David Piachaud and Holly Sutherland

Published December 2002

The paper analyses changes in poverty in Britain since 1997. A poverty level of 60 percent of median equivalised income is used. The first part examines the changes that occurred between 1996/7 and 2000/1 as shown by the Family Resources Survey, on which government estimates of Households Below Average Income are based. There was a small reduction in poverty overall and a larger proportionate fall in child poverty. This fall was attributable in part to increased employment and in part to changes in benefits and tax credits which increased for some, particularly for families on low earnings with children, but fell relative to median incomes for many of those without children and not in employment. The second part assesses policy changes implemented or announced for the period 2000/1 to 2003/4 by means of a micro-simulation model, POLIMOD, using a sample from the Family Resources Survey. The impact of policy changes is to reduce poverty compared to its prospects under previous policies. But, relative to a poverty level that rises in real terms in step with median incomes, future reductions in poverty are likely to be small. In order to keep on track towards the goal of halving child poverty by 2010, further policy measures will be required.