New metric will take account of ‘inescapable costs’ such as childcare, as well as savings

The way poverty is officially measured and defined in the UK is set for a major overhaul under government proposals which would take into account savings, assets and daily living costs when determining whether a household or individual is poor.

The Department for Work and Pensions said it would publish experimental statistics in 2020 based on a measure put forward by the independent cross-party social metrics commission (SMC), with potential for the metric to be adopted as an official statistic.

The metric does not record household income alone but for the first time accounts for a range of “inescapable costs” that reduce people’s spending power, and the positive impact of people’s liquid assets on alleviating immediate poverty.

Philip Alston, the UN’s rapporteur on extreme poverty and human rights, said last November that the UK government had inflicted “great misery” on its people with “punitive, mean-spirited, and often callous” austerity policies.

At the end of a two-week fact-finding mission to the UK, Alston said levels of child poverty were “not just a disgrace, but a social calamity and an economic disaster”, even though the UK is the world’s fifth-largest economy.

Philippa Stroud, the chair of the SMC and chief executive of the Legatum Institute, said: “I am delighted that the government is taking poverty measurement seriously. Without effective measures of poverty, we cannot hope to reduce the number of people who experience it or improve the lives of people who live in poverty.

“For too long, poverty measurement has been treated like a political football. This has allowed political and policy debate on poverty to focus on whether and how we should measure poverty, rather than the action needed to drive better outcomes for the most disadvantaged in our society.”

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Under the measure, the number of people living in poverty is about 14.2 million, broadly similar to the old figure using only average income, but the type of households included changes radically.

Around 2.7 million people are no longer considered poor, mostly pensioners, while 2.6 million people are classed as living in poverty who were not previously – largely families with children and especially households with a disabled child or adult, whose living costs are much higher.

The inescapable costs include rent or mortgage payments, childcare and the extra costs of disability. Liquid assets include savings, stocks and shares. It also includes measures of poverty depth, poverty persistence and a range of lived experience indicators.

The SMC said using its measure, around 8.4 million working-age adults, 4.5 million children and 1.4 million pension-age adults were living in poverty.

Over half of those in poverty also live in persistent poverty. This means that more than one in 10 (7.7 million) of the UK population are in poverty and have been in poverty for at least two of the previous three years.

Nearly half, 48.3%, of the people living in poverty are in families with a disabled person (6.9 million people).

Far fewer pensioners are living in poverty than previously thought, according to the SMC, with a significant fall in pensioner poverty over the last 15 years. Rates have fallen to one in 10, a drop from 17% of the total population in poverty in 2001 to 11% in 2017. There are, however some pensioner groups still experiencing high levels of poverty. For example, the poverty rate for pensioners who do not own their own home is 34.2%.