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Living on the Edge - understanding the poverty threshold

The Campaign To End Child Poverty recently highlighted the fact that 27.58% of children in Torfaen are living in poverty. Our neighbours fare much the same, with 30.23% in Blaenau Gwent and 28.68% in Newport. Those are some shocking statistics, but what do they actually mean?

In the UK, as in many European countries, poverty is officially defined as living on less than 60% of the average household income after tax. The typical UK family of two parents + two children now earns £31,000. That makes the poverty threshold for 2015 about £18,600. (Or c. £16,000 for two parents + one child, c. £14,200 for one parent + two children, and c. £11,500 for one parent + one child.)

Using this definition the figure for children living in poverty in Torfaen is actually 17.45%.


To illustrate how it all works I decided I would use our household income as an example. My hatred of maths soon made me regret the decision, but I stubbornly stuck to the plan -

Our main income is my wage, £13,175 before tax. (The IRPW - Independent Remuneration Panel for Wales - basic rate is actually now £13,868 but the Torfaen Labour group, like many other councillors, chose to turn down the increase. Yeah, it was pretty painful...) After tax it's c. £12,050 - I used THIS tax calculator.

Then we have:
Child Benefit - £1,076.40 (£20.70 x 52) [not taxable]
Child Tax Credit - £2,780 [not taxable]
Carer's Allowance - £3,229.20 (£62.10 x 52) [not taxed]
JSA [after Carer's Allowance deductions] - £2,371.20 (£45.60 x 52) [not taxed]

That gives us a household income of £22,631.80 before tax, or £21,506.80 after tax. By this measure we're doing pretty well!


But, there is another way of calculating poverty which is preferred by groups like the Campaign to End Child Poverty, because it gives a more accurate picture of spendable income. This is income after housing costs, and it's this method which gives the 27.58% figure for Torfaen.

Our housing costs us £6,000 (£500 x 12), which gives us AHC income of £16,631.80 before tax or £15,506.80 after tax, putting us (and, by association, Marianna) under the poverty threshold. I was a bit surprised to be honest as I thought we'd be over, but I probably hadn't been taking tax into consideration.

Still, what I hope this shows is the relatively wide variance between the two methods. In terms of my own example, in AHC poverty there's not much leeway, but we're okay so long as we budget properly. BHC poverty is a more serious problem - we spent some time there and it was nigh impossible to cover the basics, let alone fancy luxuries like bus fares and the TV licence. Nobody really wants to be in either, obviously, but it is useful to bear the distinction in mind when figures are being bandied about because the two are quite different.


Map of child poverty in the UK using the AHC - After Housing Costs - figures.





Comments

  1. This is really interesting as a fellow Torfaener (waves) this also means we are under the poverty threshold.I wouldn't say we struggle on a day to day basis but we do find it hard on occasion.With 3 children we both have a part time job so we can split the childcare and we can't really see a way of earning anymore until the children are older.Thanks for sharing x #picknmix

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    1. :D *waves back!* I always find the methodology behind statistics really interesting - probably because I need to get out more - but the gap is pretty huge when I think of how we are now vs. how we were when we were 'really' under the threshold. I'm hoping the other half is going to find something over Christmas at least. More for my sanity than the money, you would think he was the first dad to be at home with the baby ever sometimes!

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  2. An interesting read, thank you for sharing. x

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  3. Very interesting to read this, I never would think us in poverty but by the maths we would be too, well the children. It'll be interesting to see what happens to us when I start work we both have a theory we'll be worse off sadly! #picknmix

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    1. Me too - I thought I'd write this up and show we were fairly close to the second one, not firmly in it.

      It's the worst when that happens. I always think of my parents when I was growing up; my dad was disabled and we were getting whatever they called housing benefit then, so my mum was stuck either working about 8 hours a week or losing that. The problem was she had really decent employers who kept giving pay rises - which were all immediately deducted by the DWP! :)

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  4. The whole tax credits system drives me mad, they randomly give you extra then say you owe them that exact amount! Bizarre set up. I'm pretty sure plenty of Cornwall would be on the poverty line as the wages down here are meant to be some of the lowest in the country. Thanks for linking up to #Picknmix
    Stevie x

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  5. The whole tax credits system drives me mad, they randomly give you extra then say you owe them that exact amount! Bizarre set up. I'm pretty sure plenty of Cornwall would be on the poverty line as the wages down here are meant to be some of the lowest in the country. Thanks for linking up to #Picknmix
    Stevie x

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    1. It's all so needlessly confusing and, as my dad always says, what they giveth with one hand - they taketh with the other! :)

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  6. This is really interesting. I have to say that anything financial boggles my brain - so I am very lucky to have Ross who understands it all! And helps me keep my budget in check. #TheTruthAbout

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    1. If I left it to Anthony I think we'd be bankrupt! ;)

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  7. It is very interesting - I live in the US and for a few years (when my husband was in grad school and I was at home with a couple young kids) we were well under the federal poverty limit. We didn't have anything extra, but we had enough to cover our basic needs and got along.
    #thetruthabout

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    1. It's why I understand where they're coming from with using the after housing costs figure - so much depends on the cost of your housing and essential bills. If you can't cover your rent it's just a slippery slope really. x

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  8. I always feel fascinated by how statistics are calculated too - ever since I took my journalism course where we were shown that we could make statistics prove our point either way. Statistics aside the level of poverty is quite depressing really isn't it? I think many of us hover about in the middle ground not far from the shadow line between the two worlds. Thanks for linking up to #thetruthabout again Jess X

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    1. It's so interesting how something which seems obvious and straightforward is anything but. The methodology, how they're used - and how they're understood all make such a big impact! x

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