UK welfare policy: impact on families with children

Technical Annex B – Poverty Analysis

Poverty and income statistics are regularly published by the Scottish Government ^[31] and the methodology underpinning these is used to calculate the net income poverty thresholds for each case study.

Poverty is measured at the household level. If household income is below the poverty threshold, all people within the household are in poverty. This is based on the assumption that income is shared equally across all members of the household, and they have the same standard of living.

The poverty threshold is usually presented as an equivalised income figure. Equivalisation adjusts income for household size and composition by means of equivalence scales, to reflect the extent to which households of different size and composition require a different level of income to achieve the same standard of living. This adjusted income is referred to as equivalised income. In this analysis, the poverty threshold has been unequivalised so that the appropriate threshold for that household type is used. This is done in order to determine whether a case study household would be in or out of poverty, which is presented in figures 4, 7 and 10.

In terms of the specific analysis for this report, a number of simplifications and caveats apply to the figures in table B1, The projections of poverty thresholds to 2020/21 are based on Institute of Fiscal studies projections ^[32] of real terms median incomes before and after housing costs, which are then converted into nominal prices using CPI so that they are broadly comparable with net incomes in 2020/21. There is also some difference in what elements of income are included in the case studies and those used by the IFS (for example, the case studies exclude council tax reduction and the calculation of housing costs is based solely on rent and excludes some other elements).

Table B1: Poverty thresholds for each case study household (before and after housing costs), 2020/21