23 April 2007 - Households below average income (HBAI) corrections
Secretary of State for Work and Pensions, John Hutton issued the following written statement today correcting several of the datasets in this year’s Households Below Average Income (HBAI) report.
Secretary of State for Work and Pensions, John Hutton:
Households Below Average Income 1994/95 — 2005/06 was published on 27 March 2007. After publication the production team found an error had occurred because incorrect population estimates were used to generate the dataset for 2005/06, upon which the publication was based.
Most of the key headline figures from the publication are unaffected by this error. Looking at the measures of relative poverty, correcting the error has had no impact on reported child poverty for 2005/06. However, the revised figures do see an increase in reported poverty among working age adults, which is seen on both the "Before Housing Costs" and "After Housing Costs" measures. The revisions see both measures increase by an extra 100,000 under the rounding conventions, from 5.3m to 5.4m on the former basis and from 7.1m to 7.2m on the latter basis. Furthermore, although the revisions have no impact on the reported level of relative pensioner poverty, the rounding conventions we use now mean that we no longer see a change in measured pensioner poverty between 2004/05 and 2005/06.
Looking at measures of absolute poverty, the correction of the error has similar effects as on the measures of relative poverty, with no increase in reported measures of child poverty or pensioner poverty and a small increase in reported poverty among working age adults.
Key headline results for the number of households in relative and absolute poverty, including changes as a result of the revisions, are being placed in the House Libraries. These revisions have been quality assured and verified by the Institute for Fiscal Studies.
The error does require reproduction of all the statistics and the re-release of the report. The changes to the HBAI statistics also affect other DWP publications, specifically “Pension Credit estimates of Take-up 2005-06”, and “The Pensioners’ Income Series 2005-06” but both to a minor extent, either in terms of the number of tables affected, or the extent of the change.
We anticipate the full set of statistics to be completed by the first half of May. We will announce a release date through the National Statistical website, in line with National Statistics protocols.
Technical notes on figures for editors
What is the Households Below Average Income report about? The Households Below Average Income statistical report (HBAI) uses household disposable incomes, adjusted for household size and composition, as a proxy for material living standards. It principally gives information on the income distribution in GB / UK from the financial years 1994/5 to 2005/06 using cross-sectional data from the DWP Family Resources Survey (FRS). Analyses of FRS data are published on the DWP website at: www.dwp.gov.uk/asd/frs.
Relative and Absolute poverty measures: The key findings refer to numbers and proportion of groups below 60 % contemporary median income threshold, which we describe as the relative poverty measure and 60% 1998-99 median income threshold, which we describe as the absolute poverty measure. The 60% contemporary income threshold is 60% of the median income for each year’s survey. The 60% 1998-99 income threshold uses the median from 1998-99 year, which is then uprated for inflation as appropriate.
Before and After Housing Costs: HBAI employs two measures of (net equivalised household) income: Before Housing Costs (BHC) and After Housing Costs (AHC). Each measure has imperfections as a guide to differences in, and changes in, living standards, but the two are complementary. Housing costs are made up of: rent (gross of housing benefit); water rates, community water charges and council water charges; mortgage interest payments (net of tax relief); structural insurance premiums (for owner occupiers); and ground rent and services charges.
Rounding: When calculating changes between two sets of rounded numbers, readers should be aware that they may not produce consistent answers with our published differences. This is because reported changes are calculated using unrounded data and then rounded to the nearest 100 thousand. To illustrate, consider the change in relative pensioner poverty (BHC) between 2004-05 and 2005-06. In 2004-05, the published level was 2.3 million while in 2005-06 the corresponding figure was 2.2 million, suggesting a reduction of 0.1 million. However, the unrounded equivalents of the two published numbers were 2.271 million (which is shown as 2.3 million when rounded to the nearest 100,000) and 2.245 million (which rounds to 2.2 million using our convention), making the true calculated difference 26 thousand, which becomes zero or “no reported change” when rounded. There is also a similar rounding effect for other key headline figures.
Gini coefficient: This is a widely used, international standard summary measure of income inequality. It can take values from zero to 100, where a value of zero would indicate total equality where each household had an equal share of the national income. Higher values indicate greater inequality.
HBAI reports can be found here: http://www.dwp.gov.uk/asd/hbai.asp
Table 1: Relative
poverty and income inequality - revised key findings, before housing costs
and after housing costs, 2005/06 (16KB) 
Table 2: Absolute
poverty - revised key findings, before housing costs and after housing costs,
2005/06 (10KB)
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