Living Standards and Poverty in the Regions

Living Standards and Poverty in the Regions David Phillips Institute for Fiscal Studies 11th June 2008

What’s coming up? • Living Standards in the Regions • Poverty in the Regions • How things change when we use regional price levels

The Regions of the United Kingdom • Nine English Regions • North East, North West, Yorkshire and Humber, East Midlands, West Midlands, East of England, London, South East and South West. • Wales • Scotland • And Northern Ireland • Twelve ‘regions’ altogether.

Regions and Price Levels • Prices differ across regions. • Housing etc expensive in London and the South East • Affects real purchasing power in different parts of the country. • “Real” income higher where low prices • “Real” poverty lower where low prices • Regional prices may change our view about living standards and poverty rates across the UK.

But… • No consistent regional price series. • The ONS has produced only two recently: 2003 and 2004. We use the latter years regional price data LATER. • We therefore use national prices for most of this analysis. • Might lead to misleading estimates of real incomes and overestimation of poverty rates but should capture relative trends over time.

Median Income (BHC) • Same measure of income as usual. • Household income after taxes and benefits, but before housing costs and adjusted for household size. • Use two year averages. • UK-wide median = 100. • Bigger than 100 means higher than UK • Lower than 100 means lower than UK

Real Income (2005-06 and 2006-07) Source: HBAI Data and authors’ analysis

Real Income Growth (1996-97 to 2006-07) Source: HBAI Data and authors’ analysis

Mean Income (BHC) • Similar pattern except London now has the highest incomes by a considerable margin. • Indication of the high levels of inequality in London with a sizeable ‘very rich’ population.

Defining and measuring poverty • We use the same measure of poverty as usual. • Household income below 60% of the national median, AHC and BHC. • Because of small samples at the regional level we use two-year averages. • We only report poverty rates for the population as a whole as sample sizes for sub-groups are small at the regional level.

Poverty Rate (2005-06 and 2006-07) Source: HBAI Data and authors’ analysis

Change in Poverty (1996-97 to 2006-07) Source: HBAI Data and authors’ analysis

Regional Poverty (BHC) • Using incomes measured BHC there are a few differences • Highest in the West Midlands at 20.8% • Mid-table for London at 17.2% • Lowest in the South East at 13.6% • The changes in relative rankings over time are similar to AHC poverty, although poverty has risen slightly for a few regions (North West, East Midlands, West Midlands and the South East).

Using Regional Prices

Regional Price Indices Source: Office of National Statistics

Median Income in 2004-05 (BHC) Source: HBAI Data and authors’ analysis

Poverty in 2004-05 (BHC) Source: HBAI Data and authors’ analysis

Summary • Median income • highest in the South East and London • lowest in the North East, Northern Ireland and West Midlands. • Poverty • highest in the North West, West Midlands (BHC) and London (AHC). • lowest in South East • Accounting for cost of living has big impact on relative rankings in terms of both median income and poverty (e.g. London and Wales)

Living Standards and Poverty in the Regions