Severe Poverty in Scotland

SECTION A: SEVERE AND EXTREME POVERTY IN SCOTLAND IN 2012/13

Introduction

This section considers the extent of severe and extreme poverty in Scotland in 2012/13, the most recent year for which statistics are available. Figures are presented before housing costs (BHC) unless otherwise stated.

The relative poverty threshold covers all those individuals who have household incomes below 60 per cent of the UK median income. Here, two new thresholds have been produced - a severe poverty threshold and an extreme poverty threshold. The analysis below considers how many individuals, working age adults, children and pensioners would fall under these thresholds.

The two new thresholds are as follows:

4. Severe poverty - all those individuals who have household incomes below 50 per cent of the UK median income. This threshold includes those in extreme poverty.

5. Extreme poverty - all those individuals who have household incomes below 40 per cent of the UK median income.

Note that these are not distinct categories: the severe poverty threshold is a subset of all those in relative poverty, while the extreme poverty threshold a still smaller subset of the severe poverty group. The diagram below shows overlapping poverty thresholds.

It is important to make clear that there is no official or standard measure of severe or extreme poverty in Scotland or the wider UK. However, there are arguably a number of ways in which severe poverty is already being measured. For example, the Households Below Average Income (HBAI) series publishes, for all individuals and for children, a figure for households with income below 50% UK median income, which is consistent with the severe poverty definition applied here. It could also be argued that both the persistent low income and the combined low income and material deprivation measures in the Child Poverty Act 2010 already capture a more deprived population of children than the relative low income measure.

Note that there are no equivalent published statistics on extreme poverty rates for the UK and it is important to note that there is greater uncertainty around the extreme poverty threshold, due to the smaller sample sizes and income as a proxy for living standards for households on the lowest incomes. Household income may not represent living standards for those on very low incomes. A household may be in low income temporarily, rather than low income being a persistent state. This analysis does not track families' incomes over time and does not provide any information on the persistence of low income. More information about the FRS, and the limitations of the data, is provided in an Annex to this report.

Bearing in mind that the 50 per cent threshold is reported on at UK level and that there is some uncertainty about the 40 per cent threshold, there might be questions about the relevance of presenting these two thresholds here. Nevertheless, the lack of an official definition of severe poverty, the low profile of the 50 per cent threshold in reporting, and the lack of formal consideration of the extent of those on the very lowest incomes together serve to limit the discussion of the depth of poverty at UK level. The approach taken in this chapter therefore offers an opportunity to look in more detail at alternative conceptions of poverty and to develop a better sense of the depth of poverty in Scotland.

Poverty thresholds in 2012/13

The monetary values of equivalised household income for relative poverty, severe poverty and extreme poverty for 2012/13 are summarised below. Table 1 shows the equivalised weekly household, while Table 2 sets out the equivalent annual household income. The Scottish median income is also included in both tables, for reference.

Table 1: Weekly equivalised household income poverty thresholds before housing costs, 2012/13

	Scottish median income	Relative poverty threshold	Severe poverty threshold	Extreme poverty threshold
single adult	£295	£177	£147	£118
single parent 2 children	£529	£317	£264	£211
couple 2 children	£674	£404	£337	£269
couple no children	£440	£264	£220	£176

Table 2: Annual equivalised household income poverty thresholds before housing costs 2012/13

	Scottish median income	Relative poverty threshold	Severe poverty threshold	Extreme poverty threshold
single adult	£15,400	£9,200	£7,700	£6,200
single parent 2 children	£27,600	£16,500	£13,800	£11,000
couple 2 children	£35,100	£21,000	£17,500	£14,000
couple no children	£23,000	£13,800	£11,500	£9,200

Source HBAI 2012/13, DWP

Note these are equivalised household income levels, before housing costs are taken into account. This is the income available to pay for all the household expenses including housing, heating, food, clothing, transport, and childcare. Of course, housing costs, depending on their level, can significantly affect whether individuals are living in relative poverty or not after housing costs. Housing costs can also determine whether households living in poverty are in severe or extreme low income after housing costs.

Severe poverty in Scotland in 2012/13

In this analysis, households in severe poverty are defined here as those with equivalised household income less than 50 per cent of UK median income. Analysis of the FRS 2012/13 for Scotland suggests the following:

• 510,000 individuals (10 per cent) lived in severe poverty (BHC). This increased to 710,000 (14 per cent) after housing costs.
• 330,000 working age adults (10 per cent) lived in severe poverty (BHC). This increased to 500,000 (16 per cent) after housing costs.
• 100,000 children (10 per cent) lived in severe poverty (BHC). After housing costs, 150,000 children (15 per cent) were living in severe poverty.
• 80,000 pensioners (8 per cent) lived in severe poverty (BHC). After housing costs, 60,000 pensioners (6 per cent) lived in severe poverty

Source: HBAI 2012/13, DWP

Comparing Scotland with the UK as a whole shows a broadly similar picture. The percentage of all individuals in 2012/13 living in severe poverty in Scotland (10 per cent) was largely the same as that for the UK (9 per cent). After housing costs, the rate of severe poverty was 14 per cent in 2012/13 in both Scotland and the UK.

Similarly, the percentage of children living in severe poverty was largely the same in Scotland (10 per cent) in 2012/13 and the UK (9 per cent). However, after housing costs, the rate of severe child poverty in Scotland was 15 per cent, slightly lower than that for the UK (17 per cent).

Over the last decade, the rate of severe poverty in Scotland and in the UK remained largely unchanged. For the whole population, the rate of severe poverty before housing costs in Scotland has remained at 9-10 per cent, similar to the rate for the UK. After housing costs, the rate of severe poverty in Scotland fell slowly from 15 per cent in 2002/03 to 10 per cent in 2011/12, before increasing to 14 per cent in 2012/13. This differed from the UK trend, which saw an increase in the severe poverty rate from 13 per cent to 16 per cent between 2002/03 and 2007/08, followed by a decrease to 14 per cent in 2012/13.

There was a similar pattern in the rate of severe child poverty. Scotland saw a 2 percentage point decrease in the rate of severe child poverty before housing costs, over the last decade, as did the UK. However after housing costs, while the rate of severe child poverty for the UK decreased by 2 percentage points, the rate for Scotland decreased from 18 per cent in 2002/03 to 11 per cent in 2011/12 before increasing to 15 per cent in 2012/13.

Extreme poverty in Scotland in 2012/13

In this analysis, households in extreme poverty are those with incomes below 40 per cent of UK median income. Note that this group is a subset of those in severe poverty.

Analysis of the FRS 2012/13 for Scotland suggests the following:

• 230,000 individuals (4 per cent of the whole population) lived in extreme poverty (BHC). After housing costs, 500,000 individuals (10 per cent) were living in extreme poverty.
• 170,000 working age adults (5 per cent) lived in extreme poverty (BHC). After housing costs 370,000 (12 per cent) working age adults were living in extreme poverty.
• 30,000 children (3 per cent) lived in extreme poverty (BHC). After housing costs, 90,000 children (9 per cent) lived in extreme poverty.
• 30,000 pensioners (3 per cent) lived in extreme poverty (BHC). This increased slightly to 4 per cent (40,000) after housing costs.

Source: HBAI 2012/13, DWP

Source: HBAI 2012/13, DWP

The number of people living in extreme poverty (before housing costs) has remained reasonably stable over recent years. However, the percentage of people living in extreme poverty in 2012/13, after housing costs, has increased in the latest year, after a decade of little change. This is particularly the case for working age adults and children.