity Grant into a Best Start Grant, increasing support for children in lower income families at key stages in the early years of child's life.

Setting a target date of 2030 to meet the proposed set of AHC targets is clearly challenging. However a 2030 target date aligns with the Fairer Scotland Action Plan and other Scottish Government action including taking forward the recommendations of the Widening Access Commission, which itself sets 2030 targets. There is a wide range of activity already in train, and planned for the future, which takes us in the right direction, and we want to build on that to develop a wide-ranging, cross-government approach to reducing poverty. Crucially, a 2030 timeframe would provide us with the opportunity to fully implement a long-term, comprehensive and sustainable Child Poverty Delivery Plan.

Of course, the Scottish Government appreciates that there are a wide range of drivers of poverty. Section 10 describes the Child Poverty Measurement Framework, which contains a detailed set of indicators which would sit underneath these ambitious headline targets.

QUESTION 8

What are your views on the Scottish Government's proposal to set targets that are expected to be achieved by 2030?