House of Commons - Social Security

Select Committee on Social Security Seventh Report

DEFINING PENSIONER POVERTY

16. Of the 11 million pensioners in this country, how many can be classed as poor? The experts from whom we received evidence were reluctant to give a definition of what constitutes poverty. Mr Andrew Dilnot told us, "if we assert that we have been able to define a particular level as being the poverty level, we have almost certainly misled ourselves."[30] Mr Tom Ross, of the Pension Provision Group, set up by Government in 1997 to take an independent look at pension trends, told us "this is a very difficult subject and one thing we do think is that there is no one definition."[31]

17. In its strategy for tackling poverty and social exclusion, set out in Opportunity for all,[32] the Government's working definition of poverty was a relative one: people with incomes below 60% of the median. On this definition, over one in four pensioner households were living in poverty in 1997-98, in the region of 2.75 million households.[33] Of these, the DSS said that only one in five were receiving Income Support. Another fifth were entitled to Income Support but not receiving it; a further fifth had savings over £8000 and were therefore not eligible for Income Support; and over half had income higher than their Income Support level, but of these half had less than £20 excess income.[34] The National Pensioners Convention's evidence[35] was that half of all single pensioners had income after housing costs at best only a few pounds above income support levels.

18. There was broad agreement that it was essential to measure the relative incomes of older people against those of society as a whole, on the basis that their living standards could not be viewed in isolation but had to be measured against those of the rest of the population.[36] Age Concern argued that, whilst this approach was important, it did not measure whether the actual incomes people had were sufficient to avoid poverty and social exclusion. Age Concern had therefore proposed a 'minimum income standard' for older people, designed to measure the level of income needed to support a 'low cost but adequate' living standard. Ms Sally West of Age Concern explained that the low cost but adequate living standard was set at a level above absolute poverty; it recognised that in addition to the need for basic food, warmth and shelter, people also needed enough to be able to participate in their local communities.[37] In the words of Baroness Greengross, "our physical needs are matched by our social needs and our emotional needs."[38]

19. Work carried out by the Family Budget Unit (FBU) for Age Concern has drawn on a wide variety of sources of information to price the budget needed for a low cost but adequate standard of living, examining costs of food, housing, fuel, transport, clothing, personal care, household goods and services, and basic leisure and other costs, such as presents for grandchildren and a drink in the pub. Sources of information included survey information, discussion groups with older people across the country, and information on defined standards, for example nutritional standards.[39] Based on the FBU research, Age Concern have proposed that a single pensioner needs at least £90 a week and a couple £135 a week (plus rent and council tax) to avoid living in poverty. An estimated 52% of single pensioners, and 24% of couples had net incomes after housing costs of less than these amounts.[40] The evidence provided by the FBU and Age Concern made a strong impression on the Committee and members felt that this approach could be a more transparent and rational way of assessing and tackling pensioner poverty.

20. By either definition of poverty, both the level of the basic state retirement pension and the level set by Government as the trigger for means-tested assistance through Income Support are below the poverty line. The Minister of State for Social Security, Jeff Rooker, was refreshingly frank about the inadequacy of the MIG level. He admitted, "if you ask me could I live on £78.45, no, I could not...I do not think £78.45 is enough...The £78.45 is a safety net...It is the bottom. There is nothing lower than that."[41] The Minister was asked to explain why, in particular, the level of the means-tested safety net - the MIG - was set at the level it was. His answer was that there was no intrinsic logic to the figures which had been set:

"I used to question the DSS when I was in opposition about this, how the figures are constructed...The only answer I give you is the way it was uprated from the previous figure...It has grown like topsy over the years. I do not think anybody has ever said, 'This is the way it is calculated.'"[42]

21. Despite the Minister's own admission that current rates of benefit for pensioners are too low, he said that there were no plans for his Department to carry out its own research into the adequacy of benefit rates for pensioners in meeting pensioners' basic needs.[43] He did not take issue with Age Concern's £90 per week figure. He said, "I have not come to challenge that Age Concern figure. I cannot spell it out any clearer than that."[44] This is despite the fact that, in seeking to tackle the problems of today's pensioners, the Government has set itself indicators of success which measure not only a reduction in the proportion of older people with relatively low incomes, but also a reduction in the proportion of older people with low incomes in an absolute sense.[45]

22. Ms Holly Sutherland told us, "I think it is mistaken to try and find a single definition [of poverty]. If one is concerned about actual elderly people living out there one needs to have a range of definitions and a range of different ways of looking at the issue."[46] We agree. A relative approach is necessary to monitor how pensioners are fairing in relation to the rest of the population. It is also essential to have a measure - based on objective research rather than subjective opinion - of how much pensioners actually need to live on. The Minister has said that the current level of the MIG is not enough (and, indeed, that he could not live on that amount[47]); but we are not satisfied that the Government is doing enough to ascertain what is a decent minimum income standard for pensioners. Such a standard is needed, not least in order to measure the Government's progress in raising pensioners' incomes to at least this level. The evidence is clear and harrowing. Whether in relative or absolute terms, too many of our older citizens are suffering from poverty. This is not acceptable in an affluent industrialised society and is a reflection of the extent to which social policy since the war has failed to address the problem of pensioner poverty. We recommend that the Government should commission research to establish a minimum income standard for households over pension age in both absolute and relative terms, and that such research should be conducted at regular intervals to inform the Government's progress in countering poverty and social exclusion among older people. We return to this issue below in our recommendations in this Report.

30 Q 174. Back

31 Q 113. Back

32 Opportunity for all - Tackling poverty and social exclusion, Cm 4445, 1999. Back

33 Ev., pp. 79-80, para 15. Back

34 Ibid. Back

35 Ev., p. 32, paras 2.1 and 2.2. Back

36 See, for example, Ms Holly Sutherland, Q 202. Back

37 Q 3. Back

38 Ibid. Back

39 Ev., p. 11. Back

40 Age Concern, Ev., p. 4, para 4.8. Back

41 Q 251. Back