Poverty and Income Inequality in Scotland 2015-18

Annex A. Data sources

Family Resources Survey, Households Below Average Income (HBAI) dataset

All the figures in this publication come from the Department for Work and Pensions' (DWP) Households Below Average Income dataset which is produced from the Family Resources Survey. UK figures are published by DWP in ‘Households Below Average Income: 2017/18’ on the same day as ‘Poverty and Income Inequality in Scotland: 2015-18’. For the UK figures, as well as more detail about the way these figures are collected and calculated, see the DWP website.

Persistent Poverty figures

New figures on persistent poverty were published on 28 March 2019 and can be found on the Scottish Government’s poverty webpages.

Persistent poverty identifies the number of individuals living in relative poverty for 3 or more of the last 4 years. It therefore identifies people who have been living in poverty for a significant period of time, the rationale being that this is more damaging than brief periods spent with a low income, with the impacts affecting an individual through their lifetime.

These figures come from the Understanding Society survey which tracks individuals over time. The persistent poverty figures are not directly comparable to the figures in this publication as they use different income definitions and cover different time periods, but they provide useful additional information on poverty in Scotland.

What does the HBAI measure?

Households Below Average Income (HBAI) uses household disposable incomes, adjusted for the household size and composition, as a proxy for material living standards. More precisely, it is a proxy for the level of consumption of goods and services that people could attain given the disposable income of the household in which they live.

The unit of analysis is the individual, so the populations and percentages in the tables are numbers and percentages of individuals – both adults and children.

The living standards of an individual depend not only on his or her own income, but also on the income of others in the household. Consequently, the analyses are based on total household income: the equivalised income of a household is taken to represent the income level of every individual in the household. Equivalisation, a technique that allows comparison of incomes between households of different sizes and compositions, is explained below. Thus, all members of any one household will appear at the same point in the income distribution.

Housing Costs

It could be argued that the costs of housing faced by different households at a given time do not always match the true value of the housing that they actually enjoy, and that housing costs should therefore be deducted from any definition of disposable income. However, any measure of income defined in this way would understate the relative standard of living of those individuals who were actually benefiting from a better quality of housing by paying more for better accommodation. Income growth over time would also understate improvements in living standards where higher costs reflected improvements in the quality of housing.

Conversely, any income measure which does not deduct housing costs may overstate the living standards of individuals whose housing costs are high relative to the quality of their accommodation. Growth over time in income before housing costs could also overstate improvements in living standards for low income groups in receipt of housing benefit, and whose rents have risen in real terms. This is because housing benefit may also rise to offset the higher rents (for a given quality of accommodation) and would be counted as an income rise, although there would be no associated increase in the standard of living. A similar effect could work in the opposite direction for pensioners: if a shift from renting to owning their housing outright leads to a fall in housing benefit income, because fewer low income pensioners are paying rents, then changes in income before housing costs may understate any improvement in living standards.

Therefore, this publication presents analyses on two bases: Before Housing Costs (BHC) and After Housing Costs (AHC).This is principally to take into account variations in housing costs that themselves do not correspond to comparable variations in the quality of housing.