U.K. CONSULTATION PROCESS

1. U.K. CONSULTATION PROCESS the Government launched a consultation exercise on measuring child poverty to establish an agreed measure that could be used for the long-term. Low income is a key aspect of child poverty. The length of time spent in low income is also important, Movements in and out of low income are associated with key trigger events, such as entering or leaving the labour market, the birth of a child or marital breakdown4. However, other influences also matter, such as neighbourhood environments,lack of opportunities to acquire knowledge and skills, and inequalities in health. Those living in poorer neighbourhoods often have to put up not only with a rundown physical environment and limited opportunities, but also the worst public services, including education, health and housing.

2. In the absence of a single measure of child poverty, the relative low-income measure received most attention. But relative low income has some drawbacks as an exclusive long-term measure of child poverty. These were well summarised by Professor John Hills5. While accepting that perceptions ofpoverty are largely relative, he identified as problems: • particular cut-offs (for example, 60 per cent of median) are largely arbitrary; • ‘income’ can be defined in many different ways; • ‘depth’ of low income matters (to take account of how far below the low income line people fall) as well as head counts; • persistence (a long spell in low income) matters; • low income and deprivation overlap but are not identical; and • the ‘relative low-income paradox’ These comments indicate the importance of having a broad range of indicators. However, with multiple measures, it is difficult to track overall progress clearly. The challenge was to find the right balance between the desire for clarity, which argues for one clear headline indicator and comprehensiveness, which argues for a broader range of indicators

3. A public consultation exercise was launched in 2002 • Option 1: Multi-dimensional headline indicators - To refine the existing approach, presenting headline indicators in Opportunity for all on key areas:low income, worklessness, educational attainment, health inequalities and housing standards. • Option 2: Child poverty index - A reduction of the headline figures presented in option 1 into a single measure (or child poverty index). Weights would be assigned to the different indicators before being combined. • Option 3: Combining relative low income and material deprivation – ‘consistent poverty’ - A ‘consistent poverty’ headline measure – similar to the approach in Ireland - combining relative low income and material deprivation. • Option 4: A core set of low income and ‘consistent poverty indicators - A consistent poverty measure (as outlined in option 3) could sit among theexisting set of indicators in Opportunity for all (as outlined in option 1). A core set of low income and ‘consistent poverty’ indicators could monitor long-term progress.

4. AIMS OF A GOOD MEASUREMENT Some of them, less usual  • be based on child outcomes rather than processes • have longevity, being relevant now and to track long-term progress. 13. In addition, the detailed indicators and statistics that lie behind any approach should be: • timely; • open to and robust to statistical scrutiny from experts; • be credible with the public; • be capable of generating a long-term robust time series; and if possible: • be capable of disaggregation by group and by locality; and • be internationally comparable.  However, with multiple measures, it is difficult to track overall progress clearly. The challenge was to find the right balance between the desire for clarity, which argues for one clear headline indicator and comprehensiveness, which argues for a broader range of indicators. Most people agreed that income needed to be central to the measure, but that is should not be the only component. There was strong support for using a tiered ESCALONADO approach (option 4), for having a measure of material deprivation and very strong support for retaining the multi-dimensional indicators that are published in the annual poverty report

5. MATERIAL DEPRIVATION In common with most recent research, we have adopted an “enforced lack” approach in this analysis whereby respondents are asked to clarify if they do not have or consume an item whether this is because: a) they do not ‘need’ it, or b) because they ‘cannot afford’ it. It is therefore possible to distinguish between ‘unenforced’ and ‘enforced’ hardship. This helps to discriminate between those not choosing to have necessities and those forced to do without necessities because of a lack of economic resources.On balance, we decided therefore that an ‘enforced lack’ approach should be adopted. As a first step towards the new material deprivation tier, we commissioned work to look at the choice of deprivation items to form the measure. This confirmed that, when measuring material deprivation, it is not necessary to include a long list of goods and services. The items selected for inclusion in the FRS were selected on the basis of being robust over time and less affected by technological advances or reduced costs. They do not, for example, include consumer durables or food items. Durable goods have been described as widely owned yet not classified as essential by society as a whole20. The suite of deprivation items was introduced to the FRS in the 2004/05 survey. Income and deprivation can be seen as separate concepts in poverty measurement and they should complement each other rather than act as substitutes for each other

6. Two of the options were ruled out at this stage: • the child poverty index – there was very little support for this and most people said it would be difficult to measure progress clearly or to communicate; and • consistent poverty – whilst people supported using some measure of material deprivation, people found this particular approach difficult to understand. We also undertook analysis on UK data to create a measure similar to the Irish poverty measure8. This analysis showed that it would be unwise to use this as the sole measure of child poverty. This is because of the lack of a settled approach to selecting items for a deprivation indicator and the need for periodic revision of those items, which would introduce discontinuity into the time series. In other words it would not meet the test of consistency over time. This did not mean ruling out incorporating some measure of deprivation as one component of a tiered measure of poverty •Material deprivation– this data was not collected on the main income survey in the UK and so we needed to undertake analysis to identify a set of questions that could be added to the survey. We also needed to consider how this type of measure could be updated over time and undertake analysis to explore the relationships between persistent low income and material deprivation

7. A tiered approach was chosen as the best way in which we could monitor progress on child poverty in the long term  Income is at the core of people’s conception of poverty. The components are: • Absolute low income - to measure when the poorest families are seeing their incomes rise in real terms; • Relative low income – to measure whether the poorest families are keeping pace with the growth of incomes in the economy as a whole; and • Material deprivation and low income combined – to provide a wider measure of people’s living standards. Each has significance in its own right and the objective is to make progress on all indicators; poverty is falling when all three indicators are moving in the right direction Analysis carried out as part of this work showed a clear and positive relationship between the recurrence of low income and the intensity of deprivation10:families who spent longer periods living in low income experienced more severe deprivation. Therefore it was decided not to include an additional measure of persistent low income as the material deprivation tier will not only give a wider measure of people’s living standards, but it will also capture elements of persistent poverty. More recently, Goodman & Myck11 looked at the relationship between income and material deprivation in lone-parent families, also confirming that income is negatively correlated with material deprivation, as the former goes up the latter goes down; there is also a greater effect on deprivation at the lower end of the income distribution