- The Guardian,
- Tuesday November 19 2002
Child poverty - defined in terms of households with disposable incomes below 60% of the national average - has emerged as a major focus of government action in recent years. Poverty is not evenly distributed across Britain, but until recently little attention has been paid to variations in poverty levels between areas, perhaps because data on household incomes at regional level has only been published since 2000. New data on poverty in inner London in a report commissioned by the mayor of London raises important questions about the factors contributing to poverty.
Income poverty in Britain is measured in two different ways. The first is based on disposable household income after tax and national insurance contributions, yielding a child poverty rate of 21% for the UK in 2000-01. The second uses the same data but also deducts housing costs from disposable income. On this basis, the child poverty rate is 31%.
The measure which takes account of housing costs is the one which appears most commonly in government statements on poverty. It is also the measure needed to make realistic comparisons of poverty between areas. Unless housing costs are deducted in measuring disposable incomes, higher housing benefit payments in areas with higher housing costs will lead to a distorted picture of poverty levels.
Before housing costs are taken into account, the regional distribution of child poverty in Britain is more or less as might be expected from widely recognised patterns of employment and deprivation. The north-east and south-east represent opposite extremes, with poverty rates of 32% and 11% respectively. London emerges as significantly disadvantaged compared with other southern regions, but not in comparison to elsewhere in Britain. However, inner London - which with nearly three million inhabitants is comparable in size to the north-east or Wales - has a higher child poverty rate than any region, at 36%.
A more realistic comparison, taking account of housing costs, shows much greater relative disadvantage in London. Forty-one per cent of children in Greater London are in poverty, compared with 31% nationally and 37% in the north-east. This is largely due to unparalleled levels of poverty in inner London: 53% of children in inner London are living in income poverty.
Poverty rates for pensioners and working-age adults in inner London are also far higher than in other regions. Thirty-six per cent of pensioners are in poverty, compared with 28% in the north-east, and 30% of working age adults, compared with 23% in the north-east.
The hitherto unrecognised scale of income poverty in inner London raises important questions about the factors contributing to poverty in different parts of Britain. The most important single factor behind the unprecedented rate of child poverty in inner London appears to be the proportion of children living in households where nobody works. While employment is not a guarantee that households will not be in poverty - 40% of poor children live in households where at least one person is working - the difference between the child poverty rate in London and the national average reflects the high percentage of children in the capital living in workless households.
This shifts the burden of explanation to London's labour market. While in the 1970s and 1980s unemployment in London was well below the national average, over the past 10 years the capital has had one of the worst unemployment rates in the country. Inner London has the highest unemployment rate of any sub-region in Britain. Economic activity - the proportion of the population which is either in employment or seeking employment - is also among the lowest in the country.
What is of particular concern is the mounting evidence that households with children in London are especially at risk of exclusion from the labour market. Analysis of economic activity by age and gender reveals a striking pattern of low rates of employment in London for women between the ages of 30 and 45, when they are most likely to be looking after young children. Receipt of the working families tax credit - the main benefit available to parents in employment - is by far the lowest in Britain.
Any explanation of the pattern of disadvantage in London needs to take into account the cost of housing and childcare in the capital. While the working families tax credit provides a boost to households with low earnings and meets up to 70% of childcare costs, the financial benefit is reduced in areas with high housing and childcare costs. Using the Department for Work and Pensions tax-benefit model, the mayor's report shows that even with the working families tax credit, a lone parent moving from benefits to a job paying £250 will, after meeting average childcare costs, be only £20 a week better off - the price of a weekly travel card.
· Declan Gaffney is senior research fellow at the School of Public Policy, University College London, and policy adviser to the mayor of London.
