Headlines: July 16th, 2001

The Institute of Fiscal Studies (IFS) has tried to set out why – despite a full term of a Labour Government promising to help those in poverty – income inequality remains higher than when it first came to power.The analysis follows publication by the Department of Work and Pensions of new information about low-income households.

The Government report, Households Below Average Income 1994/95 – 1999/00, shows that income inequality went up in the first two years of the last parliament before falling in 1999-2000. Although it may now be showing a change of direction it remained higher in the year to April 2000 than it was before Labour came to power.

It does however, show some more promising signs for two groups targeted by the Government – children, and pensioners.

The Government report indicates that in the year up to April 2000, 1 in 3 children (4.1 million children) lived below its headline poverty measure – a fall of six per cent since Labour took power in 1997.

It also indicates that 1 in 4 pensioners lived in poverty in the same period, down four per cent since 1997.

The IFS ponders why the improvements are not dramatic, especially as they don’t yet live up to Government promises. It points out that the latest figures point to a year ago, and more may have been achieved since then. It also highlights that the ‘poverty line’ is a moving target, which is set at sixty per cent of average incomes. It blames particularly large rises in income for the better-off for raising the poverty line so that families are still considered to be in poverty even though their income has risen.

IFS Briefing Note No. 19, Inequality and Living Standards in Great Britain can be found on the IFS website at www.ifs.org.uk/inequality/bn19.pdf

The Department for Work and Pensions report, Households Below Average Income, can be found at www.dss.gov.uk/publications/dss/2001/hbai)