Accredited official statistics

Households Below Average Income: an analysis of the UK income distribution: FYE 1995 to FYE 2022

Updated 24 August 2023

The Households Below Average Income (HBAI) report presents information on UK living standards based on household income measures for financial year ending (FYE) 2022. Estimates are provided for average incomes, income inequality, and for the number and percentage of people living in low-income households. The statistics are the UK’s official source of poverty estimates and, with a larger sample size, are the main source on household and individual incomes.

The HBAI statistics are commonly referred to as ‘poverty statistics’ which show the number or percentage of people living in poverty. This publication uses terms such as ‘income statistics’ and ‘people living in low-income households’ to describe more precisely what the data reflects. Although low income is a significant aspect of poverty, there are other aspects of poverty too. This publication additionally includes measures of ‘material deprivation’, which provide an indication of peoples’ ability to access or afford a range of everyday goods and services. Statistics are also included on household food security, which measure the percentage of households considered to have access to sufficient, varied food to facilitate an active and healthy lifestyle.

In this report, comparisons between years are generally made using percentages rounded to the nearest percentage point for each year. Changes are not statistically significant unless marked with an asterisk.

Impact of the coronavirus (COVID-19) pandemic on these statistics

As with FYE 2021, collection of the FYE 2022 Family Resources Survey (FRS) data was affected by the coronavirus (COVID-19) pandemic. Although government restrictions introduced in response to the pandemic were significantly eased over the course of the survey year, the change in survey mode from established face-to-face interviews to telephone interviews in response to the pandemic persisted for the duration of the survey year 2021 to 2022. This affected both the size and composition of the achieved sample.

Last year, we did as much as we could to address biases and make the weighted FRS sample as representative as possible. However, we were unable to validate several of the HBAI statistics we produce for subnational populations (for example, by region, ethnic grouping, and economic status). We took the decision to issue only a limited number of tables covering our headline estimates. This year, we have again undertaken extensive analysis of our low-income measures across several dimensions and are content that the level of bias in the data resulting from the mode change is lower than FYE 2021 and is having less influence on the statistics. We have therefore returned to publishing the full suite of our statistics both in our supplementary tables and via the Stat Xplore tool. However, there remain areas where caution is advised when making comparisons with previous years and when interpreting larger changes. We invite users of these statistics to read the technical report accompanying this release for more detail. This should be consulted when drawing conclusions on the data and the trends.

Following consideration, we have maintained our decision to not release the FYE 2021 data publicly. The HBAI dataset underpinning the headline estimates remains available for expert users and researchers in the UK Data Service, and we recommend consulting the FYE 2021 technical report for guidance on use and interpretation of sub-national estimates for that year.

In this report, where FYE 2021 estimates are not published, we make a direct comparison of change compared to FYE 2020 and would advise users to do likewise. Where FYE 2021 statistics are available, such as for our headline measures, we make a direct comparison between FYE 2022 and FYE 2021, while also drawing on changes since the pre-pandemic period and longer-term trends in the measures.

1. Main stories

The statistics presented in this release show that:

• there was an increase in real terms median household income between FYE 2021 and FYE 2022. The increase was 0.5% before housing costs (BHC) and 1.6% after housing costs (AHC)

• the growth in household income (BHC) varied across the income distribution

• the household incomes of individuals in the bottom quarter of the income distribution showed real terms reductions

• those between the 25th and 75th percentiles recorded increases in real incomes

• there was a mixed picture for the highest income quintile

• income inequality (measured by the Gini Coefficient) was unchanged since FYE 2021, both before and after housing costs. The level has remained broadly stable since FYE 2011

• the percentage of individuals in relative low income increased both before and after housing costs in FYE 2022. Increases for children and working-age adults were lower than pensioners, with rises of 1 or 2 percentage points. For pensioners, the increases were 2 and 3 percentage points BHC and AHC respectively

• the percentage of individuals in absolute low income was unchanged for all groups and measures except for pensioners

• only a single recorded change in our headline low-income measures was statistically significant. Compared to FYE 2020, there was a statistically significant reduction in the percentage of individuals living in disabled households in relative low income, BHC. A comparison with FYE 2021 was not possible for this group due to data quality issues arising from changes to FRS fieldwork during the coronavirus (COVID-19) pandemic

• An increase in material deprivation was recorded for pensioners, and in the measures of combined low income and material deprivation for both children and working-age adults. However, the continuation of coronavirus (COVID-19) pandemic restrictions into FYE 2022 affected the measurement of material deprivation, as it did in FYE 2021. Statistics for both years are not directly comparable with the pre-pandemic period.

Although the change to the mode of survey data collection still affected Family Resources Survey (FRS) sample composition in FYE 2022, it has had less influence on the low-income statistics than in FYE 2021.

Median Household Income - Increase to £565 (BHC) and £500 (AHC) in FYE 2022

Figure 1: Median Weekly Household Income, FYE 2003 to FYE 2022

Between FYE 2021 and FYE 2022, average (median) household net equivalised disposable income increased in real terms (i.e. taking account of inflation), estimated at £565 (BHC) and £500 (AHC) respectively. The increase was greater for incomes after housing costs.

Income Inequality – Gini coefficient stable BHC and AHC

Figure 2: Income Inequality, FYE 2003 to FYE 2022

The Gini coefficient is an international standard technical measure of how incomes are distributed across all individuals. It ranges from 0% (when everyone has identical incomes) to 100% (when all income goes to only 1 person). In FYE 2022, the Gini coefficient remained unchanged for both BHC and AHC income, at 34% (BHC) and 38% (AHC) respectively. The trend in the measure since FYE 2011 is broadly stable.

Low Income Measures – relative measures increased, absolute measures were unchanged.

Figure 3: Percentage of all individuals in relative low income, FYE 2003 to FYE 2022

The percentage of individuals in relative low income has increased both BHC and AHC, with both measures rising by 1 percentage point this year (BHC increased from 16% to 17% and AHC increased from 20% to 22%). The BHC measure remains 1 percentage point below the last level recorded prior to the coronavirus (COVID-19) pandemic.

Figure 4: Percentage of all individuals in absolute low income, FYE 2003 to FYE 2022

Absolute low income BHC and AHC measures are unchanged since FYE 2021 at 13% and 17% respectively. They are both 1 percentage point below the last level recorded prior to the pandemic, in FYE 2020.

It should be noted that none of the changes in these measures were statistically significant.

2. What you need to know

The Households Below Average Income (HBAI) statistics are the UK’s official source of poverty estimates and are the main source on household and individual incomes. Users include central government, the devolved governments, local authorities, academics, think tanks, journalists and the voluntary sector. It meets DWP’s statutory obligation to publish a measure of relative and absolute low income, and combined low income and material deprivation for children under section 4 of the Welfare Reform and Work Act 2016.

Income measures

HBAI estimates incorporate widely used international standard measures of low income and inequality. The primary measure used in HBAI is disposable household income adjusted for household composition (a process called equivalisation), estimated on both a before and after housing costs basis (BHC and AHC). Our main income measure includes contributions from earnings, state support, pensions, and investment income among others, and is net of tax. See section 14 of this report for an exhaustive list.

HBAI uses this net equivalised disposable household income as a proxy for living standards.

A household is said to be in relative low income if their net equivalised disposable household income is below a threshold set at 60% of median income, while they are in absolute low income if their net equivalised disposable household income is below 60% of the FYE 2011 median income adjusted for inflation. We also publish measures using thresholds at 50% and 70% below the median.

In line with international best practice, the income measures used in HBAI are subject to several statistical adjustments and, as such, are not always directly relatable to income amounts as they might be understood by people on a day-to-day basis. These adjustments, however, allow us to compare measures over time and across households of different sizes and compositions on a consistent basis.

HBAI uses variants of CPI inflation when estimating how incomes are changing in real terms over time. For further information, see the HBAI Quality and Methodology Information Report.

Survey data

Estimates are based on the Family Resources Survey (FRS), which prior to the coronavirus (COVID-19) pandemic conducted face-to-face interviews with over 19,000 UK households. However, due to the national lockdown and restrictions introduced during the pandemic, interviewing has been conducted by telephone since April 2020. This has resulted in smaller achieved sample sizes for the last 2 survey years.

The data in this report is from interviews conducted between April 2021 and March 2022. The achieved sample was over 16,000 households compared with around 10,000 households during FYE 2021. This year’s sample is not only larger but also more representative, with the profile of respondents closer to those who responded to the survey before the pandemic. However, in common with other large-scale surveys across government where survey mode was changed in response to the pandemic, the FRS responders remained more likely to be older, owner-occupiers and better educated compared with previous years. To address additional biases in the raw sample, we retained the grossing controls introduced in FYE 2021 to weight the FRS sample by level of educational attainment, alongside the longstanding FRS and HBAI grossing regimes which bring age and tenure profiles into line with the UK population.

The grossing regime in FYE 2022 has also been adapted to control for the differential level of response seen through the year. We applied a biannual grossing control for Great Britain to balance the number of households across the 2 halves of the survey year. This was necessary due to the pre-planned introduction of FRS sample boost in England and Wales in October 2021. In Northern Ireland, changes to the approach of contacting respondents in July 2021 meant that the achieved sample increased markedly partway through the year. This is not normally a feature of the FRS achieved sample, with response normally spread relatively equally over each twelve-month run of fieldwork. We introduced a quarterly household grossing control to balance their sample across the year. For further information please see our technical report detailing the impact of the coronavirus (COVID-19) pandemic on the FYE 2022 HBAI statistics, or our quality and methodology information report for details on the changes to grossing.

Use of survey data means results in this report are subject to uncertainty which can affect how changes should be interpreted, especially in the short term. Latest estimates should be considered alongside long-term patterns. The FRS uses a clustered sample design to produce robust regional estimates. Therefore, the FRS is not suitable for analysis below regional level.

Statistical significance is a technical concept that says whether a reported change is likely to have arisen only by chance due to variations in the sampling. We calculate 95% confidence intervals around estimates in HBAI which sets a standard that, where any change is reported as statistically significant, there is less than a 1 in 20 chance that the reported difference is due to sampling variation and there is no real underlying change. Changes are not statistically significant unless highlighted by an asterisk (*). Due to the reduced sample size in FYE 2022, confidence intervals around estimates for FYE 2022 are wider than in years up to and including FYE 2020. In general, latest estimates should be considered alongside long-term patterns.

The reported change between 2 years in the supporting tables and charts may not equal the difference between the rounded numbers for those years. This is because we round at the final point in any calculation.

Additional tables and data

A wide range of ODS supported tables are available alongside this release, breaking down the results presented in this report for different demographic characteristics. This includes breakdowns of the statistics by region, ethnic group, family type, and economic status. All tables can be downloaded via the HBAI homepage (see Directory of Tables link on this webpage to locate tables referenced in the following pages and to generally find the desired tables). Results are available for most series back to FYE 1995.

HBAI data is also available between FYE 1995 and FYE 2022 on the Stat-Xplore online tool. You can use Stat-Xplore to recreate measures in our static tables and create bespoke HBAI analysis.

The source data behind these statistics is available for download and further analysis via the UK Data Service.

Following consideration, we have maintained our decision to not release the FYE 2021 data publicly, and it is excluded from both our tables and from Stat-Xplore. The HBAI dataset underpinning the headline estimates for FYE 2021 remains available for expert users and researchers in the UK Data Service, and we recommend consulting the FYE 2021 technical report for more guidance on use and interpretation of sub-national estimates from that year.

New for this publication

New statistics on food bank usage for individuals living in low-income households

A new series of questions was added to the FRS for FYE 2022 on the topic of food bank usage. Our household food security tables have been broadened to include statistics on food bank usage among individuals living in low-income households for the first time. The statistics report the number and percentage of individuals living in low-income households who have used a food bank i) within the last 12 months of, and ii) within 30 days of, their Family Resources Survey interview.

Food bank usage measures are reported separately for children, working-age adults, and pensioners, and cover different thresholds of both relative and absolute low income (at below 50/60/70% of the appropriate median income). The measures are also available on a ‘before’ and ‘after’ housing costs basis (BHC and AHC).

Food bank usage questions are asked of the person in the household who knows the most about food purchasing and preparation. This means that the questions do not directly ask about the food bank usage needs of children, and it cannot be determined which individual or individuals the food parcels are for. Food bank usage in the FRS refers only to visits to a food bank when emergency food supplies (food parcels) were obtained. This excludes visits to the food bank made only for other support (e.g. financial advice or mental health support).

Please see tables 9.1 to 9.8, plus the FRS Background Information and Methodology Report for more information.

Combined low income and material deprivation statistics for working-age adults

In March 2022, experimental statistics were published on the number and percentage of working-age adults living in households with combined absolute low income (below 50/60/70% thresholds of the median) and in material deprivation. This year, the statistics are now included as part of the suite of measures published in HBAI as National Statistics. The statistics have also been extended to include relative low-income measures. Several tables provide more detail on the composition of working-age adults who are in combined low income and material deprivation. This ensures the suite of available statistics and outputs are consistent with those published for children. See tables 5.7tr and 5.8tr for headline data on each of the measures and 5.4db to 5.9db for information on composition.

In section 8 of this report, we have provided a new chart and commentary on combined working-age relative low income and material deprivation (using the below 70% of annual median income threshold). This aligns with our reporting of the same measure for children.

For more information on the methodology underpinning these measures, please see the HBAI Quality and Methodology Information Report.

Three-year rolling averages

The HBAI publication estimates of the number and proportion of people in low-income households for each UK region and ethnic group using a three-year rolling average. This is an established method used to smooth out observed variation in single year estimates for these groups, which are subject to smaller sample sizes.

Following our decision to not publish breakdowns of the FYE 2021 estimates, all three-year averages calculated and published for any period including FYE 2021 will be based on 2 data points only.

Other methodological changes due to the coronavirus (COVID-19) pandemic

To address additional biases in the raw sample, we retained the inclusion of a new grossing control introduced in FYE 2021 to weight the sample by level of educational attainment. This boosted numbers of working-age adults with education levels below degree level.

Two major new sources of income were introduced in FYE 2021 to support jobs and businesses affected by the coronavirus (COVID-19) pandemic – the Coronavirus Job Retention Scheme (CJRS) for employees, and Self Employment Income Support Scheme (SEISS) grants. Levels of support from the government decreased during the second quarter of the survey year, and both schemes ended on 30 September 2021.

Both income sources are taken into account in the FYE 2022 estimates, although for SEISS this is included in self-employed income based on reported profit data from previous tax years, rather than directly using amounts of SEISS grants received.

Information on changes to our grossing methodology and how income sources introduced during the pandemic are treated in our estimates can be found in the HBAI Quality and Methodology Information Report.

Inclusion of income from dividends

In FYE 2022, a question on the value of director’s dividends received within 12 months of interview was added to the Family Resources Survey. For the first time this income is included in our published estimates. Receipt of a director’s dividend was reported by just under 350 individuals in the survey. The income is treated as income from either employment or self-employment.

More information on this addition can be found in the FRS background Information and Methodology note.

3. The Overall Income Distribution

Distribution of UK household income is skewed with a long right-hand tail of higher incomes.

Figure 5: Income distribution (BHC) for the total population, FYE 2022

See Table 2.1 BHC for full data. AHC data is available in Table 2.1 AHC

Interpretation

Deciles divide the population, when ranked by equivalised household income, into ten equal sized groups, while quintiles divide the population into five groups. The shape of the overall income distribution evolves slowly over time, with relatively small year-on-year changes.

The presence of large numbers of individuals with relatively high incomes results in a skewed or non-symmetric distribution (decile 10 is removed from Figure 5 due to the long right-hand tail of the distribution). As a result, the median income is the standard measure of average income as changes in the mean can be driven by extreme values. The median represents the income of the individual in the middle of the distribution.

There are a large number of individuals with household incomes around the 60% of median income mark. Those falling below this line are considered to have relative low income. As a result of the decile clustering around this income level, relatively small movements in the overall distribution can sometimes lead to sizeable movements in this low-income measure.

Main Findings

Figure 5 shows that in FYE 2022, the average (median) real terms household income before housing costs (BHC) was £565 per week (around £29,500 per year). This represented an increase of 0.5%, or £3 per week, compared with FYE 2021. Average income after housing costs (AHC) also increased to £500 per week (around £26,000 per year). This represented an increase of 1.6%, or £8 per week.

After the introduction of the survey series in FYE 1995, real terms income BHC increased steadily until FYE 2010 (see Figure 1). Following falls in FYE 2011 and FYE 2012 related to the recession, there were rises until FYE 2017 and real incomes peaked in the year prior to the coronavirus (COVID-19) pandemic (FYE 2020). In FYE 2022, median incomes BHC were 1.2% lower in real terms than the FYE 2020 peak, or £7 a week.

For average incomes after housing costs (AHC), real terms median incomes returned to levels reported in FYE 2020. This reflects lower growth in housing costs compared to incomes over the period, influenced by factors such as lower historical mortgage interest rates, and the reinstatement of Local Housing Allowance rates to the 30th percentile of private rented sector market rents in 2020.

See Table 2.1ts Decile for full data.

During FYE 2022, the UK economy and labour market were recovering from the coronavirus (COVID-19) pandemic and the restrictions introduced in response to it. Varying limits on social mixing, indoor dining and entertainment, and travel, persisted in all UK nations for the first quarter of the survey year. On 19 July 2021, most legal restrictions on social contact were removed in England and final closed sectors of the economy reopened. Support from the government in the form of Furlough and the Self-Employment Income Support Scheme (SEISS) decreased during the second quarter of the survey year, and both schemes ended on 30 September 2021.

Over the course of FYE 2022, there were improvements in the employment rate compared to FYE 2021, although it remained below levels measured in FYE 2020. There was growth of 6.6% in the official measure of weekly average earnings, which was 2.6 percentage points above annual CPI inflation of 4%. These factors boosted the household incomes of those in employment and is the main driver of the slight growth in the FYE 2022 BHC median.

The incomes for those at and below 60% of median income are most affected by annual uprating of state benefits received and policy changes affecting benefits. In April 2021, all working-age benefits increased by 0.5% and the Basic and New State Pension by 2.5%, which were both below inflation and earnings growth. In October 2021, the temporary additional £20 per week uplift introduced during the pandemic for new and existing Universal Credit (UC) claimants was removed. However, HBAI has recorded increases in benefit income for several reasons, an increase in numbers claiming disability benefits, the number of children receiving Free School Meals recovering to pre-pandemic levels, and in December 2021, the UC taper rate reducing from 63% to 55%, and the UC Work Allowance increasing. Overall, the factors leading to increases and decreases to benefit income tended to cancel each other out leaving little change in overall benefit income received between FYE 2021 and FYE 2022. This means the HBAI statistics show there was little change to overall income in real terms for those at or below 60% of median income.

See Table 2.1tr for full data on FYE 2022 economic indicators.

4. Income Inequality

Income inequality was unchanged between FYE 2021 and FYE 2022, with the trend remaining broadly flat since FYE 2011.

Figure 2 shows that the BHC and AHC Gini coefficients both remained unchanged in FYE 2022, at 34% BHC and 38% AHC respectively.

Figure 6: The 90:10 ratio measure of inequality, FYE 2003 to FYE 2022

Interpretation

Another measure of inequality is the 90:10 ratio. Percentiles divide the population, when ranked by household income, into 100 equal sized groups. The 90:10 ratio is the income at the 90th percentile divided by the income at the 10th percentile. It is equivalent to the average (median) income of the top 20% (quintile 5) divided by the average income of the bottom 20% (quintile 1). The higher the number, the greater the gap between those with high incomes and those with low incomes.

Main Findings

As with the Gini Coefficient, the 90:10 ratio both remained unchanged in FYE 2022, at 3.9 BHC and 4.9 AHC respectively.

See Table 2.1ts and 2.2ts for full data.

Figure 7: Change in real terms income BHC by percentile, FYE 2021 to FYE 2022

Interpretation

Looking at changes to incomes by percentile between FYE 2021 and FYE 2022 allows assessment of how each section of the income distribution has changed during the period of recovery from the coronavirus (COVID-19) pandemic.

Please note that at all levels of the distribution there is greater uncertainty around the estimates compared to before the pandemic (due to smaller FRS sample size). None of the measured changes to real incomes were statistically significant.

Main Findings

This year, the incomes for those in the bottom 25% of the distribution recorded negative real terms BHC income growth. Those between the 25th and 75th percentiles recorded an increase in real terms BHC incomes, with a more mixed picture in the highest income quintile.

The degree of income change across all points of the income distribution was modest, with most percentiles showing change of between +1.5% and -1.5%. As a similar pattern of growth was measured for the upper and lower deciles, this helps explain the unchanged 90:10 ratio compared to last year.

The distribution of the change in incomes AHC was very similar for BHC, but there was higher growth across the board. The incomes for those in the bottom 25% of the income distribution were broadly flat in real terms, and growth was closer to 2% for those between the 25th and 65th percentiles.

Full details are in the publication charts file.

Figure 8: Weekly net equivalised disposable household income BHC by percentile FYE 2022

Interpretation

Percentiles divide the population, when ranked by household income, into 100 equal sized groups. The chart indicates the amount of weekly net equivalised disposable household income an individual requires to sit at each percentile of the UK income distribution.

Main Findings

Income BHC at the 10th percentile is around half of the median (50th percentile) implying that around 10% of the population have less than half of the median household income BHC.

Incomes increase sharply past the 90th percentile BHC. In FYE 2022, income at the 90th percentile was about double that of the median, whilst the top 3% of the population (97th percentile and above) have around three times the income of the median individual.

Full details are in the publication charts file.

Annual net equivalent disposable household income BHC by household type at different percentiles of the FYE 2022 UK distribution

Percentile	Single individual	Couple with no children	Couple with two children under 14
10th	£9,800	£14,600	£20,500
50th	£19,700	£29,500	£41,300
90th	£38,400	£57,400	£80,300
97th	£59,700	£89,100	£124,700

Interpretation

To analyse incomes by percentile, the population is ordered according to their net equivalised disposable household income. The annual income required to be at a given point in the distribution is different for different household types. See section 12 for more information on equivalisation in HBAI.

Main Findings

Larger families require a higher level of household income to achieve similar living standards (based on a household income measure) to smaller families.

To lie in the top half of the income distribution in FYE 2022, a single individual needed an annual household income over £19,700, compared to a couple with 2 young children who required a combined annual household income over £41,300.

A single individual with an annual household income of over £38,400 would sit above the 90th percentile in the distribution in FYE 2022, implying their income exceeded that of 90% of the UK population. A couple with 2 children receiving the same level of combined annual household income would lie just below the middle of the income distribution and be considered to have slightly less than average (median) household income.

5. Sources of income

The majority of household income in the UK comes from either earnings or state support. Two main new sources of income were introduced in FYE 2021 to support jobs and businesses affected by the coronavirus (COVID-19) pandemic – the Coronavirus Job Retention Scheme (CJRS) for employees, and Self-Employment Income Support Scheme (SEISS) grants. This support continued to be available until 30 September 2021. Income from these sources is categorised as earnings in the charts below. Please see the HBAI Quality and Methodology Information Report for more information on how these income sources are treated in the HBAI estimates.

There was more variability in the estimates of income sources by percentile in this year’s estimates, reflecting the smaller achieved sample sizes compared to periods before the pandemic. We have therefore chosen to present our analysis by income decile, rather than by percentile, in order to draw meaningful conclusions.

Figure 9: Income sources as a percentage of gross income by decile, FYE 2022

Percentiles 1-3 and 98-100 are excluded because of large statistical uncertainty. This means deciles 1 and 10 are not true deciles (covering percentiles 4-10 and 91-97 respectively). Percentages may not always sum to 100% due to rounding.

Interpretation

The charts show the different sources of gross income by decile, ranking the population by income and dividing into 10 equal-sized groups (deciles). Income components are all considered before tax (gross). This is a different definition of income from that used elsewhere in the HBAI report.

Main Findings

Higher income households receive a larger proportion of their income from earnings, a trend which builds moving up the income distribution. Lower income households receive more of their income from state support. In FYE 2022:

• earnings accounted for around a third of gross income for individuals in the 1st decile compared to around 80% for individuals in the 10th decile

• around 70% of the UK population (those in the third income decile and above) received a higher proportion of their household income from earnings than from state support

• those with household incomes around and below 60% of the median (deciles 1-3) saw a fall in the proportion of their household income from earnings compared to FYE 2021, with increases in the proportion for decile 5 and above. The falls were partially offset by an increase in the proportion of income received from state support in the bottom 2 deciles.

Figure 10: Sources of income for households containing working-age adults, FYE 2022

• across all deciles, earnings is the main source of gross income for households containing only working-age adults. For example, in the lowest decile, around 45% of income is from earnings, compared to 40% from state support. For the highest decile, almost all income is from earnings

Figure 11: Sources of income for households containing children, FYE 2022

• households containing children have similar income sources as households containing working-age adults only, but receipt of state support generally makes up a larger proportion of income due to greater eligibility for state support for this group (including Universal Credit, child benefit and tax credits)

Figure 12: Sources of income for households containing pensioners and no children, FYE 2022

• in the bottom half of the income distribution (deciles 5 and below), households containing pensioners and no children receive at least 85% of their income from state support (particularly the state pension) and occupational pensions combined.

• There is a slight step change from decile 6 onwards, and a higher proportion of income consists of earnings and investments, steadily increasing across deciles 6 to 9 and accounting for a third of all income for those in decile 10.

Full details are in the publication charts file.

6. Low-income indicators

The percentage of the overall population in relative low income increased in the latest year, both before and after housing costs (BHC and AHC). These changes were not statistically significant. The percentage of individuals in absolute low income was unchanged.

Relative Low Income

Figure 13: Percentage of individuals in relative low income, FYE 2003 to FYE 2022

Interpretation

The relative low income threshold is set as a proportion of the UK average (median) net equivalised household income and moves each year as average income changes. It is used to measure the number and proportion of individuals who have income below this threshold. Estimates are available for below 50%, 60% and 70% of the median.

The percentage of individuals in relative low income depends on changes in median incomes, and how changes in the income of those below the low income threshold compare to changes in the median.

Main Findings

This year, the percentage of the population in low income has increased because average (median) incomes have risen at a faster rate than those who are in low income.

Our central estimates for both relative measures, BHC and AHC, have increased by 1 percentage point between FYE 2021 and FYE 2022. The percentage of individuals in relative low income BHC increased to 17% between FYE 2021 and FYE 2022, and relative low income AHC increased to 22%. While the AHC measure has returned to levels measured in the year prior to the pandemic, the BHC measure is 1 percentage point lower. Prior to the pandemic, there was an upward trend in the percentage of individuals in relative low income.

These changes were not statistically significant.

Absolute Low Income

Figure 14: Percentage of individuals in absolute low income, FYE 2003 to FYE 2022

Interpretation

Absolute low income takes the 60% of median income threshold from FYE 2011 and then fixes this in real terms (i.e. the line moves with inflation). This is designed to assess how low incomes are moving forward in time with reference to inflation. It measures the number and proportion of individuals who have incomes below this threshold. We also publish measures using thresholds at 50% or 70% below the median.

The percentage of individuals in absolute low income will decrease if individuals with lower incomes see their incomes rise by more than inflation.

Main Findings

This year our central estimates for both absolute measures, BHC and AHC, are unchanged since FYE 2021. The percentage of individuals in absolute low income BHC was 13% in FYE 2022 while the percentage AHC was 17%. In recent years, there has been a downward trend in the proportion of individuals in absolute low income.

Neither change was statistically significant.

See Tables 3.1tr and 3.2tr for full data.

Household Food Security

This publication includes statistics on household food security for individuals living in low-income households. More information on household food security in the general population can be found in the FRS publication.

Interpretation

To measure household food security, questions are asked of the person in the household who knows the most about buying and preparing food. In common with the rest of the FRS, the focus is on the period of 30 days leading up to interview. The questions are comparable to those used by other public bodies in the UK, and also internationally. From the questions, a ten-point household score is generated, and the household is given a food security status:

• High food security (score=0): The household has no problem, or anxiety about, consistently accessing adequate food

• Marginal food security (score= 1 or 2): The household had problems at times, or anxiety about, accessing adequate food, but the quality, variety, and quantity of their food intake were not substantially reduced

• Low food security (score = 3 to 5): The household reduced the quality, variety, and desirability of their diets, but the quantity of food intake and normal eating patterns were not substantially disrupted

• Very low food security (score = 6 to 10): At times during the last 30 days, eating patterns of 1 or more household members were disrupted and food intake reduced because the household lacked money and other resources for food.

Households with high or marginal food security are “food secure”. Food secure households are considered to have sufficient, varied food to facilitate an active and healthy lifestyle. Households with low or very low food security are “food insecure”. Food insecure households have a risk of, or lack of access to, sufficient, varied food. More details are available in the FRS Background Information and Methodology note.

Main Findings

In FYE 2022, 85% of individuals in low income BHC (household income below 60% of the median) lived in a food secure household and 83% AHC. These percentages were the same on a relative and absolute income basis.

This was a decrease of 1 percentage point compared to FYE 2021 BHC (relative) and 2 percentage points (absolute), but an increase of 1 percentage point AHC for both. All measures were higher than the levels recorded in FYE 2020.

There were greater decreases in the percentages of individuals who lived in a household with high food security compared to FYE 2021, decreasing to 73% (from 77%) and 71% (from 73%) for relative and absolute BHC and AHC measures respectively. All measures were higher than the levels recorded in FYE 2020.

Food Bank Usage

In FYE 2022, 8% of individuals in low income BHC (household income below 60% of the median) lived in a household where a food bank had been used within the 12 months prior to their FRS interview. This percentage was the same on a relative or absolute income basis and compares to 3% of all individuals in the UK population.

3% of individuals in relative or absolute low income BHC lived in a household where a food bank had been used in the last month. This compares to 1% of all individuals in the UK population.

Children in low income are more likely to be living in a household where a food bank has been accessed compared with working-age adults and pensioners in low-income households.

See tables 9.1a (relative) to 9.2b (absolute) for full data on Household Food Security and Food Bank usage amongst individuals in low income. This includes measures on a AHC basis.

7. Children in low-income households

Three of the four low-income measures for children included in section 4 of the Welfare Reform and Work Act 2016 form part of the HBAI publication. These are: a 60% threshold relative low-income measure, a 60% threshold absolute low income measure, and a combined 70% threshold low income and material deprivation measure. As with individuals, we report four measures of the percentage of children in low income – based on relative and absolute income, and before and after housing costs (BHC and AHC).

Compared to the overall population, children are more likely to live in low-income households.

See Tables 4.1tr, 4.2tr and 4.5tr for full data.

Relative low income BHC and AHC rose, while absolute low income BHC and AHC remained stable

Relative Low Income

Figure 15: Percentage of children in relative low income, FYE 2003 to FYE 2022

Main Findings

Between FYE 2021 and FYE 2022, relative low income BHC for children increased by 1 percentage point to 20%. The relative AHC measure also increased in FYE 2022 by 2 percentage points to 29%.

Both measures are below the last set of estimates published prior to the coronavirus (COVID-19) pandemic, for FYE 2020. There was a general upward trend in both of the measures in the decade leading up to the pandemic.

Neither of the changes in the measures were statistically significant.

Absolute Low Income

Figure 16: Percentage of children in absolute low income, FYE 2003 to FYE 2022

Main Findings

Both measures of the percentage of children in absolute low income were unchanged between FYE 2021 and FYE 2022. The percentage of children in absolute low income households BHC was 16%, and 23% AHC. Both estimates are lower than FYE 2020, the last period before the pandemic.

In the decade prior to the pandemic, the measures both followed a broad downward trend.

Combined low income and child material deprivation

For FYE 2022, all estimates of material deprivation, including those combined with low income measures, are not comparable with previous years.

Several of the questions asked as part of the measure were affected by government restrictions introduced in response to the coronavirus (COVID-19) pandemic. Although the effect on survey responses was less marked than last year, social restrictions remained in place throughout the first quarter of the survey year and access to some social opportunities remained more limited than pre-pandemic throughout the course of the year. Changes in recorded material deprivation for FYE 2022 may not fully reflect the real change in household circumstances compared to FYE 2021 or the pre-pandemic period. Further details can be found in the technical report which accompanies the release of these statistics.

Figure 17: Percentage of children in combined relative low income and child material deprivation, FYE 2005 to FYE 2022

Figure 18: Percentage of children in combined absolute low income and child material deprivation, FYE 2005 to FYE 2022

Interpretation

For this measure of combined low income and child material deprivation, respondents are asked whether they have access to a list of 21 goods and services. If they can’t afford a given item, this is scored in the material deprivation measure, with items more commonly owned in the population given a higher weighted score. A child is classified as being in combined low income and child material deprivation if they live in a family that has a total score of 25 or more out of 100 and a net equivalised disposable household income BHC below 70% of the median. More details are available in the HBAI Quality and Methodology Information Report.

Main Findings

In FYE 2022, the percentage of children in combined low income and child material deprivation was 11% for relative BHC and 9% for absolute BHC.

We have chosen to emphasise the non-comparability of the estimates for the current year by presenting a discontinuity in the time series chart above. We recommend that the recorded percentage is interpreted alongside the long-term trend in the measures.

Any movements seen in the relative measure in the decade prior to the pandemic were small but slightly downwards. The absolute measure was broadly stable in the years leading up to the pandemic, after a downward trend in the series to FYE 2017.

Household Food Security

In FYE 2022, 79% of children in relative low income BHC (with a household income below 60% of the median) lived in a food secure household, and 81% of children in absolute low income BHC. This was a decrease of 4 and 5 percentage points respectively compared to FYE 2021.

There were also decreases in the proportions of children who lived in a household with high household food security compared to FYE 2021, declining to 63% (from 72%) and 64% (from 74%) for relative and absolute BHC measures respectively. All measures of the household food security of children in low-income households were lower compared to FYE 2021, but higher than in FYE 2020.

Children in low income are less likely to be living in a food secure household compared with working-age adults and pensioners in low-income households.

Food Bank Usage

In FYE 2022, 12% of children in low income BHC (household income below 60% of the median) lived in a household where a food bank had been used within the 12 months prior to their FRS interview. The percentage was the same on both a relative and absolute low income basis. This compares to 6% of all children in the UK population.

4% of children in relative low income BHC lived in a household where a food bank had been used in the last month. The percentage was the same on an absolute low income basis. This compares to 1% of all children in the UK population.

Children are more likely to be living in a low-income household where a food bank has been accessed compared with working-age adults and pensioners in low income households.

See Tables 9.3a to 9.4b for full data and measures of household food security and food bank usage for children in low income. This includes measures on a AHC basis.

8. Working-age adults in low-income households and low income by work status

Working-age adults make up around 60% of the UK population. As such, changes in income for this group can drive overall results more than changes amongst children and pensioners (with each of these groups making up around 20% of the population). Working-age adults also receive a greater proportion of their income from earnings and so the estimates are more sensitive to changes in the labour market.

See Tables 5.1tr, 5.2tr, 5.2ts, 5.7tr, 5.8tr, 5.11ts, and 4.14ts for full data.

Both relative low income measures BHC and AHC increased. Absolute low income measures remained stable.

Figure 19: Percentage of working-age adults in relative low income, FYE 2003 to FYE 2022

Figure 20: Percentage of working-age adults in absolute low income, FYE 2003 to FYE 2022

Main Findings

The percentage of working-age adults in relative low income BHC increased by 1 percentage point from 14% to 15% in FYE 2022. Relative low income AHC increased by 1 percentage point to 20%. Please note that these changes do not match the differences between the levels displayed in the chart due to rounding. None of the changes in the measures were statistically significant.

The relative low income estimates for FYE 2022 are broadly consistent with the stable long-term trends.

The percentage of working-age adults in absolute low income BHC remained unchanged at 12% and absolute low income AHC stayed at 16%. In the years from FYE 2012 to FYE 2020, there was a broadly downward trend in both measures.

Percentage and composition of working-age adults and children in low income by work status

This analysis was not published in FYE 2021 in response to coronavirus (COVID-19) pandemic data quality issues. Figures 21 and 22, which show estimates of low income for working and workless families do not include this data point.

A greater proportion of children in low-income households are in working families. Working families constitute 54% of all working-age adults in low-income households, compared with 67% of children.

Figure 21: Percentage of children in relative low income BHC by family work status, FYE 2003 to FYE 2022

Main Findings

Although more children in low income are in working families, children who are in workless families are more likely to be in low income than those in working families. In FYE 2022, 46% of children in workless families were in low income. Although estimates have been quite variable since FYE 2015, this percentage is comparable with an average of the published estimates since. There was a downward trend in the measure until FYE 2014.

In comparison, 16% of children in working families were in low income in FYE 2022. This estimate is lower than when it was last published, in FYE 2020. Prior to the coronavirus pandemic, there had been an upward trend in the measure since FYE 2015.

Figure 22: Working-age in relative low income BHC by family work status, FYE 2003 to FYE 2022

Main Findings

Like children, working-age adults who are in workless families are more likely to be in low income than those in working families. In FYE 2022, 38% of working-age adults in workless families were in low income. This percentage is comparable with the estimates from FYE 2011 onwards. There was a downward trend in the measure prior to FYE 2011.

In comparison, 10% of working-age adults in working families were in low income in FYE 2022. The trend in this measure has been stable over the timeseries. This year’s estimate is comparable to when it was last published prior to the coronavirus pandemic.

Combined low income and working-age material deprivation

Statistics on combined low income and material deprivation for working-age adults are included in the HBAI report for the first time this year, having been released as experimental statistics for FYE 2021. The statistics have been extended to include relative low-income measures. We are reporting measures based on household income BHC below 70% of the median for consistency with the combined low income and child material deprivation analysis in section 7 for children. Publication of a full set of measures, using other low-income thresholds, can be found in tables 5.7tr and 5.8tr.

As with the measure of child material deprivation, it should be noted that all estimates of working-age material deprivation, including those combined with low-income measures, are not comparable with previous years.

Further details can be found in the technical report which accompanies the release of these statistics.

Figure 23: Percentage of working-age adults in combined relative low income and material deprivation, FYE 2011 to FYE 2022

Figure 24: Percentage of working-age adults in combined absolute low income and material deprivation, FYE 2011 to FYE 2022

Interpretation

For this measure of combined low income and working-age material deprivation, respondents are asked whether they have access to a list of 9 goods and services. If they can’t afford a given item, this is scored in the material deprivation measure, with items more commonly owned in the population given a higher weighted score. A working-age adult is in combined low income and material deprivation if they have a material deprivation score of 25 or more and a household income below the relevant threshold of median income, Before Housing Costs. More detail on the methodology is available in the HBAI Quality and Methodology Information Report.

Main Findings

In FYE 2022, the percentage of working-age adults in combined low income and child material deprivation was 9% for relative BHC and 8% for absolute BHC.

We have chosen to emphasise the non-comparability of the estimates for the current year by presenting a discontinuity in the time series chart above. We recommend that the recorded percentage is interpreted alongside the long-term trend in the measures.

Both measures showed a downward trend in the years prior to the pandemic, with a steeper reduction in the absolute measure over the period since the series began in FYE 2011.

Household Food Security

In FYE 2022, 83% of working-age adults in relative low income BHC (household income below 60% of the median) lived in a food secure household, and 82% AHC. This is a decrease of 1 percentage point for those in relative low income BHC and an increase of 1 percentage point AHC. There were decreases in the proportions who lived in a household with high food security, with both measures falling to 71% from 75% and to 70% from 72% for relative BHC and AHC respectively.

The levels and changes in measures based on absolute low income were very similar.

Food Bank Usage

In FYE 2022, 9% of working-age adults in relative low income BHC (household income below 60% of the median) lived in a household where a food bank had been used within the 12 months prior to their FRS interview. This percentage was the same for working-age adults in absolute low income, BHC, and compares to 3% of all working-age adults in the UK population.

3% of working-age adults in relative low income BHC lived in a household where a food bank had been used in the last month. This compares to 1% of all working-age adults in the UK population. The percentage was slightly higher on an absolute low income basis, at 4%.

See Tables 9.5a to 9.6b for full data and measures of household food security and food bank usage. This includes measures on a AHC basis.

9. Pensioners in low-income households

Around three-quarters of pensioners live in homes that are owned outright (compared to roughly a quarter of working-age adults), and so face minimal housing costs. This means the percentage of pensioners in low-income households is lower AHC than BHC, unlike for children and working-age adults.

Only a small proportion of pensioners have earned income from employment. Therefore, trends in low income for this group are influenced more by how the value of state or personal and occupational pensions change relative to inflation and relative to growth in earnings for the population below state pension age.

All 4 measures of the percentage of pensioners in low income increased. Increases were greater for the relative low-income measures.

This section also reports a broader material deprivation measure for pensioners.

See Tables 6.1tr, 6.2tr, and 6.7tr for full data.

Figure 25: Percentage of pensioners in relative low income, FYE 2003 to FYE 2022

Figure 26: Percentage of pensioners in absolute low income, FYE 2003 to FYE 2022

Main Findings

The percentage of pensioners in relative low income increased to 18% for both BHC and AHC measures between FYE 2021 and FYE 2022. This represented an increase of 2 and 3 percentage points respectively. These changes were not statistically significant.

While the relative AHC measure has returned to levels measured in FYE 2020, pre-pandemic, the BHC measure remains 1 percentage point lower.

Between FYE 2011 and FYE 2020 there was a gradual upward trend in both relative measures. The FYE 2021 changes in the measures were larger and in a downwards direction, which has been partially reversed in FYE 2022. We recommend interpreting the changes measured in FYE 2022 alongside the longer-term trends.

Absolute low income BHC and AHC measures also both increased, from 13% to 14% BHC and from 11% to 12% AHC. Both measures are 1 percentage point below estimates published for FYE 2020. In the years prior to the pandemic, both absolute measures had been broadly flat.

Compared to the overall UK population, pensioners have been less likely to be in relative or absolute low income AHC since around FYE 2005, and similar levels BHC since around FYE 2010.

Material Deprivation

For FYE 2022, all estimates of material deprivation are not comparable with previous years.

As with the child and working-age material deprivation measures, access to several of the social opportunities asked about as part of the measure were affected by government restrictions introduced in response to the coronavirus (COVID-19) pandemic during FYE 2021. These effects persisted in FYE 2022.

Figure 27: Percentage of pensioners in material deprivation, FYE 2010 to FYE 2022

Interpretation

Pensioners aged 65 or over are asked whether they have access to a list of 15 goods and services. If they don’t have a given item (because of cost, health, or availability), this is scored in the material deprivation measure, with items more commonly owned in the population given a higher weighted score. A pensioner is considered to be in material deprivation if they live in a family that has a final score of 20 or more out of 100. More details are available in the HBAI Quality and Methodology Information Report.

Main Findings

In FYE 2022, the percentage of pensioners in material deprivation was 6%.

We have chosen to emphasise the non-comparability of the estimates for the current year by presenting a discontinuity in the time series chart above. We recommend that the recorded percentage is interpreted alongside the long-term trend in the measure, which had a downward trajectory in the years prior to the pandemic.

Household Food Security

Pensioners in relative low income BHC are much more likely to live in a food secure household compared with working-age adults and children in low income BHC.

In FYE 2022, 97% of pensioners in relative low income BHC (with a household income below 60% of the median) or absolute low income BHC lived in a food secure household. The proportion who live in a household with high food security is 94% for both measures. All estimated levels are stable compared with last year and with FYE 2020, when the statistics were introduced.

Food Bank Usage

Pensioners are very unlikely to live in a low-income household who have accessed a food bank.

In FYE 2022, 1% of pensioners in relative low income BHC (household income below 60% of the median) lived in a household where a food bank had been used within the 12 months prior to their FRS interview. This compares to less than 0.5% of all pensioners in the UK population.

See Tables 9.7a to 9.8b for full data and measures of household food security and food bank usage. This includes measures on a AHC basis.

10. People in low-income households, by disability in the family

Around 25 million individuals (or 38%) lived in a family where someone was disabled in FYE 2022. This consisted of 5.5 million children, 13 million working-age adults and 6.5 million pensioners.

The proportion of individuals in disabled families who are in low income decreased, for all relative and absolute measures. The change in relative low income BHC was statistically significant.

The assessment of change in these low-income rates is made compared to FYE 2020, prior to the pandemic, because estimates for FYE 2021 were not published. This was due to concerns with the representativeness of the disability sample following the change in survey mode. This year’s sample is better aligned with expectations. Further information is available in our technical report detailing the impact of the coronavirus (COVID-19) pandemic on the HBAI Statistics.

See tables 1.7a, 1.7c, 1.7e and 1.7g for full data.

Definitions

Disabled people are identified as those who report any physical or mental health condition(s) or illness(es) that last or are expected to last 12 months or more, and which limit their ability to carry out day-to-day activities a little, or a lot. This is in line with the Equality Act definition.

The means of identifying people with a disability has changed over time however, with different criteria applied for FYE 2003 to FYE 2004, FYE 2005 to FYE 2012, and FYE 2013 to date. As such, changes over time in the number of individuals with disabilities could be affected by the changes in the disability questions.

Further, different individuals may also have different interpretations of health conditions or question wording, meaning that changes to the disability questions may have had a different effect on different groups.

Therefore, comparisons between estimates from FYE 2013 onwards with earlier years should be made with caution.

Figure 28: Percentage of individuals in relative low income BHC, by family disability, FYE 2003 to FYE 2022

Figure 29: Percentage of individuals in relative low income AHC, by family disability, FYE 2003 to FYE 2022

Main Findings

Between FYE 2020 and FYE 2022, relative low income BHC for those in families where someone is disabled declined by 3 percentage points from 23% to 20%. This change was statistically significant. The change follows a statistically significant increase in the measure in FYE 2020, of the same scale. The FYE 2022 percentage is aligned with the longer-term trend in the measure.

Those living in a family with a disabled member are more likely to be in low income than non-disabled families. The percentage of individuals in families where someone is disabled in relative low income BHC is 5 percentage points higher than equivalent families where no-one is disabled.

Relative low income AHC for those in families where someone is disabled was 27%, a fall of 1 percentage point since FYE 2020. This was not statistically significant. At 8 percentage points, the difference in the percentage in low income for disabled and non-disabled families is larger for the after housing costs measure.

Figure 30: Percentage of individuals in absolute low income BHC, by family disability, FYE 2003 to FYE 2022

Figure 31: Percentage of individuals in absolute low income AHC, by family disability, FYE 2003 to FYE 2022

Main Findings

Absolute low income BHC fell by 2 percentage points from 18% to 16% for individuals in families where someone is disabled between FYE 2020 and FYE 2022, whereas AHC fell from 22% to 21%. None of these changes were statistically significant.

For both relative and absolute measures, there is no direct relationship between the trends for those with and without disabled family members. Different factors could affect the household income where someone in a family is disabled. We know, for example, that working-age adults with disabilities are less likely to be in employment, and that disability is more prevalent amongst pensioners.

Figure 32: Percentage of children, working age, and pensioners in relative low income where someone in the family is disabled, FYE 2003 to FYE 2022

Figure 33: Percentage of children, working age, and pensioners in absolute low income where someone in the family is disabled, FYE 2003 to FYE 2022

Main Findings

The charts above show large reductions in rates of low income for pensioners and children in disabled families between FYE 2008 and FYE 2012, with smaller movements either side of this period. Since FYE 2013, when disability definitions changed, the trends in relative low income have been broadly stable across the groups, with the levels recorded for FYE 2022 being more line with the trend up to and including FYE 2019.

Much of the increase in relative rates reported in FYE 2020 has been reversed in FYE 2022. The overall reductions have been driven more by changes in the low-income rates for children and working-age adults in disabled families, where the falls have been greater.

All groups have seen reductions in the level of absolute low income compared to the period since FYE 2013.

See Summary tables 1.7a, 1.7c, 1.7e and 1.7g for full data.

11. Long-term trends (data prior to FYE 1995 are not National Statistics)

Work undertaken by IFS to extend HBAI trends back to 1961 shows large increases in inequality over the 1980s

Figure 34: Long term trend in the Gini Coefficient

Figure 35: Long term trend in Relative Low Income

Figure 36: Long term trend in Absolute Low Income

Main Findings

Looking at trends over the past 60 years, incomes across the population have increased dramatically in real terms over time, driving falls in absolute low income. This pattern has held fairly consistently over time, with rises in absolute low income being relatively rare, although the rate of decline in the measures has slowed over the last decade.

During the 1980s, incomes for those further up the income distribution grew more quickly than for those at the bottom, driving large increases in income inequality (Gini) and in relative low income measures. Since the early 1990s, income inequality measures in the UK have remained relatively stable, although analysis by Atkinson, Piketty et al, held at the World Inequality Database suggests that increasing inequality has continued with incomes for those within the top 1% continuing to grow faster than for the rest of the distribution. Changes this far up the distribution will not be captured well in the HBAI data.

Interpretation

The increase in income inequality (and in relative low income) over the past 40 years or so has been driven in part by a significant increase in individual earnings inequality over the same period.

Partial explanations for wider trends are:

• from the late-1970s there was a large rise in unemployment following the recession, accompanied by increasing inequality in earnings – driven in part by factors like increases in part-time working

• from the mid-1980s increasing income inequality was further driven by incomes of those in employment pulling away from those who are economically inactive (including pensioners) as growth in employment income rose faster than for other sources such as benefits

• in the late-1980s the widening of the income distribution was driven further by increases in earnings inequality, with increasing differences between wages for different occupations

• by the early 1990s the picture began to stabilise with incomes of those economically inactive starting to catch up to those in employment

• in the early 2000s falls in low-income measures were driven by increasing relative incomes for families with children and pensioners – driven in part by the introduction of tax credits and the Basic State Pension “triple lock”

See the IFS publication for full data and Accounting for changes in inequality for detailed decomposition analysis of trends

12. Measuring income in HBAI

HBAI uses data from the Family Resources Survey (FRS) to derive a measure of disposable household income. Adjustments are made to take account of the size and composition of households to make figures comparable.

FRS Survey Data – In FYE 2022, the FRS covers a sample of over 16,000 private households in the United Kingdom (around 19,000 households for the period before the coronavirus (COVID-19) pandemic). Therefore, certain individuals, for example students in halls of residence and individuals in nursing or retirement homes will not be included.

Sampling Error - Results from surveys are estimates and not precise figures - in general terms the smaller the sample size, the larger the uncertainty. Confidence intervals help to interpret the certainty of these estimates, by showing the range of values around the estimate that the true result is likely to be within.

Non-sampling Error - These results are based on data from respondents to the survey. If people give inaccurate responses or certain groups of people are less likely to respond this can introduce biases and errors. This non-sampling error can be minimised through effective and accurate sample and questionnaire design and extensive quality assurance of the data. However, it is not possible to eliminate it completely, nor can it be quantified.

Income - This is measured as total weekly household income from all sources (including child income) after tax, national insurance and other deductions. Income measures are presented before and after housing costs (rent, mortgage interest payments, buildings insurance etc.)

A household income measure implicitly assumes that all members of the household benefit equally from the household’s income and so appear at the same position in the income distribution.

SPI adjustment - Estimates of mean income and some inequality measures are very sensitive to fluctuations in incomes at the top of the distribution. An adjustment to correct for this is made to ‘very rich’ households in FRS-based results using data from HMRC’s Survey of Personal Incomes.

Key Definitions

Household - One person living alone or a group of people (not necessarily related) living at the same address who share cooking facilities and share a living room, sitting room or dining area. A household will consist of 1 or more benefit units or families.

Family or Benefit Unit - A single adult or a couple living as married and any dependent children.

Equivalisation - An adjustment is made to income to make it comparable across households of different size and composition. For example, the process of equivalisation would adjust the income of a single person upwards, so their income can be compared directly to the standard of living for a couple. Different equivalisation scales are applied before and after housing costs, with the BHC example below. AHC scales can be found in our HBAI Quality and Methodology Information Report.

Figure 37: Equivalisation scales used in HBAI (Before Housing Costs)

Inflation is the speed at which the prices of goods and services rise or fall. The use of different inflation measures has an effect on trends in average household income and absolute low-income measures in HBAI.

HBAI uses variants of CPI to adjust for inflation to look at how incomes are changing over time in real terms i.e. if, for example, average incomes rise by 3% in cash terms but inflation is higher at 5%, then we will record a fall in average incomes as the real average purchasing power of incomes has fallen.

13. Strengths and limitations

The main strengths of HBAI include:

• HBAI has provided the UK’s headline household income statistics since FYE 1995 using a consistent methodology. Hence, HBAI provides data on both current levels and short/medium/long term trends in incomes and the income distribution. The statistics are the UK’s official source of poverty estimates and, with a larger sample size, are the main source on household and individual incomes.

• Alongside statistics on low income, HBAI also measures and publishes data on other aspects of poverty. It includes statistics on levels of material deprivation, household food security, and food bank usage, in combination with low income.

• The data are subject to extensive quality control and cleaning. Firstly, via the FRS data collection and editing processes operated by the FRS Consortium and DWP. And secondly via the HBAI production process operated by DWP and with additional quality assurance provided by the Institute or Fiscal Studies (IFS).

• HBAI follows national and international best practice regarding the measurement of household incomes (e.g. regarding income from self-employment and housing costs) and the equivalisation of household incomes (see previous section) across differing household sizes and compositions.

• HBAI provides headline estimates with an extensive suite of supplementary tables via the HBAI homepage, as well as user-defined breakdown tables via Stat-Xplore and in-depth analysis of case-level datasets via the UK Data Service.

• Given its coverage of the whole UK private household population and wide range of demographic and socio-economic data, FRS/HBAI data can be used for many purposes beyond income/poverty analysis e.g. for a wide range of policy impact analyses.

The main limitations of HBAI include:

• As with any survey, the data are subject to both non-response bias and reporting error, despite the best efforts of the survey sample design, data quality control and cleaning. We are seeking to transform the FRS by increasing the use of administrative data from the full range of available sources (for example, from other parts of government). This should help correct for issues like benefit under-reporting and improve the quality of our income estimates. For more information on our strategic project to link the FRS to administrative data, please see the FRS background and methodology note, or the DWP Statistical Work Programme

• Although the source FRS survey is relatively large (with around 19,000 households surveyed before the coronavirus (COVID-19) pandemic), estimates for smaller sub-groups and geographical areas need to be produced by combining multiple survey years together and/or will be subject to wide confidence intervals.

• Whilst the equivalisation process allows household incomes to be compared across differing household sizes and compositions, the equivalisation factors used are somewhat simplistic e.g. adjusting income in the same way for all people aged 14 and over in a household (beyond the household reference person), regardless of whether the person is a child/working-age adult/pensioner or whether they are disabled or not.

• The statistics treat all members of each household equally in terms of the overall household income i.e. the equivalised household income is calculated and then all of the household is in low income (‘poverty’) if the household income is below 60% of the median, or all of the household is not in low income if the household income is at or above 60% of the median. In effect, this assumes that all members of the household are equally affected by the overall household income: a more reasonable assumption where household members are related than where they are not e.g. a group of unrelated young adults living together.

• Due to the amount of data processing and quality assurance required, the statistics are published around 12 months after the reporting year.

• As the survey sampling frame covers private households only, it does not cover those living outside of private households e.g. people living in residential care and nursing homes, university halls of residence, prisons/detention centres or rough sleepers.

14. About these statistics

The income measure used in HBAI is weekly net equivalised disposable income Before Housing Costs measuring income from all sources from all household members, including:

• usual net earnings from employment

• profit or loss from self-employment (losses are treated as negative income)

• income received from dividends (from FYE 2022)

• state support – all benefits and tax credits, including state pension

• income from occupational and private pensions

• investment income

• all maintenance payments

• income from educational grants and scholarships

• the cash value of certain forms of income in kind, including free school meals

Income is net of:

• income tax and National Insurance contributions

• domestic rates and council tax

• contributions to occupational pension schemes

• all maintenance payments

• student loan repayments

• parental contributions to students living away

• ground rent and service charges

Income After Housing Costs is derived by deducting housing costs, including:

• rent (gross of housing benefit)

• water rates, community water charges and council water charges

• mortgage interest payments

• structural insurance premiums

Negative incomes BHC are reset to zero, but negative AHC incomes are possible.

Children are defined as individuals aged under 16, or aged 16 to 19 in full-time non-advanced education.

Pensioners are defined as individuals over their state pension age at the time they are interviewed.

National Statistics Status: The regulatory arm of the UK Statistics Authority, the Office for Statistics Regulation (OSR), has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007, signifying compliance with the Code of Practice for Statistics.

The statistics underwent a full assessment against the code of practice in 2011 and were confirmed as National Statistics in November 2012 by the Office for Statistics Regulation.

National Statistics status means that official statistics meet the highest standards of trustworthiness, quality and public value and comply with all aspects of the Code. OSR has undertaken this assessment to consider whether the statistics meet the required standard. Since the OSR assessment, we have continued to comply with the Code of Practice for Statistics, and have made a number of improvements including:

• publications have been made significantly shorter to enable a focus on commentary and analysis

• our publication, including charts and images, is now available in HTML format to aid accessibility, and tables have been revised to meet accessibility guidelines

• the timeliness of the publication has been improved so that reports are released within 12 months of the completion of the Family Resources Survey, made possible by improvements to the background, publication and checking codes that are used to conduct analysis

• by making our data available on Stat-Xplore and UK Data Service, our statistics are more accessible and support new analysis for users not included in the publications themselves

• the quality of statistics have improved as variants of the Consumer Price Index (CPI) have replaced the use of Retail Prices Index (RPI) when adjusting for inflation, in line with guidance from the UK Statistics Authority and National Statistician

• improved methodology for measuring and reporting uncertainty around key HBAI estimates.

• The content of the HBAI publication has evolved in response to user needs, and to reflect increased interest in areas such as material deprivation, household food security, and food bank usage, when combined with low income. In the FYE 2021 and FYE 2022 publications we extended our combined low-income and material deprivation measures, so they are now available for both children and working-age adults, on a relative and absolute income basis, and below three different thresholds of low income (50/60/70% of the appropriate median)

Where to find out more

Further outputs and reference tables from HBAI analysis, alongside our HBAI Quality and Methodology Information Report, giving further detail on how we estimate the measures reported here are available on the HBAI website.

15. Signposting to related statistics

The OSR review published in May 2021 recommended that income-based poverty statistics should improve the way they reference other data sources via signposting. This section has been expanded with additional links to sources to provide clearer and more detailed signposting to other income-based poverty statistics. This information will be reviewed and updated annually.

Other DWP National and Official Statistics

Details of other National and Official Statistics produced by the Department for Work and Pensions can be found on the DWP website with a schedule of statistical releases over the next 12 months and a list of the most recent releases.

In accordance with the Code of Practice for Statistics, all DWP National Statistics are also announced on the Government Statistics website, and in the DWP statistics release calendar

Other official income statistics

The UK has 2 main, official data sources of household income statistics: the Family Resources Survey (FRS) run by the Department for Work and Pensions (DWP) and the Household Finances Survey (HFS) run by the Office for National Statistics (ONS).

The FRS estimates underpin DWP’s Households Below Average Income (HBAI) series, which is the UK’s official source of poverty estimates. With a larger sample size, it is also the main source on household and individual incomes. HFS data are used to produce ONS’s Household Disposable Income Inequality (HDII) and Effects of Taxes and Benefits (ETB) series, these outputs are the main source for considering the overall financial well-being of households.

There are some key methodological differences between the 2 series which means that their income estimates are different. For example, the FRS focuses on respondents’ weekly incomes at the time of interview, whereas HFS focuses more on annual income. The treatment of pension contributions also differs, with ONS’ estimate of Gross Household Income being calculated before pension contributions. Further details are available in the income and earnings statistics guide.

The ONS interactive tool is an additional resource which can be used to identify sources of statistics on income and earnings, and their key features. Alongside the HDII and ETB series, 2 others which may be of particular interest to users with an interest in income-based poverty are:

• Income Dynamics (ID) which looks at changes in household income including a measure of persistent low income, based on Understanding Society data

• Children in Low Income Families provides data on the number and proportion of children living in low-income families, Before Housing Costs (BHC), across the United Kingdom by local area