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                            Living Standards, Poverty and Inequality in the UK: 2015
	Institute for Fiscal Studies
	7 Ridgmount Street
	London WC1E 7AE
Executive Summary
	Chapter 2 – Living Standards
	Chapter 3 – Inequality
	Chapter 4 – Income Poverty
	Chapter 5 – Arrears and Material Deprivation
1. Introduction
2. Living Standards
	2.1 Trends in UK living standards
		Trends in living standards by demographic group
		Comparison with previous recessions
		Comparison with National Accounts measures of living standards
	2.2 Average income and its components
		Employment income
	2.3 Prospects for living standards
	2.4 Conclusion
3. Inequality
	3.1 Income inequality across the whole population
		Inequality over the long run
	3.2 Pensioners, working households and workless households
		The relative incomes of pensioners, working households and workless households
		Inequality among non-pensioners
		Why has inequality among working households fallen since 2007–08?
	3.3 Prospects for inequality
	3.4 Conclusion
4. Income Poverty
	4.1 Trends in income poverty
		Comparing changes in poverty in 2013–14 with projections by IFS researchers
	4.2 Family work status and poverty (working-age only)
	4.3 Earnings and benefits for low-earning working families
	4.4 Prospects for income poverty
	4.5 Conclusion
5. Arrears and Material Deprivation
	5.1 Trends in arrears on household bills
		Specific benefit reforms and arrears
			Support for council tax in England
			The ‘bedroom tax’
	5.2 Trends in material deprivation
		The rise in child material deprivation since the mid 2000s
	5.3 Material deprivation and income
		Item deprivation and income
	5.4 Conclusion
Appendix A. The Households Below Average Income (HBAI) methodology80F
	Income as a measure of living standards
	The treatment of housing costs
	Income sharing
	Comparing incomes across households
	Sample weighting, and adjusting the incomes of the ‘very rich’
	Adjusting for inflation
	The income measure summarised
Appendix B. Benefit and tax credit income: comparing HBAI and administrative data
Appendix C. Supplementary analysis to Chapter 4
Document Text Contents
Page 1

Living Standards, Poverty and
Inequality in the UK: 2015

Chris Belfield
Jonathan Cribb
Andrew Hood
Robert Joyce

Page 2

Living Standards, Poverty and Inequality
in the UK: 2015

Chris Belfield

Jonathan Cribb

Andrew Hood

Robert Joyce

Institute for Fiscal Studies

Copy-edited by Judith Payne

Institute for Fiscal Studies

7 Ridgmount Street

London WC1E 7AE

Page 56

Income poverty


lone parent with one child working part time, this growth was just 0.6%.
Meanwhile, CPI inflation between 2012–13 and 2013–14 was 2.2%. In addition,
many families receiving housing benefit and council tax support saw real cuts to
those entitlements. The nominal value of pensioners’ means-tested benefits also
grew more slowly than inflation, but faster than those for working-age family
types, while the basic state pension actually increased slightly in real terms.

Year-on-year changes in these benefit entitlements have previously been shown
to correlate very strongly with poverty trends, at least for families with
children42 – which is not surprising, as the majority of household income for
those around the poverty line comes from state benefits. Nonetheless, absolute
poverty in the HBAI data actually fell slightly in 2013–14. In the next short
subsection, we briefly discuss further the discrepancy between poverty trends
measured by HBAI between 2012–13 and 2013–14 and those projected by IFS

Comparing changes in poverty in 2013–14 with projections by
IFS researchers

The changes in both absolute and relative income poverty according to the HBAI
data between 2012–13 and 2013–14 are somewhat different from – and in
particular, more favourable than – those projected by IFS researchers in
February 2015 (which were for BHC poverty only). For brevity, we focus here
just on the absolute poverty numbers. Cribb, Hood and Joyce (2015) projected
that absolute BHC poverty would rise in 2013–14 by 0.4ppt overall and by 1.1ppt
for children. This compares with small (and statistically insignificant) falls in
absolute BHC poverty in the HBAI data, of 0.6ppt overall and 0.9ppt for

When seeking to understand discrepancies between the data and the projections,
the first thing to emphasise is that the statistics are subject to a margin of error
and are based on different samples of the household population each year. Year-
on-year changes are rarely statistically significantly different from zero.
Conversely, an unchanged poverty rate in the data could easily mean an increase
or decrease in reality. The projections of trends in poverty in 2013–14 were
produced by effectively modelling what happened to the incomes of the
households sampled by HBAI in 2012–13, given known changes to tax and
benefit policy and trends in employment and earnings recorded by the Labour
Force Survey.


Joyce, 2015.

Note that the projections in Cribb, Hood and Joyce (2015) used the RPIJ to uprate the absolute
poverty line over time, whereas here we use a variant of the CPI. This means that the poverty lines
are slightly different in each case, but it will make a negligible difference to the changes recorded
in 2013–14 – the two indices both recorded a 2.2% rate of inflation in 2013–14.

Page 57

Table 4.1. Growth in nominal entitlements to state support for example family types (%)

3 children,

no work

Lone parent,
1 child,
no work

Lone parent,
1 child,

part-time work

Single person on

Basic state

Single pensioner
entitled to means-

tested benefits

Couple pensioner
entitled to means-

tested benefits




line (BHC)


line (AHC)

Total change (%)

1996–97 to 2013–14 142.1 93.2 109.7 49.7 80.1 122.6 117.0 44.3 42.0 85.6 84.8

2007–08 to 2013–14 29.8 25.6 21.4 21.2 26.2 21.4 21.7 16.3 20.5 15.9 17.3

Annualised growth
rates (%)

1996–97 to 2004–05 6.9 4.5 5.8 1.9 3.4 6.3 5.9 1.6 1.2 4.5 4.5

2004–05 to 2007–08 3.1 2.7 3.2 2.1 3.1 4.0 4.0 3.0 2.2 4.0 3.4

2007–08 3.6 3.3 3.7 3.0 3.6 4.2 4.3 3.3 2.1 4.1 3.2

2008–09 7.0 5.4 6.2 2.3 3.9 4.8 4.6 2.7 3.8 3.8 3.2

2009–10 6.4 6.1 5.5 6.3 5.0 4.6 4.7 0.0 2.3 1.0 3.6

2010–11 2.2 2.0 1.9 1.8 2.5 1.9 1.9 3.6 3.6 2.0 1.6

2011–12 6.1 5.0 4.1 3.1 4.6 2.8 3.1 4.2 4.4 2.1 2.0

2012–13 4.3 4.1 1.7 5.2 5.2 3.8 3.8 2.6 2.6 3.1 2.5

2013–14 0.9 0.8 0.6 1.0 2.5 1.8 1.9 2.2 2.3 3.0 3.3

2014–15 1.0 1.0 1.0 1.0 2.7 2.0 2.0 1.0% 0.9% n/a n/a

2015–16 1.0 0.9 1.0 1.0 2.5 1.9 1.9 n/a n/a n/a n/a
Note: The table shows annual changes in maximum entitlements to benefits for various family types with no private income (except the working lone parent, who is assumed to
earn an amount that is below the personal income tax allowance and the primary threshold for National Insurance contributions), ignoring housing benefit and council tax
benefit/support and the value of free school meals for families with children. ‘CPI (BHC)’ and ‘CPI (AHC)’ are not available for 2015–16 because forecasts for these measures of
inflation do not exist. For further details, contact the authors.
Source: Authors’ calculations.

Page 112



Cribb., J., Hood, A. and Joyce, R. (2015), ‘Living standards: recent trends and future
challenges’, Institute for Fiscal Studies (IFS), Briefing Note no. BN165

Cribb, J. and Joyce, R. (2015), ‘Earnings since the recession’, in C. Emmerson, P. Johnson
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which expenditures are curtailed first?’, Social Indicators Research, vol. 120, pp. 723–40.

EAPN Social Inclusion Working Group (2009), ‘Poverty and inequality in the EU’,
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Emmerson, C., Heald, K. and Hood, A. (2014), The Changing Face of Retirement: Future
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Child Poverty

HM Revenue and Customs (2012), The Exchequer Effect of the 50 per cent Additional Rate
of Income Tax

Hood, A. (2015), ‘Benefit changes and distributional analysis’, presentation at IFS Post-
Budget Briefing 2015 (

Johnson, P. (2015), UK Consumer Price Statistics: A Review, London: UK Statistics
Authority (

Joyce, R. (2015), ‘Child poverty in Britain: recent trends and future prospects’, Institute
for Fiscal Studies (IFS), Working Paper no. W15/07

Miller, R. (2011), ‘The long-run difference between RPI and CPI inflation’, Office for
Budget Responsibility (OBR), Working Paper no. 2

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Living standards, poverty and inequality in the UK: 2015


Office for Budget Responsibility (2015b), Economic and Fiscal Outlook – July 2015

Office for National Statistics (2014), ‘Working and workless households, 2014’, Statistical
Bulletin (

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