Income and Health 5 Reforming social security

Social security … is like a game of snakes and ladders played at the Mad Hatter’s tea party. Instead of a common starting point some people are not allowed to play at all, some start at the bottom of ladders and others at the top of snakes, The rules change as the game proceeds, snakes turn into ladders and ladders into snakes, and once on a snake it is impossible to escape..

The Beveridge tradition

Social insurance schemes, since their introduction by Bismarck, have come to form the backbone of income support throughout Europe. In Britain the Beveridge system, introduced between 1945 and 1948, still provides the framework of income support.

The Beveridge system was designed to tackle what were regarded as the two main causes of poverty. The first was lack of access to a wage – either temporarily, through unemployment or sickness, or permanently, for example through disability or old age. The second was a family size that the wage couldn’t cover. For those threatened by poverty due to temporary interruptions from work, or retirement after a lifetime of work, income support was provided through the social insurance system, with eligibility based on contribution record. For others in need who were not eligible for social insurance there would be a residual safety net in the form of means-tested national assistance. To avoid large working families with low wages living in poverty there would be a non-contributory family allowance.

This system still provides the basic framework of our income support. However the British system – and indeed other social security systems throughout Europe – is breaking down.

Firstly, social security is failing to keep people out of poverty. By 1979 there was more poverty in Britain than in the fifties, with one in five of the population living in or on the margins of poverty. This was a miserable achievement for the 34 years since the war, years characterised by considerable economic growth and widespread commitment to the welfare state, exactly half of them under a Labour government.

But since 1979 things have gone from bad to worse. Unemployment has risen, the gap between the well-paid and the low paid has widened, more of the country’s income is paid out as dividends or interest and less as wages, the tax structure has redistributed from poor to rich, high inflation has hit the poor hardest and benefits have risen more slowly than wages.

Together, these changes have resulted in a dramatic increase in inequality at all levels of society. In the first five years under the Conservatives, the top ten percent of families made up all the ground they had lost in the previous twenty years. For the first time since the Second World War, the poorest half of the population have found that their share of total income is dropping. The last decade has been characterised by a substantial rise in earnings, but the improvement of living standards for the average person masks a growing gap between the highest and lowest paid. It is clear that, far from trickling down from rich to poor, household income has been siphoned up from poor to rich.

Not surprisingly, the effects of increased inequality are felt most painfully at the bottom of the pile. In 1987 a quarter of the population were living on low incomes and nearly a fifth – over 10 million people – were living in poverty. The proportion on low incomes is approximately twice what it was thirty years ago when comparisons are made using an equivalent poverty level.

The poor have not only failed to gain a fair share of increasing prosperity, they have failed to share it at all. Calculating real incomes is controversial but it has been estimated that, since 1979, the poorest ten percent experienced a slight fall in real income after housing costs, while the average income increased by twenty three percent. The single largest factor in the increase in the numbers in poverty was the Government’s decision in 1980 to end indexation of social security benefits to earnings. It has been calculated that had benefits continued to rise in line with average earnings, by 1990 the number with incomes less than sixty percent of average would have been less than half what it was.

Secondly, despite the increasing poverty of claimants, costs are escalating. Expenditure on social security now amounts to around £1000 a year for each man, woman and child in Britain. As a proportion of gross household income, social security expenditure has risen from eight percent in the mid-sixties to around twelve percent by the end of the eighties. Demographic trends, in particular the in creasing number of elderly people, suggest expenditure is unlikely to drop.

Finally, that part of the system designed as a safety net for those not covered by social insurance is now the main source of benefit for many Thus in 1988-9 non-contributory benefits came to £21,000 million, compared with almost £20,000 million on national insurance retirement pensions, and just over £6,000 million on other national insurance benefits. By 1986 it was estimated that thirty percent of the population were in families receiving means-tested benefits, and a further ten percent were not claiming benefits they were entitled to. In 1948 when National Assistance was introduced only three percent were reliant on it.

This move away from insurance benefits is due to several changes.

  • the increasing numbers of people in need who do not qualify for national insurance benefits;
  • the fact that such insurance benefits are often so low that they have to be supplemented by means-tested benefits;
  • the failure of child benefit to compensate adequately for additional expenditure, which pushes low-paid families onto means-tested benefits;
  • the increased taxation of the low-paid which also has this effect.

Means-testing

Most non-contributory benefits are means-tested. This in itself raises many problems. The basic argument put forward in favour of means testing is that, by removing benefits from those who do not need them, more money is available for those who do. It has been calculated that, for example, cutting universal child benefit by £2.00 would enable an additional £7.70 per child to be given to those on income support and family credit, which redistributes to the poorest thirty percent of families. However, the arguments against means-testing are overwhelming.

Firstly, the assumption that money which is not given to the better-off is available for the poor rests on implausible political assumptions. If removing benefits reduces the net income of the better off it may be followed by pressure for compensatory tax reductions, reducing the money available for benefits. More important, means testing leaves the interests of the poor dangerously isolated.

There is clear evidence that benefits shared by the middle class were much more successful in retaining their value during the 1980s than those aimed only at the poor even though the government had an explicit policy of tighter targeting.

Secondly, means tests are regarded by many as humiliating, stigmatising and an expression of the notion that income support is a form of charity rather than a right. The conditionality of means tests can significantly restrict personal freedom, for example in the hated cohabitation rule and restriction of earnings.

Thirdly, means-tested benefits are an ineffective way of reaching those in poverty. This is because they are less likely to be claimed by those entitled to them than other benefits. For contributory benefits, such as retirement pension, widow’s benefit and unemployment benefit, as well as for child benefit, virtually everyone entitled claims. For the non-means tested One Parent Benefit take up was 93% in 1984. For means-tested benefits the take up rate is much lower. Figures for 1983 and 1984 suggest that of those entitled to claim Supplementary Benefit, only 76% did so, with 77% claiming Housing Benefit, and 54% claiming Family Income Supplement. Once non-take-up is allowed for, it has been calculated that the proposal mentioned earlier to transfer £2 from child benefit to child additions would actually make 62% of families with children in the bottom half of the income distribution worse off!

Fourthly, considerable sums are spent administering means-tested benefits, which could otherwise be spent on the benefits themselves. Administering Supplementary Benefit took 11.3% of the benefit expenditure in 1985-6 compared with 1.4% for retirement pensions. Finally, unless the benefit ‘taper’ is very gradual, claimants suffer all the disadvantages associated with the ‘poverty trap, a point discussed later.

In addition, the argument that means-testing is necessary to save government expenditure is totally unconvincing. If there is a genuine concern to save money from within the social security budget the obvious option is to recoup benefits from the better-off through taxation. For example, it has been calculated that if those with incomes over £25,000 had their social security benefits recovered through their tax bill at the end of the year, it would cut net social security expenditure by around ten percent, administration would be cheap and fraud difficult. There is a much more urgent need to look at who is actually benefiting from patterns of expenditure in other areas of public spending such as health care or education, let alone from transport or agricultural policies where ‘targeting’ the benefits to those most in need could radically alter policies! It is clear that much of the support for means testing, like the obsessive concern with social security fraud, is an expression of fear of people choosing to live ‘off the state’ when they could be working. It is ironic that this concern has led to proposals that succeed only in discouraging attempts at self-help and trapping people in their role as claimants.

The future of social insurance

Is social insurance, with a means-tested safety net, the best way of organising income support in the future? There are a number of reasons for questioning this.

Above all, it was designed for a world in which the vast majority of people lived in households headed by a wage-earner in full-time work throughout their working life, except for temporary interruptions. This always left some outside the system, but has become increasingly inappropriate. To realise its inadequacy as the basis for a strategy for relieving poverty, it is useful to look at the situation of those in poverty today.

The following table shows the percentage of the ten and a half million people who were living on below fifty percent of average income (after housing costs) in 1987 broken down by situation of head of family.

Figure 6 Percentage of those living on below fifty percent of average income, after housing costs, by situation of head of family.

Percentage of those living on below fifty percent of average income

1987 figures

Their family situation can been seen by looking at the proportions living in families with various family heads

Figure 7 Percentage of those living in families with various family heads

Percentage of those living in families with various family heads

Since 1979 the situation of many of these groups has declined. Pensions and some other benefits have increased in line with prices only and so have dropped still further behind average earnings – some have failed to keep up even with prices. Low pay is more widespread. The proportion of the total adult work-force who are paid less than two-thirds of the median male earnings or hourly equivalent has risen from 36% in 1979 to 45% in 1989/90. Unemployment is less easy to calculate, as the Government has changed the method of calculating the figures thirty times since 1982! Although lower than the peak of three million in 1986, unemployment in 1991 is around two million. Households headed by a lone parent are increasing – from 8% of all families with children in 1971 to 14% in 1987 and a high proportion are in poverty.

The social insurance model does not lend itself easily to meeting these changes. It is hard for many – women, single parents, people with disabilities or caring responsibilities – to build up adequate contribution records. It was not designed for helping those in low paid jobs whose wage is insufficient to meet their needs. Long-term unemployment and increasing part-time, casual, temporary and self- employment create more people with inadequate contributions. The return of long-term unemployment has put even adult males outside the system – in 1985 only twenty six percent of unemployed male claimants were in receipt of unemployment benefit. The Institute for Fiscal Studies suggests that two thirds of the increase in those on supplementary benefit between 1979 and 1987 was due to increased unemployment, through lack of entitlement to unemployment benefit or the need to top it up. Every country in Europe has experienced a similar increase in numbers dependent on benefits but not entitled to social insurance.

A more philosophical issue is that the principle of social insurance embodies a basic distinction between the right to income support, on the one hand, of those who are supporting themselves in the market-place with temporary interruptions and, on the other hand, of those whose contribution through caring for children or adults is unpaid, or whose market-place value is insufficient to earn them a reasonable standard of living. For the latter group, access to income support is given grudgingly, means-tested and withdrawn if there is any possibility of access to a wage – for example by cohabiting. Such values permeate our society and our system of social security both reflects and reinforces them. One consequence of valuing the paid over the unpaid worker is that it diminishes the willingness to perform unpaid work, a factor which is likely to become more significant as opportunities for women to return to work after childrearing increase with the drop in the number of school leavers.

As H Parker, one critic of the current system put it: “If you start from the premise that only those people who have been in paid work deserve income security, you create a rat-race society in which people who work for nothing become second-class citizens”

Despite their limitations the introduction of social insurance schemes was a landmark in protecting the poor. But in today’s world some commentators have gone so far as to claim that it has come to perpetuate rather than reduce inequalities. Parker writes: “Social insurance protects the strong and not-so-strong but leaves the weak dependent on means-tested social assistance or poor relief, and in some countries nothing at all. Today social insurance is getting to look more and more like a select club, from which millions of would be workers are excluded. Millions more, who do unpaid work in the home or the community, haze always been excluded. In the dual labour markets now emerging core workers still stand to benefit from old-style social insurance. But increasing numbers of peripheral workers will be left in the cold and this will affect their future pensions as well as their current living standards.”

All in all, it is doubtful whether the current structure, however benevolently implemented, can ensure that no-one is excluded from society by poverty, encourage those who wish to enter the labour market to do so, yet avoid penalising those who are unable to work or who choose to engage in the unpaid tasks of bringing up children or caring. There is an urgent need for a wide-ranging review of the basis of income support in the future, and a Royal Commission is likely to provide the best format for this. This is what the Fowler Review promised, yet it failed to examine any of the fundamental tenets of our current system, and indeed by excluding taxation from its brief was precluded from doing so. It is given urgency not only by the difficulties of the current system, some of which (notably the poverty trap) would actually be exacerbated rather than relieved by improving benefit levels, and which will be under increasing strain with the demographic changes underway. In addition, pressure for harmonisation across Europe could too easily lead to the adoption of a virtually immovable framework based on assumptions and values inappropriate for the problems we face and the society we want.

The search for alternatives

Putting forward convincing alternatives is complex. It is not just a matter of having the political will to find the necessary money- there are important technical problems, and complex social and political implications, to be considered. The main conclusion of almost all commentators is that there is no ready-made obvious solution waiting to be adopted. With benefits, as in so many other. areas, Conservative attacks have diverted those who should have been at the forefront of developing alternatives to the existing system into frustrating campaigns to defend it. Nonetheless, the debate about more major reform is becoming increasingly sophisticated – helped by the development of better computer modelling.

The majority of proposals put forward by both the liberal and socialist left, sometimes labelled the ‘Beyond Beveridge’ approach, aim to build on the best elements of the current system, and to coordinate benefits and taxation. Labour Party policy also fits this model. Benefit proposals are put forward as part of a package with redistributive tax reform. They usually retain a commitment to maintain or extend social insurance’, though there have been suggestions of eliminating the contributory principle altogether, and sometimes proposals are couched in the short-to-medium term, stressing the need for a wide ranging discussion on the long-term basis of income support. (The CPAG pamphlet “There is an Alternative” is an example.) The general aim is to reverse the trend towards selectivist, means-tested residual benefits, and increase non-means-tested benefits based on ‘contingency’ – such as unemployment or disability. The most immediate tasks are usually seen as increasing contribution-based benefit rates, taking a large number out of means-testing, raising children’s scale-rates and child benefit, restoring indexation to the higher of wages or prices and removing discrimination against the long-term unemployed and younger claimants.

There are also a wide range of schemes put forward for various contingent benefits, aimed at people with disabilities, carers, mothers of young children and other groups aimed in part at reducing means testing – though housing support proves stubbornly difficult in this respect. A principle that is increasingly adopted is that changes should aim to make the system neutral with respect to formal marriage, sexual orientation, illegitimacy and family breakdown, and to maximise choices such as those between, for example, paid employment and childcare or caring. Developing and modelling the impact of detailed proposals, either overall or in part, has been a main focus of activity of those aiming at a social security system that both relieves and prevents poverty.

Others, however, feel that such proposals are just tinkering with a structure that is irreparably flawed and must be redesigned from scratch. The two main alternatives (other than proposals for a ‘minimal state’ from the new right) are negative income tax and some form of social dividend. They have many similarities but approach the problems from very different standpoints. For the left, social dividends prove by far the most interesting, and are attracting increasing attention, partly around the work of the Basic Income Research Group associated with the National Council of Voluntary Organisations. Such schemes are often misunderstood, and raise important issues of principle and general policy. But before moving on to the details of such schemes it is necessary to be clear about one of the fundamental issues behind discussions of reforms, marginal ‘tax’ rates and the poverty trap.

Marginal ‘tax’ rates and the poverty trap

The tax and social security systems have grown up independently, creating unplanned interactions of which the ‘poverty trap is the best-known. The poverty trap is the way in which the poor can find themselves little if any better off if they earn more (although sometimes the term is restricted to those situations where increased earnings leave people worse off). They face very high marginal ‘tax’ rates – that is to say only a small proportion of the next pound earned (which may also be the first pound earned) goes into the earner’s pocket, the rest being removed as tax, national insurance contribution or through benefit withdrawal.

The marginal ‘tax’ rate can in some situations be over 100% as in the classic poverty trap – ie a higher gross income can result in a lower net income – and there may be ‘steps’ as entitlement to flat rate benefits, such as free school meals, are withdrawn at a particular level.

If the combined effect of the tax and benefit system is to be redistributive, then it is inevitable that some people will find an increase in gross income is accompanied by a less-than- proportional increase in net income. The poverty trap is the result of concentrating this process on comparatively few people towards the bottom of the income scale rather than spreading the burden more widely, and on those better able to afford it. Many people are surprised to realise that, for the majority of the population, marginal ‘tax’ rates go down as income increases. Using 1989 figures, low-earners who are also receiving benefits, can face marginal ‘tax’ rates over 90%. For the majority of wage-earners, in the band of income between withdrawal of means-tested benefits and the upper limits for National Insurance contribution, the rate falls to 34%. Once the National Insurance ceiling is reached, the marginal ‘tax’ rate becomes the rate of income tax – initially at 25%, then on incomes of around £500 a week (depending on mortgage and other tax reliefs) at 40%.

The marginal ‘tax’ rates of most earners are thus kept down at the expense of very high marginal ‘tax’ rates for those on benefits. This is politically expedient; claimants are powerless and few in number compared with tax-payers, and their ‘right’ to their benefits is valued much less highly than the ‘right’ to earned income. Historically, the poverty trap was an acute problem facing a few families. The 1988 budget succeeded in abolishing marginal ‘tax’ rates of over 100%, but did so by turning the poverty trap into a less extreme problem facing larger numbers of families .

The disincentive effect of high marginal ‘tax’ rates was the government’s justification for the abolition, in the 1988 Budget, of the top rate of income tax of 60% (which would have affected 180,000 families in 1988-9). But the April 1988 benefit reforms increased to 545,000 the number of low income families facing marginal ‘tax’ rates of 70% or more.; And, although there is little evidence that marginal ‘tax’ rates affect the employment decisions (rather than just the financial arrangements) of the rich, for the poor they are much more important. When the costs of working, including transport, clothing and – most importantly for many – childcare, are taken into account, working may not be economic.

In broad terms, an income support system that encourages people to work within the formal economy if they wish to must be preferable to one which makes working not worthwhile or pushes people into illegality. Ensuring that claimants do not face very high marginal ‘tax’ rates is essential to this.

Social dividends and negative income tax

Negative income tax would work more or less like income tax does now, with a similar calculation made for everyone. Those below the tax threshold, whether earning or not, would receive payments instead of making them. With a social dividend, also known as a basic income or convertible tax credit, everyone would receive a certain income through the state whatever their employment status, and all other income would be taxed, with no allowances. In both systems, taxes and benefits are calculated together and everyone is guaranteed a minimum income. The safety net is there, as a right, for everyone rather than, as at present, having a means-tested safety net only for those who fall outside more standard schemes.

Social dividends do not mean that everyone gets a uniform cash hand-out whether they need it or not. For most of the population they are a tax credit or allowance, paid as cash, but for those who cannot take advantage of this they can be converted into cash benefit. Perhaps the clearest way of understanding this model is to consider child benefits, which are in fact a partial social dividend or convertible tax credit. For those above the tax threshold child benefit effectively lowers their net tax bill compared with childless people on the same income, though this is received as a cash allowance rather than through PAYE or tax returns as was the child tax allowance that child benefit replaced. The great advantage, of course, is that those who do not earn enough to benefit from tax allowances still receive the cash payment. In effect, a social dividend switches automatically between being a benefit to being an income tax allowance as the receiver’s income varies.

There are two major differences between social dividends and negative income tax. The first concerns their effectiveness in dealing with the poverty trap and those just above the minimum income. A pure social dividend scheme eliminates the poverty trap – the marginal ‘tax’ rate is the same for everyone (until higher income tax bands are reached) and working, however little, is always worth it. Negative income tax schemes may avoid the worst excesses of the poverty trap but they institutionalise a more moderate version of it. It is an attempt to target money on those in most need at any moment, bringing them up to a minimum income, while regarding any benefits to those above this as unnecessary. While possibly effective in relieving poverty, it does nothing to help people to escape from it in the future by encouraging employment. Social dividends on the other hand, while they do not necessarily offer a higher standard of living to those with no earnings, do offer the opportunity of legally building on the minimum in a way that can help people escape from poverty in the longer term.

Payments under negative income tax are administratively complex. They would have to be processed as situations changed. it would have difficulty in coping with those moving in and out of employment through the year; if someone loses their job, it is not adequate to assure them that when they return to work, their tax payments will be lower – they need an income immediately. It becomes administratively very complex if people are to have money as soon as they need it; experimental systems in the USA placed the onus on claimants to file claims, which would undoubtedly miss some of those in need.

Social dividends, by contrast, are simple to administer. They have the advantage – most important to the poor – of providing a regular income irrespective of how other income might fluctuate. It might at first sight seem rather clumsy to have taxpayers paying tax that is then repaid to them in the form of a flat-rate benefit, but in fact it is administratively extremely efficient to have a payment credited through, for example, the post office or to a bank account at a rate that would change only rarely (for example on having a child or becoming disabled) and taxes paid through the income tax system, where speed is less vital.

Overall, a social dividend offers much more potential for those concerned with poverty prevention and redistribution than negative income tax. It can be applied in many different ways: the unit of selection could be the individual, family or household, it is compatible with minimum wage or its absence, levels of payment could depend on factors related to need such as disability, it can be applied only to those who meet particular criteria such as pensioners, those with disabilities, or carers. Receipt can be made conditional on willingness to participate in the labour market for those without other responsibilities.

A major argument against a full social dividend is the cost of providing a reasonable standard of living for those with no earnings. An important aim of tax and benefits is to ensure that it is financially worth-while taking part time or casual work. Since earnings are liable either for tax or for benefit withdrawal, any earnings reduce the costs of such schemes, but if marginal ‘tax’ rates are too high they undermine much of their rationale. Yet if the marginal ‘tax’ rate on the first band of earned income is low, very large numbers of people not usually regarded as poor will be receiving more in their guaranteed income than they are paying in taxes. For example, if the social dividend was £50 a week and income tax started at 20%, anyone with a gross weekly income of less than £300 (£15,600 pa) would be a net beneficiary. This makes the scheme astronomically expensive, and explains why the guaranteed minimum income that can be provided for a given cost is low. What makes some of the social dividend schemes so much more expensive than conventional benefit systems is not primarily more generous benefits to non-earners, but the reduced marginal ‘tax’ rates for those at the bottom of the earnings distribution.

Generally, negative income tax schemes work out cheaper for the same level of guaranteed minimum income. as benefit withdrawal rates below the break-even levels are usually higher than the rates of positive taxation above them. This offers the opportunity to keep costs down by reducing benefits to those just above the minimum income level who are considered not to need them, albeit at the cost of high marginal ‘tax’ rates. thus defeating one of the main aims of integration. (The Adam Smith Institute negative income tax scheme, for example. is not unusual in having a 90% benefit withdrawal rate.) Withdrawing benefits faster than tax is imposed also retains the traditional distinction between taxpayers and beneficiaries. Perhaps for this reason as well as lower cost it has traditionally attracted more supporters in high places than have social dividends

In addition to the cost, the scale of changes, both administrative and political, involved in introducing full social dividends are such that accepted as unrealistic to attempt to introduce them over the life of one parliament). It is unlikely that they would ever be introduced if they were nothing more than a party-political football. They would need solid backing, maybe in the form of the conclusions of a Royal Commission, wide professional and public support, and a degree of cross-party sympathy.

Phasing in integration

Thus for both financial and political reasons, full social dividends are currently dismissed by virtually all commentators as an option for the near future. Detailed discussion has focused on models of partial integration – that is, either a low level of social dividend topped up with other benefits, or a higher level for some members of the community only, such as pensioners or people with disabilities. In this way integration could be phased in, initially as a fairly small part of the total, eventually allowing the phasing out of other benefits.

Phasing in integration has a number of advantages. First, protecting some existing rights for a time may be both equitable and politically expedient. Second, phasing in gives public opinion time to change. Third, it would also allow the possibility of using any economic growth to reduce the impact on losers, and thus their opposition. Fourth, administrative difficulties would be reduced. Many critics of radical changes say their introduction would be an administrative nightmare. Against this it has been argued that the difficulties consist largely in the many civil servants whose livelihood is tied up in the cumbersome administration of the current system. However, the civil service is an opponent to avoid, so it would be preferable to allow time for natural wastage and avoid mass redundancies. Fifth, computerising the system has been estimated to take around five years .

Social dividends raise a number of wider social issues, and it is on these, at least as much as the technical difficulties, that attitudes are determined. A full social dividend scheme offers the prospect of a system that operates in a way that makes no distinction between net contributors and net receivers, is unconditional in its support and aims to maximise the opportunities for people to sort out their lives in different, and changing, ways. For many, this is the greatest attraction. But there is no doubt that some are stirred into passionate objection to the idea that men and women who could work are getting something without working for it – despite the fact that the current system actively discourages them from taking paid work or training, unless they are in the position to command a well-paid full time job.

A number of different proposals for partial integration have been made. Parker contains a useful analysis of five schemes for partial social dividends. including her own preferred option. Basic Income 2000, which includes a full social dividend for pensioners, people with disabilities and carers. Her discussion should convince anyone not only that integration can serve different political ends. but that political good-will is not a sufficient criterion with which to engage in this debate; designing a system whether integrated or based on the current dual set-up, which actually has the effects desired is highly complex and indeed in some cases desirable ends are incompatible.

In part, the issue is an empirical one; would social dividends act as a disincentive to employment and can the economy afford this? it also relates to broader social issues, particularly what future is envisaged for the current distinction between paid and unpaid work and the role and status of women, of elderly people and of those with disabilities. Such questions take us back to our fundamental concerns with security and self-esteem that appear to have such an influence not only on health but on the wider quality of life of all of us.

The meaning of “Poverty”

The two standard definitions of poverty are to be on incomes at or below fifty percent average income (adjusted for household size and composition) or the state minimum income as laid down by benefit levels. Low income. or ‘on the margins of poverty’ is defined as at or below sixty percent of average income (again adjusted) or 140% of benefit levels. Both are clearly measures of relative poverty, and give similar results.

It is generally agreed that poverty figures underestimate the extent of poverty. First, they normally exclude homeless people and those living in institutions such as hospitals, nursing homes, residential care and prisons. Such people usually have very little money. which compounds the extreme exclusion from participation in society that they experience for other reasons.

Second, changes in the government’s basis of analysis, from families to households, will miss some in poverty. It has been estimated that this change may result in 1.5 million less people appearing in the government statistics as in poverty

Third, an important and usually ignored aspect of poverty is poverty within families. There is evidence that some women deprive themselves in order to protect other members of the household. and that some men keep money for themselves A series of studies have found that between a fifth and a third of women whose marriages had broken down and were on social security reported that they were ‘better off’ than when living with their husbands, even when their previous family income was well above benefit levels. It is thus highly likely that poverty amongst women is more widespread than figures on family or household income would suggest. The way in which benefits are paid, or tax is deducted, can of course affect this; it is a widely recognised advantage of paying child benefit to the mother and there is no reason why all benefits should not be paid individually, even if assessed jointly.