Friday, 9 February 2018

THE OFFICE FOR BUDGET RESPONSIBILITY SCEPTICAL ABOUT DWP CLAIMS FOR LABOUR SUPPLY EFFECTS OF UNIVERSAL CREDIT



 The roll-out of Universal Credit may be running five years later than planned, having  wasted £40 million in botched IT, and been emasculated by austerity cuts since 2015, but its advocates in DWP still argue that it is all going to be worthwhile in the end because its labour supply effects will get people into work and onto higher earnings. Sir Robert Devereux the DWP Permanent Secretary claimed this in a retirement interview “the roll-out will see unemployment rates fall as disincentives are taken out of the system”. Esther McVey the new Secretary of State for Work and Pensions even seemed to claim that 3.1 million extra people were in work as a result of UC when at the time only 700,000 were on it.

The impact assessment[1] for UC in 2012 estimated that between 100,000 and 300,000 would enter work and between 1 million and 2.5 million more hours would be worked as a result of UC. A PQ[2] in 2017 reduced the entering work number to 150,000 and made no claim on extra hours. DWP presented estimates of the impact of UC in reports published in 2015 with an update  in 2017. The latter found that that UC claimants were 3 percentage points more likely to be in work after six months than matched jobseeker’s allowance claimants (56 per cent versus 53 per cent).

The Office for Budget Responsibility concentrated on UC in its latest Welfare Trends report and was clearly not convinced enough by this evidence to take it into account. They concluded “we have not yet incorporated these (findings) into our forecasts, as it is not yet clear that the impact found for the simple cases migrated so far will be replicated for the more complex ones to come or if the resources devoted to the early cases will be sustained (para 7). They point out that simple cases are unlikely to be representative of the overall caseload; that operational choices and resources available per case may not be representative of the policy when scaled up; and that the generosity of the UC system has been significantly reduced since the trials, with large cuts to work allowances taking effect in 2016-17.  They reproduce with implicit hilarity the onerous job description for the 13,000 work coaches being recruited for UC at £24,000 to £26,000 per year, commenting these “stretching roles are modestly remunerated”.  They conclude “that we will consider the updated estimates that are due to be published in the full UC business case later this year, but do not expect to make any new forecast judgements until UC is operating at greater scale across all types of claimant and for a sufficiently long period for robust evidence of any labour market effects to emerge.”

So the jury is still out on whether, what is effectively the sole remaining claim for Universal Credit, will be realised.



[1] Impact Assessment: Universal Credit, Department for Work and Pensions, December 2012.
[2] 16 October 2017, Department for Work and Pensions, Universal Credit, House of Lords written Parliamentary Question HL2020.

Wednesday, 6 December 2017

UK child poverty gaps increasing


UNIVERSITY OF YORK
Social Policy Research Unit

UK child poverty gaps increasing but small reductions in deprivation


Updated 6/12/17                   

There has always been a debate in the world of poverty measurement about whether we should be more concerned about poverty rates (the proportion below a poverty threshold) or poverty gaps (how far people in poverty are below the poverty threshold). Is it better for a country to have many children a little way below the poverty threshold or few children below the poverty threshold, but a long way below it? The UK has tended in the past to have comparatively high poverty rates but comparatively low poverty gaps. This has been thanks to a fairly comprehensive but quite low minimum income scheme.  But since the recession our minimum income scheme has been undermined by benefits caps, the two child limit, the bedroom tax, local rent limits, real cuts, the failure to uprate child tax credits and child benefits, the localisation of council tax benefit and sanctions.

 The most recent HBAI statistics for 2015-16 produced by the DWP show an increase in child poverty rates, the first for a decade. The HBAI series have never included poverty gap data. There are some good reasons for this: the calculation is rather arcane (for households below the poverty threshold, the average of how far their incomes are from the poverty threshold); the statistic is subject to outliers (including negative incomes); and quite large sampling errors, even in a survey as large as the Family Resources Survey.

 Nevertheless they are worth having a look at – especially for trend data over time. Poverty rates may be falling when poverty gaps are rising and vice versa. For the Child Poverty Action Group we have analysed trends in the poverty gaps for families with children from 2007/8 to 2015/16 and the results are presented in tables 1 and 2 and figure 1.


It is probably safest to focus on the median poverty gap and all families with children. There has been an increase in the poverty gap, both before and after housing costs. In 2007/8 the median poverty gap before housing costs was £41.60 per week by 2015/16 it had increased to £50.60 per week.  After housing costs the increase was from £50.40 per week in 2007/8 to £61.80 per week in 2015/16. Over the same period the child poverty rates had fallen both before and after housing costs.

 Table 1: Poverty gaps average £ per week BHC

£ per week
 
2007/8
2008/9
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
Lone parent       
 
 
 
 
 
 
 
 
 
Mean (SD)
47.00 (42.56)
48.17 (48.67)
48.32 (48.48)
47.56 (50.60)
55.05 (48.25)
63.32 (59.55)
53.87 (54.56)
61.96 (61.28)
66.25 (64.09)
95% CI for the mean
46.92-47.08
48.07-48.26
48.22-48.43
47.44-47.68
54.93-55.16
63.18-63.46
53.73-54.00
61.82-62.10
66.11-66.38
Median
35.60
32.60
32.00
31.80
41.20
45.00
33.80
37.80
45.60
Couple with children
 
 
 
 
 
 
 
 
 
Mean (SD)
66.34 (59.68)
70.30 (63.19)
70.12 (64.65)
68.22 (62.88)
63.59 (60.44)
74.68 (71.49)
68.89 (63.07)
75.39 (68.55)
72.47 (69.57)
95% CI for the mean
66.25-66.42
70.21-70.39
70.03-70.22
68.12-68.31
63.50-63.69
74.57-74.79
68.79-68.99
75.29-75.49
72.37-72.57
Median
47.60
48.60
49.00
48.80
45.20
51.00
50.80
54.80
51.60
All families with children
 
 
 
 
 
 
 
 
 
Mean (SD)
59.04 (54.67)
62.18 (59.25)
63.21 (60.85)
62.08 (60.24)
61.07 (57.24)
71.33 (68.38)
64.92 (61.29)
71.25 (66.68)
70.45 (67.90)
95% CI for the mean
58.98-59.11
62.11-62.25
63.14-63.29
62.00-62.16
60.99-61.14
71.24-71.42
64.84-65.00
71.17-71.33
70.36-70.53
Median
41.60
42.60
44.00
42.80
44.20
49.00
46.80
49.80
50.60
Total no. of children
12,975,932
12,965,385
13,150,415
13,206,669
13,266,967
13,349,935
13,329,444
13,480,133
13,541,132
% children in poverty
22.5
21.9
19.8
17.6
17.6
17.3
17.0
18.8
19.6
Source: Own analysis of HBAI

Table 2: Poverty gaps average £ per week AHC

£ per week
 
2007/8
2008/9
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
Lone parent
 
 
 
 
 
 
 
 
 
Mean (SD)
57.66 (49.57)
59.83 (61.61)
59.95 (61.36)
59.31 (57.62)
60.62 (57.41)
66.90 (67.50)
63.02 (65.57)
75.69 (69.65)
78.04 (72.42)
95% CI for the mean
57.58-57.73
59.74-59.93
59.85-60.05
59.21-59.41
60.52-60.72
66.79-67.02
62.90-63.13
75.57-75.80
77.93-78.16
Median
46.40
43.00
44.20
41.80
47.00
46.40
46.60
54.40
57.80
Couple with children
 
 
 
 
 
 
 
 
 
Mean (SD)
78.01 (84.23)
81.62 (80.61)
78.67 (80.98)
78.10 (74.65)
76.46 (78.29)
80.47 (83.21)
81.55 (75.57)
85.14 (81.50)
90.76 (107.84)
95% CI for the mean
77.91-78.12
81.52-81.72
78.57-78.77
78.00-78.19
76.36-76.57
80.37-80.58
81.46-81.65
85.04-85.24
90.63-90.90
Median
52.40
57.00
57.20
57.80
56.00
55.40
62.60
61.40
63.80
All families with children
 
 
 
 
 
 
 
 
 
Mean (SD)
70.02 (73.30)
73.29 (74.68)
71.86 (74.99)
71.44 (69.68)
70.78 (71.90)
75.59 (78.20)
75.16 (72.82)
81.80 (77.66)
85.95 (96.19)
95% CI for the mean
69.95-70.09
73.22-73.37
71.79-71.94
71.36-71.51
70.70-70.85
75.51-75.68
75.09-75.24
81.72-81.88
85.86-86.05
Median
50.40
52.00
52.20
50.80
52.00
51.40
55.60
57.40
61.80
Total no. of children
12,975,932
12,965,385
13,150,415
13,206,669
13,266,967
13,349,935
13,329,444
13,480,133
13,541,132
% children in poverty
31.4
30.3
29.5
27.3
27.1
27.2
27.8
29.0
29.6
Source: Own analysis of HBAI

 

Tables 3 shows trends in child deprivation and Table 4 trends in deprivation for adults in families with children. Most of the child indicators show slight reductions in deprivation since 2007/8 – the exception is a holiday away from home. For adults lack of a holiday away from home and contents insurance have increased since 2007/8.

 
Table 3            Percentage of children lacking necessities in 2007/8 to 2015/16 (weighted by GS_NEWCH)

Item
2007/8
2008/9
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
Outdoor space or facilities nearby where they can play safely
14.8
13.1
11.2
9.5
8.7
9.6
7.4
7.5
7.1
Enough bedrooms for every child over 10 of different sex to have his or her own bedroom
16.9
17.7
18.4
15.7
13.6
15.1
16.9
16.5
14.2
Celebrations on special occasions such as birthdays, Christmas or other religious festivals
4.1
3.4
3.6
2.9
2.7
3.2
2.9
2.2
2.3
Leisure equipment (for example, sports equipment or a bicycle)
7.6
7.6
7.5
6.9
6.4
7.4
6.4
6.3
6.1
A holiday away from home at least one week a year with his or her family
32.3
35.6
37.4
37.3
38.3
38.0
36.4
34.8
33.9
A hobby or leisure activity
6.9
7.3
7.5
6.2
5.9
6.4
7.5
6.8
6.4
Friends round for tea or a snack once a fortnight
7.8
8.9
8.7
7.3
6.3
6.7
8.5
7.2
7.3
Going on a school trip at least once a term for school-aged children
5.4
5.7
6.4
4.7
5.0
5.1
6.1
5.2
4.5
Play group/nursery/toddler group at least once a week for children of pre-school age
8.3
6.9
6.8
5.3
6.0
5.1
4.3
4.5
3.9
Source: Family Resources Survey 2007/08 to 2014/15.

 
Table 4            Percentage of adults in families with children lacking necessities in 2007/8 to 2014/15 (weighted by GS_NEWPP)

Item
2007/8
2008/9
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
Enough money to keep your home in a decent state of repair
18.1
19.1
18.5
18.1
21.4
20.8
20.3
18.6
17.1
A holiday away from home for one week a year, not staying with relatives
36.2
39.1
41.1
42.1
42.8
43.4
42.8
40.9
38.9
Insurance of contents of dwelling
17.8
18.0
19.0
19.2
19.8
21.4
21.5
20.6
20.1
Regular savings (of £10 a month) for rainy days or retirement
38.8
40.7
42.1
41.2
41.1
42.9
40.6
39.0
35.5
Replace any worn out furniture
28.8
32.1
33.7
34.3
34.1
35.5
34.2
31.1
28.6
Replace or repair broken electrical goods such as refrigerator or washing machine
20.4
23.5
23.5
24.9
24.7
25.7
24.5
22.1
20.0
A small amount of money to spend each week on yourself, not on your family
31.5
33.2
34.2
34.2
36.7
38.2
36.8
33.2
29.1
Source: Family Resources Survey 2007/08 to 2014/15.