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Household spending in Britain: what can it teach us about poverty?

Mike Brewer, Alissa Goodman and Andrew Leicester
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Much of the recent policy debate surrounding poverty in Britain focuses on income as a measure of living standards. In this report we consider one alternative to income for measuring poverty that has been largely overlooked in the mainstream poverty debate in the UK: namely household expenditure.

Economic theory suggests that household expenditure is an important measure of financial well-being. Using 30 years of data from household surveys, this report:

  • shows the trends in poverty in Britain since the 1970s when household expenditure is used as a measure of financial well-being, rather than household income;
  • investigates how using spending, rather than income, as a measure of well-being alters our view of who is poor;
  • examines the spending levels of the lowest-income households;
  • analyses whether low-income pensioners' spending on basic and non-basic items increased as a result of the large increases in entitlements to means-tested benefits since 1999.

The research will be of interest to civil servant policy-makers, academics and researchers working on poverty issues, and other groups with an interest in anti-poverty policies.

Mike Brewer and Alissa Goodman are Programme Directors, and Andrew Leicester is a senior research economist, all at the Institute for Fiscal Studies, UK.

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Observation
Last week ministers made changes to the Government's child poverty targets, suggesting that it would be enough to cut the proportion of children in poverty on the most familiar definition to 10% rather than the 5% they have so far aspired to.
Press release
When household spending, rather than income, is used to measure living standards, relative poverty in Britain has risen, rather than fallen, since 1997.