Third Report - Children in poverty: Measurement and targets

The Office for Statistics Regulation has recently made recommendations for improving income-based poverty statistics. DWP has said that it is considering its response to these recommendations, working with others in Government.

We recommend that DWP publishes a detailed and full response to all the recommendations made by the Office for Statistics Regulation in its review of income- based poverty statistics by March 2022. (Paragraph 11) Defining child poverty, identifying its causes and consequences

Poverty is at least partly about a lack of material resources, and most people consider income to be a core measure of poverty. But definitions of poverty cannot be entirely divorced from the society in which people live. A ‘poverty line’ should relate to the normal expectations of, and the cost of living and participating in, that society. Making a decision about where to draw that line is, however, a matter of judgment. These decisions should nevertheless be informed by what the evidence tells us about the impact of being below that line.

We heard compelling evidence describing why a lack of material resources in childhood matters and the impact it has on child development and their future outcomes. But defining poverty in income terms does not mean that the Government’s response to poverty should neglect the underlying causes of it. A holistic approach to child poverty should target the income poverty itself and the factors that lead to it or are made worse by it.

DWP’s analysis of the drivers of child income poverty from 2014 concluded that a key factor was the quantity and quality of paid work in families. Since this analysis, the labour market has continued to evolve and more children in income poverty are now in working families. We have seen the disruption caused by the pandemic and there has been a further decoupling of social security from the cost of living. We think the time is now right for the Department to revisit its analysis.

We recommend that DWP should commission a systematic review of the latest evidence on child income poverty, its definitions, its causes and its consequences. It should use this review to prompt a better dialogue with the public, charities and others, and inform future cross-government work on measures to address child poverty. The findings from this review should be published by July 2022. (Paragraph 31) Measuring child poverty

Poverty measurement is important because it involves translating abstract concepts and definitions into very concrete expressions of who is poor and who needs extra help. Backed by a legal obligation to do so, the UK Government measures and reports Children in poverty: Measurement and targets 51 child poverty through a suite of income-based indicators which enable consistent tracking over time. DWP plays a valuable role in overseeing this measurement work.

Ministers have made clear to us that they consider absolute income poverty to be the most useful measure. They have been dismissive of the Government’s own measure of relative income poverty. But both measures have advantages and disadvantages. The Secretary of State is of course right to say that a relative measure can, in the short term, produce counter-intuitive results—but it has great value for assessing long term trends. We are concerned to see Ministers focusing on a single measure, rather than drawing on the rich information offered by DWP’s own set of income-based measures, which combines relative, ‘absolute’ and broader material deprivation statistics.

Ministers should reaffirm their commitment to measuring poverty through all four measures of children in low income as set out in the Welfare Reform and Work Act

The Government legislated for the statutory monitoring of worklessness and educational attainment indicators in the Welfare Reform and Work Act 2016. It reports performance against these indicators as part of a wider set of ‘Helping Workless Families’ indicators. The Government argued that indicators of worklessness and educational attainment directed attention towards the underlying causes of child poverty. Measures of worklessness and educational attainment are certainly useful as part of a wider framework which assesses the causes and consequences of income poverty. But they are not a substitute for measuring poverty. Moreover, we know that most children in income poverty are in working households. We also know that family circumstances and income poverty have a significant impact on educational outcomes.

We recommend that the Department for Work and Pensions broadens the scope of its ‘Helping workless families indicators’ to measure the quantity and quality of work in families and communities, and the quality of family support so that they better address the challenge of in-work poverty and the additional stresses often endured by families in income poverty.

DWP’s key collections of income-related poverty and wider social deprivation statistics are all published separately. The Office for National Statistics also publishes separate statistics on household income. There is no consolidated publication and no clear narrative setting out how the measures all link together. The current arrangements are a missed opportunity to develop and present a comprehensive and coherent measurement framework which brings core income-related measures of child poverty alongside a wider set of dimensions or social deprivations reflecting the consequences and causes of that poverty. (Paragraph 53) 52 Children in poverty: Measurement and targets

DWP should consolidate its statistical publications on income-related poverty and wider social deprivations to create a single dashboard of indicators of child poverty which logically describe the evidence-based causes and consequences of child poverty. DWP should, in doing so, be careful to keep its core income-related measures of poverty separate from indicators which describe wider social deprivations. DWP should align work on a single dashboard of indicators with household income data publications from the Office for National Statistics.

The Social Metrics Commission has proposed a new approach to measuring poverty which has widespread support. It was therefore welcome that the Government announced in 2019 that it would develop supplementary experimental statistics building on the Commission’s methodology. But that work seems to have ground to a halt. This was understandable during the first months of the pandemic, when DWP faced an unprecedented volume of claims for Universal Credit. We are, however, concerned that the Secretary of State has no clear plans to resume this work and is yet to decide the strategy the Department will adopt.

DWP should set out clearly, in response to this report, what work it now plans to do on the development of supplementary experimental statistics using the SMC’s methodology and a timescale for completing this work. It should also explain how the Secretary of State’s focus on aspects of material deprivation will inform its approach to poverty measurement.

The UK can learn from international approaches to poverty measurement, including from those countries and organisations which have developed multidimensional measurement approaches that bring together measures of income poverty and wider social deprivations. Some multidimensional approaches blend measures of income poverty with wider deprivations to produce a single index. There is a danger that a single index mixes measures of income poverty with factors that may be the consequence or cause of income poverty. This could make it hard to see what is driving changes in the measure and could have the unintended effect of reducing transparency overall.

DWP should continue to liaise with other countries, universities, and international organisations in developing a single dashboard for reporting income-related measures of poverty and the wider social deprivations on which the Government currently reports. (Paragraph 66) A strategy for child poverty

We heard strong views that the UK now needs a cross-government strategy for child poverty. We welcome the creation of a new Inter-Ministerial Group to identify practical measures to address the cost of living. But a focus on the cost of living suggests only a partial response to child poverty, ignoring aspects relating to income and earnings and the wider social deprivations linked to poverty. The Government now needs to commit to a comprehensive cross-departmental UK strategy for child poverty. (Paragraph 76) Children in poverty: Measurement and targets 53

The Government should commit to developing and implementing a long-term, cross- departmental strategy to address child poverty now and in the future. This should be informed by findings from the Inter-Ministerial Group on the cost of living and, more broadly, by the latest evidence on the key drivers of poverty.

Past income-based targets for child poverty have helped to focus minds across Government. But, like all targets, they can ‘distort’ the policy response, and some witnesses believed that this happened in the final years of the 2010/11 child poverty target as the emphasis shifted towards income transfers. To counter this risk, it is important to have a broad set of targets covering income and other policy measures. The Government must also be committed to reducing child poverty, with a clear strategy which is supported by measurable objectives and strong delivery plans.

As part of a new cross-departmental strategy, the Government should set clear, ambitious and measurable objectives and plans for reducing child poverty. The Government should report to Parliament annually on progress in implementing its child poverty objectives and plans. (Paragraph 84) The quality, timeliness and completeness of child poverty data

The pandemic has brought into sharp relief the delay in publishing poverty data through DWP’s ‘Households Below Average Income’ statistics. DWP and HMRC have a wealth of administrative data on benefits, tax and earnings. DWP can make better use of these to produce ‘closer to real-time’ information on child income poverty to support its strategy. This ‘lead’ data would supplement the data gathered through household surveys. Its publication will help DWP to account for its performance in addressing child poverty.

Working with HMRC and other UK producers of income statistics, DWP should develop a dashboard of child income-related poverty ‘lead’ indicators which are closer to real time and supplement existing survey data sources. DWP should publish this data as part of its child poverty measurement framework.

The 12-month delay in producing income poverty statistics means that DWP data on the proportion of children in low income for the year to March 2021 will not be published until March 2022. We were encouraged to hear that DWP is working with the Department of Health and Social Care and the Office for National Statistics to understand better the impact of the pandemic on family outcomes. Lessons from this exercise might also help DWP in its approach to modelling the impact of future changes to social security on health and well-being. It is, nevertheless, surprising that DWP has not published any more research or analysis on the impact of the pandemic on children and families in low incomes, bearing in mind its responsibilities for poverty. This seems especially important in the light of evidence from other sources, including witnesses to our inquiry, that the pandemic has particularly affected families and children towards the bottom of the income distribution who were already vulnerable before covid-19 struck.

DWP should commission research examining, in depth, the impacts of the pandemic on children living in families in low income. It should publish the results of this 54 Children in poverty: Measurement and targets analysis alongside its March 2022 Households Below Average Income statistics. DWP should also publish early findings from its longer-term project with the Department of Health and Social Care and the Office for National Statistics to understand the differential impacts of the pandemic. DWP should use the lessons from its exercise with the Department of Health and Social Care to inform how it might better estimate the health and well-being impacts of future changes to social security affecting children and families.

DWP has valuable administrative data that can be used to improve understanding of child poverty and support a better response to it. To make the best use of this resource, DWP will need to collaborate with others in Government, local authorities and academics. However, we have heard significant concerns from local authorities and from some academics about the Department’s preparedness to share data. We are encouraged by its recent progress in some areas but believe DWP could be more open and constructive in its approach.

DWP should liaise with other government departments to identify lessons for how it might take a more constructive approach to sharing data related to child poverty. DWP should write to us by June 2022 updating us on its progress (a) in working with the Office for National Statistics, Administrative Data UK and other government departments to develop new data matching and analysis programmes to understand better the causes and consequences of child income poverty; and (b) in addressing local authority concerns about the sharing of Universal Credit administrative data.

DWP and the Office for National Statistics both have survey and statistical research projects on income. There is a risk that these overlap, reducing the quality of the overall data collected and contributing to reduced clarity in Government reporting of poverty data.

DWP should work with other UK producers of income statistics to co-ordinate the current suite of survey and data analysis to strengthen the breadth and depth of work and improve reporting clarity. DWP should write to us by March 2022 setting out the additional steps it has taken to integrate surveys to maximise their efficiency and reach.

Gaps in data on inescapable costs that households face, including those associated with disability and debt, reduce the accuracy of data about who is in poverty. The Social Metrics Commission has shown leadership in highlighting these matters but is reliant on Government data. Making progress on addressing these gaps will require significant commitment from DWP, working with other departments.

To improve its measurement of income-related poverty, DWP should work with others, including the Office for National Statistics, relevant academics, and children’s charities to identify a list of inescapable household costs and define options for how data on these might be collected. DWP should write to us by June 2022 setting out the additional costs it intends to capture and the methods it proposes to use.

Gaps in the analysis of income poverty for different ethnic groups caused by small survey samples reduces our understanding of poverty and solutions to it. We Children in poverty: Measurement and targets 55 therefore welcome DWP’s recent decision to increase the sample size of its Family Resources Survey which will strengthen the analysis of poverty for different groups.

DWP should write to us by June 2022 setting out precisely what additional subgroup analysis, including analysis of ethnic minority households, it expects to be able to conduct as a result of the increase in the sample size for its Family Resources Survey.

Income poverty data on children whose parents have no recourse to public funds is limited. DWP’s Family Resources Survey picks up very small numbers of these children and the Department does not collect significant administrative data on them because their parents are not normally entitled to its benefits and services. This blind-spot in DWP’s understanding of children in poverty is not sustainable. As a Department with responsibility for poverty and disadvantage it falls to DWP to conduct research and analysis for all of society, including for children of families with no recourse to public funds. We expect to return to this issue later in 2021.

We recommend that DWP works with the Office for National Statistics to produce robust income-related poverty and income data on children and their families with no recourse to public funds. DWP should write to us by June 2022 to give an update on its progress in addressing this unsustainable gap.

Local level data on child income poverty is important to enable national and local governments to plan their services. DWP’s recent work with HMRC to produce local area estimates of children in low income families is welcome, but its usefulness is reduced because the estimates do not include housing costs. For most families with children, housing costs take up a significant portion of their monthly budget, especially in the south of England and in coastal areas. Without good quality data about those costs it is impossible to gain a full picture of a family’s circumstances, but DWP told us that there is a lack of individual-level data on housing costs. The Centre for Research in Social Policy at Loughborough University has, however, been able to use the housing data that is available to model local rates after housing costs.

We recommend that DWP works with external academics, local authorities and other government departments to identify options for reflecting the cost of housing in its local area estimates of children in low income families. DWP should write to us by June 2022 to update us on its analysis of options. (Paragraph 126) 56 Children in poverty: Measurement and targets