Reductions in relative poverty continued in 2010/11, according to the latest official figures. But unlike in previous years, this did not reflect rising absolute living standards among poorer households – instead, it reflected big falls in median incomes.

The annual report examines trends in the number of UK households on below-average incomes.

Key points for 2010/11

• 27 per cent of children (3.6 million) were in households with incomes below the poverty line (defined as 60 per cent of contemporary median net disposable household income after housing costs). This represents a fall of 2 percentage points compared with 2009/10, and 7 points compared with 1998/99. Relative poverty among working-age adults fell by 1 point on the same basis compared with 2009/10, and 2 points compared with 1998/99. For pensioners, the fall was 1 point compared with 2009/10, and a whole 14 points compared with 1998/99.
• There was the largest one-year fall in median income since 1981, reversing five years of (slow) growth in middle incomes in a single year. This meant that, after inflation, median income in 2010/11 was no higher than in 2004/05.
• Incomes fell right across the income distribution. But incomes fell proportionally more for richer households than poorer ones – as those on benefits had their incomes relatively better protected – leading to a large fall in income inequality.
• Although the previous Labour government’s 2010 relative child poverty target was missed, large increases in benefits and tax credits for families with children meant child poverty had fallen substantially since 1998/99, reaching its lowest level since 1984.

Source: Nick Adams, Jane Carr, Jenny Collins, George Johnson and Peter Matejic (eds), Households Below Average Income: An Analysis of the Income Distribution 1994/95 – 2010/11, Department for Work and Pensions

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