MEMORANDUM PRIME MINISTER MINIMUM INCOME STANDARDS

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MEMORANDUM PRIME MINISTER MINIMUM INCOME STANDARDS

MEMORANDUMto thePRIME MINISTERonMINIMUM INCOMESTANDARDSFebruary 2004ZACCHAEUS 2000 TRUST


MEMORANDUMto thePRIME MINISTERonMINIMUM INCOMESTANDARDSFebruary 2004ZACCHAEUS 2000 TRUST


First published in Britain in 2004By Zacchaeus 2000 TrustRegistered Charity No 1062221Designed and Typeset byPiranha Design LimitedPrinted and supported byAll rights reservedCopyright Zacchaeus 2000 TrustISBN0-9546779-1-9The memorandum is based on a seminar run by the Zacchaeus 2000 Trust in October 2003 which discussedbudget standards. Papers were presented by Professors Peter Ambrose, Jonathan Bradshaw, Dave Gordon andJerry Morris. It was attended by Government officials and policy officers of the supporting NGOs. Where theappendix has been written or the text approved by one particular contributor that person’s name is given.Otherwise the appendices have been written individually or in collaboration by Paul Nicolson and Peter Ambrose.Price £12.50 - including postage in UKAll orders toInkwell, 713 Seven Sisters Road, London N15 5JTPlease make cheques payable to Zacchaeus 2000 Trust.2Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


ContentsBackground and Acknowledgements 5List of Planning Group Members 6List of supporting NGOs 7Memorandum to the Prime Minister 8Appendix 1 - Income before housing costs - an incomplete measure of poverty 11Appendix 2 - Low pay and poverty 17Appendix 3 - Brief history of budget standards work 21Appendix 4 - The need for scientific not arbitrary judgements 23Appendix 5 - What budget standards work can deliver 25Appendix 6 - Minimum Income for Healthy Living (MIHL) 29Appendix 7 - Low Cost but Acceptable (LCA) 33Appendix 8 - Consensual Budget Standards (CBS) 35Appendix 9 - Triangulating the methods used in budget studies 39Appendix 10 - Market forces discriminate against the poor 41Appendix 11 - Hunger and poor diet 43Appendix 12 - Poverty and ill health 45Appendix 13 - The growing burden of debt 49Appendix 14 - Savings to public finances resulting from a reduction of poverty 53Appendix 15 - Weaknesses identified by No 10 2003 Strategic Audit 57Appendix 16 - Determining Government MIS elsewhere 59Appendix 17 - International obligations 63Appendix 18 - A Minimum Income Standards Commission 67References 69Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 3


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Background and AcknowledgementsThe Prime Minister met a delegation from the Zacchaeus 2000 Trust coalition in his room at the House ofCommons on the 17th September 2003.The signatories to the letter asking for the meeting were Lord Morrisof Manchester;The Chief Rabbi, Professor Jonathan Sacks;The Bishop of Oxford,The Rt. Rev. Richard Harries;Lord Adebowale, Chief Executive,Turning Point; Sir Archy Kirkwood MP; Andy King MP; Dr Doug NaysmithMP and Dr Howard Stoate MP.The delegation was led by Lord Morris of Manchester and comprised Lord Adebowale; Andy King MP; DrDoug Naysmith MP; Professor Jerry Morris of the London School of Hygiene and Tropical Medicine; GeoffRayner, Chairman of the UK Public Health Association; Neera Sharma, Senior Policy Officer, Barnardo’s;Georgia Klein, Senior Policy Officer, National Consumer Council; Reverend Paul Nicolson, Chairman,Zacchaeus 2000 Trust,Trustee, London Citizens and Family Budget Unit and Lina Jamoul (minutes).The coalition of 66 NGOs listed below are calling for research into the minimum incomes needed for healthyliving to provide information to Government when the levels of unemployment benefits, tax credits/minimumwage and pensions are being set.The Prime Minister was informed that a seminar was to be held in October todiscuss existing research into minimum income standards.This seminar was addressed by Professors PeterAmbrose, Jonathan Bradshaw, Dave Gordon, Jerry Morris and John Veit-Wilson.They have all been involved inresearching, writing and teaching about poverty and minimum incomes standards. It was attended byrepresentatives of NGOs that have used the research and by government officials appointed by their Ministers atthe invitation of Sir Archy Kirkwood MP who chaired the seminar.Professor Peter Ambrose, of the University of Brighton, has drawn together the papers presented to the seminarand other relevant information presented in this memorandum. I am very grateful to him, to the other seminarspeakers for their continuing support, to members of the coalition Planning Group, to Sue Middleton of theCentre for Social Policy Research at Loughborough University, to Guy Palmer of the New Policy Institute, toElizabeth Dowler of Warwick University, to Annie Seeley of The Food Commission, and to ChristopherDeeming of the London School of Hygiene and Tropical Medicine.Rev Paul Nicolson, Chairman.Zacchaeus 2000 Trust,93 Campbell Road,London N17 0AXTel: 020 83765455Mobile: 0796 1177889Email: zacchaeus2000@blueyonder.co.ukZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 5


Zacchaeus 2000 Coalitionplanning groupChair, Geof Rayner - Chair UKPHARon Bailey - Food JusticeNattalie Cronin - NSPCCDeborah Littman - UNISONCatherine Howarth - TELCOGeorgia Klein - NCCRachel Lampard - Methodist ChurchTim Marsh - UKPHABrian McGinnis - MENCAPMohibur Rahman - Muslim Council of Great BritainNeera Sharma - Barnardo’sHelen Simpson - Age ConcernMartyn Williams - Fuel Poverty.Rev Paul Nicolson - Zacchaeus 2000Professor Jerry Morris, London School of Hygieneand Tropical Medicine.Professor Peter Ambrose, University of Brighton.Professor Dave Gordon - University of BristolProfessor Jonathan Bradshaw - University of YorkProfessor John Veit-Wilson - University of Newcastleupon TyneProfessor the Reverend Nicholas Sagovsky - LiverpoolHope University College6Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Local organisationsCatholic Children’s’ Society -ShrewsburyChurch Action on Homelessness in London -UNLEASHCommunities Against Poverty - LiverpoolIlfracombe Credit UnionLiverpool Archdiocese Justice and Peace CommissionSt Albans Diocesan SynodPartners in Health - DudleyEast London Communities Organisation - TELCONational organisationsATD Fourth WorldAccess to JusticeAfghan Association of Great BritainCampaign WomenDebt on our DoorstepEuropean Anti Poverty NetworkLobby to end Age Discrimination - LEADLow Pay UnitNational Consumer CouncilNew Policy InstituteRefugee CouncilScottish Low Pay UnitWomen In Prison TrustPensioners’ CharitiesAge ConcernHelp the AgedNational Pensioners’ ConventionParents’ and Children’s CharitiesBarnardo’sButtle TrustChildren’s SocietyNational Council for One Parent FamiliesMaternity AllianceNSPCCNCH action for childrenParenting Education and Support ForumSave the Children FundSingle Parent Action NetworkThe Child Poverty CampaignNGOs supporting theZacchaeus 2000 PetitionHealthBritish Medical AssociationCentre for Food PolicyFaculty of Public Health - Royal College of PhysiciansFood CommissionFood JusticeFood Poverty ProjectFuel Poverty ProjectMencapMental Health FoundationMilk for SchoolsNational Heart ForumRoyal College of NursingSocialist Health AssociationUK Health for All NetworkUK Public Health AssociationTrades UnionsTrades Union CongressUNISON - (conference decision)FaithCatholic Agency for Social Concern - CaritasCatholic Bishops’ Conference- Social Welfare Committee (wound up in February2002)Catholic Child Welfare CouncilChurch Action on PovertyChurch of England - General Synod- (Motion won 339 - 0)Church of Scotland - General Assembly- (Unanimous decision)Conference of Religious in England and Wales- Social Justice DeskChristian Council for Monetary Justice.Methodist Conference (unanimous decision)Muslim Council of Great BritainIona CommunityVon Hugel InstituteVincentian Millennium PartnershipTotal 66 - February 2004Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 7


ZACCHAEUS 2000 TRUSTA Memorandum to the Prime MinisterThe Case for a Minimum Income Standards CommissionIt is universally agreed that income is an essential measure of poverty hence the need to establish minimumincome thresholds.The selection of two before housing costs thresholds by the DWP in Measuring ChildPoverty provides incomplete information about the progress of the Government’s commitment to eradicatechild poverty. Income after rent and council tax is the crucial measure of poverty (Appendix 1).On coming to power in 1997 the Government was faced with the task of removing a mountain of povertyin the UK. Low pay and increasing inequalities in income and wealth remain central obstacles to theachievement of the Government’s commitment to end child poverty (Appendix 2).Budget standards present the opportunity to fix income thresholds, related to the need for healthy livingand social inclusion, in which the goods and services that can be afforded by households living at thatthreshold can be listed, described, understood, quantified, priced and adapted.They represent livingstandards across the life cycle that are transparent.They have been available for many decades (Appendix 3).Budget standards are valuable because the judgements involved in setting the levels are less arbitrary thanother existing or proposed ways of fixing thresholds (Appendix 4). Such work can also deliver a range ofother information about quantities needed and prices to be paid by low income households crucial to themonitoring of progress and to sound investment policy formation (Appendix 5).The key advantage of budget standards against more arbitrary thresholds is that they are completelyflexible. Once fixed they should be up-rated by an earnings index rather than a prices index; from time totime they can be re-based.They are available for public scrutiny (Appendices 6, 7 and 8).Modern budget standards methodologies involve empirical and scientific effort to justify what items areincluded, their quantities, durability and retail prices.They use official standards for both nutrition andheating.They use consumer surveys on patterns of consumption.They use focus groups and other methodsto validate the judgements made.They can be triangulated with other relevant research to validatejudgements and set Minimum Incomes Standards (MIS) (Appendix 9).8Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


They can be adapted to recognise that the operation of market forces means the cost of some items ishigher for the poor - their housing costs often exceed Housing Benefit and they have to pay more forutilities, phones and loans - and that living costs, especially housing costs, vary regionally (Appendix 10).Hunger and poor diet (Appendix 11), poverty-related ill-health and stress (Appendix 12) and the growingburden of debt (Appendix 13) are not properly addressed by policies based on current or proposedmeasures of poverty. Nor has any systematic attempt been made to assess the large-scale savings to publicfinances that would result from a reduction of poverty (Appendix 14).The need for MIS is implicitly endorsed by the findings of the Strategic Audit published by the StrategicUnit at 10 Downing Street in November 2003.Weaknesses it identified include persistent poverty andinequality, poorer people not being ‘engaged’, obesity growing rapidly, a growing life expectancy gap andeducational failure among poorer children (Appendix 15).MIS are set in a number of countries, for example Norway, Sweden, Germany and Canada, and have beeninfluential in policy in a number of others, for example the Netherlands, Australia, and the US (Appendix16).Among many other international covenants to which the UK is signatory (Appendix 17) that on Economic,Social and Cultural Rights includes ‘The right of everyone to be free from hunger’. Nevertheless laws arebeing introduced that deliberately make UK citizens and asylum seekers totally destitute, and the lowestlevel of state support for both is at destitution level.The Zacchaeus 2000 coalition recommends that an independent and transparent Minimum IncomeStandards Commission (Appendix 18) is needed to carry the Government’s vigorous anti-poverty workforward.Zacchaeus 2000 Trust1 February 2004Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 9


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Appendix 1 - Income ‘before housingcosts’ - an incomplete measure of povertyDr Peter AmbroseVisiting Professor in Housing StudiesUniversity of BrightonReverend Paul NicolsonChairmanZacchaeus 2000 TrustIn the DWP ‘before housing costs’ measurement of child poverty, whether low income families are officiallypoor depends on the size of their rent and council tax, not on whether they have enough money to buy theminimum quantities of food, clothes, fuel and other essentials needed for healthy living. It is the income afterrent and council tax that is the crucial measure of poverty.Persistent poverty is normally found in rented accommodation. Housing stock in the UK on 31 March 2003recorded by the ODPM was as follows (000s housing units):Owner-occupied 17,888 (69.8%)Local authority rented 3,542 (13.8%)Privately rented 2,494 (9.8%)Registered Social Landlord (HA) 1,693 (6.6%)_______ _________25,617 (100.0%)In Measuring Child Poverty the Department of Work and Pensions announced three ‘new’ measures of childpoverty1. One called ‘absolute low income’ currently fixed at £210 a week before rent and council tax arededucted for a couple with one child, another ‘relative low income’, also before housing costs, to monitor thenumber of children living in households below 60% of the median, and the third a measure of socially perceivednecessities.Whether families are officially poor will depend on the level of their rent and council tax not onwhether they have enough money to buy a healthy diet, decent clothes, fuel and other necessities for healthyliving.It is difficult to tell which level of income officially measures the poverty of this family. If one of a couple withone child moves into work in England on the DWP ‘absolute low income’ of £210 a week living in a privatetenancy in council tax band C paying £93 rent (see DETR survey of English Housing 2002/3) and £13.85council tax (Hackney 2003/4 - a representative deprived area) they would be left with £103.15 to buy everything else; which is £36.85 less than the already inadequate £140 a week Income Support, described whendelivered by the DWP as ‘how much money the law says you need to live on each week’.When Working Tax Credit and National Minimum Wage are put together the Government calculates they willreceive £237 a week, which is already below the £246.85 in unemployment when the 100% rent and counciltax benefits are added to the £140 Income Support. Experience shows that tax credits in work are underminedby increasing rent, council tax, childcare and transport to work costs and the loss of free school meals.The inclusion of housing benefit is the reason given for the before housing costs measurement. But who pays theZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 11


ent and council tax is not the issue. It has to be paid and there is no margin for error, official mistakes or acrisis in statutory minimum incomes. Deprivation is a life of threats. Eviction for rent arrears; a fine or prisonfor council tax,TV licence arrears and truancy; disconnection for gas, electricity and BT arrears; and bailiffs forall of them, make deprived families, struggling to pay for food and school clothing, vulnerable to theextortionate interest rates of door-to-door lenders and catalogue companies.There is no punishment, but illhealth and anxiety, for cutting down on food, fuel or clothes.60% of the median income before rent and council tax will be persistently open to challenge for the samereasons. It is used for comparisons with Europe; we were the worst in 1997. It is marred by the radicaldifference in the housing markets. Households below 60% in countries with lower rents than the UK can enjoya higher standard of living. A survey of socially perceived necessities is no substitute for researching theminimum quantities of the essential items needed for healthy living by low income families after rent andcouncil tax and the prices to be paid in a market dominated economy.There are powerful reasons for doubtingthe efficacy of the before housing costs measurement of poverty in the UK.Factors producing high UK housing costsTaken together several long-standing trends in UK housing history help to explain why poorer families here facemuch more severe housing problems than those faced in the comparator countries shown on pages 10 and 11 ofMeasuring Child Poverty.They render the ‘before housing cost’ comparisons misleading.UK housing costs are rising inexorably in relation to incomes and simultaneously inter-regional differences inrents and prices are increasing. During the last three decades house price rises have outstripped those in mostcomparator EU countries (OECD 2000). In the early 20th century there was local flexibility in the system inthat changes in economic fortunes, up or down, could swiftly be matched by moving to housing at anappropriate rent. Now the majority of UK households are locked into long-term loan commitments that canspell disaster with changes in personal circumstances. Low rent housing has become virtually impossible to findin many ‘housing stress’ areas.The number of homeless families housed, often very expensively, in temporaryaccommodation arranged by their local authorities in England is now 99,620. In 1997 it was 54,930 (Wilcox2003).These changes have been brought about largely by a combination of three linked factors:(a) conscious political strategy(b) credit expansion and the self-interest of housing producers and lenders and(c) the continuing loss of public sector rented housing(a) Conscious political strategyAt the time of the General Strike in 1926 Neville Chamberlain made the ‘homes and gardens’ point that‘...every fruit tree planted converts a potential revolutionary into a contented citizen’.With a nervous eye onthe 1917 revolutions in Russia the notion of home ownership as a ‘bulwark against bolshevism’ was freelydebated in Parliament and developed in a popular book (Bellman 1928).The building society industry wasaccordingly favoured by tax advantages. In the mid 1960s a Labour government pronounced home ownership tobe the ‘normal tenure’ and in recent decades the Thatcher governments powerfully reinforced this logic.Thepayoff seen by all these politicians is that home ownership is presumed to lead to greater commitment to ‘thesystem’ and reduced capacity to exert pressure in wage bargaining (the main reason normally given for crossinga picket line is the need to support the mortgage).12Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Movement from a rented system to an ownership system appears to confer no intrinsic benefits since some ofthe best-functioning housing systems in Europe, for example in Switzerland, Germany, Austria and Sweden, aremajority renting systems.(b) The housing debt explosion and the self-interest of producers and lendersThe uniquely damaging effects for low income families of the UK system derive from the impact on prices andrents of the extraordinary rise in house purchase lending over recent decades coupled with the stagnation inhousing output, particularly of low cost housing for rent.The house purchase lending market has been much less regulated here than in, for example, Germany, Franceand Italy (OECD 2000).The total house purchase debt outstanding in 1980 was £53 billion. Updated to 2002prices using the RPI this would be about £126 billion and allowing for the increase in the number of housingtransactions we might have expected the aggregate debt to be around £148 billion in 2002. In fact the figure inthat year was £671 billion (all data from Wilcox 2003).This is £523 billion more than expected. As a percentageof GDP the figure has moved from 23%, which was roughly in line with France and Germany, to 65% which iscompletely out of line with comparator EU countries.This huge and unregulated expansion of credit has been achieved by the actions of lenders in increasing the ratiobetween the loan allowed and household income at the time of application, by counting in the income of secondearners and by lengthening repayment terms (terms of up to 50 years are now being discussed).This has beenhighly beneficial to housing producers, who themselves have close links to the lending industry. As the OECDpoint out ‘An increase in property prices generally goes hand in hand with increased net mortgage lending...’(OECD 2000).The rapidly expanding credit has fuelled property price rises that, at least in higher demand areas, haveoutstripped all other price indicators with the consequent removal of owner-occupancy as an option for poorerhouseholds. Rising prices for newly developed housing have in turn bid up the price of development land to thedisadvantage of any public sector agencies seeking to buy for public service purposes.The price of developmentland per hectare rose from £112,000 in 1981 to £822,000 in 2001, and in London from £390,000 to£4,000,000 (Wilcox 2003,Table 46).Perversely, escalating property prices, which have the effect of pricing out poorer residents, are often seen as a‘positive’ indicator in regeneration schemes.The philosophy is quite different in Denmark where, according to arecent report from BRFkredit, prices have remained ‘attractively low’ and have risen much less than in the UK.Similarly in Germany, Japan and Switzerland prices have remained stable or fallen in real terms in recentdecades. In Finland prices have risen only 20% in real terms in twenty years (Ball 2003) whereas in the UK theincrease has been 109.6% since 1993 and in Greater London 154.8% (Wilcox 2003).Rapidly rising prices and debt commitments could well have associated social effects, for example on the age ofhaving a first child, which are so far largely un-researched.There have certainly been personal disasters forseveral million households who have found themselves over-extended by the long-term debt. Many of thesehave been pushed over into other forms of debt since mortgage repayments must be their first priority. Despitethis prioritisation 492,000 homes have been re-possessed in the years since 1991 (Wilcox 2003).There isgreater exposure to this risk in the UK because 94% of household debt is mortgage debt (compared to 57% inFrance and 73% in Germany - OECD 2003, Annex Table 56).Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 13


There also appear to be some unintended consequences of high home ownership for the labour market.TheGovernment’s present policy is to place heavy reliance on the ‘work route’ out of poverty. But at least one studyof a number of European countries (Oswald 1999) has found a positive relationship between the percentage ofowner-occupancy and the rate of unemployment. Oswald suggested that largely owner-occupied housingsystems place impediments on the mobility of labour. High unemployment rates were found to be much moreclosely related to high home ownership rates than to other factors frequently advanced such as the degree ofunionisation of the workforce or the level of unemployment benefits.(c) Successive governments are selling off the public housing stockThe third factor damaging the housing interests of poorer households has been the purposeful and continuingcontraction of the public rented sector from a high point of about 28.3% of UK housing in 1971 down to thepresent 13.8%.Public sector housing finance systems can deliver low rents in relation to the housing quality provided becauserent-setting stems from the ‘pooled historic cost’ principle.This means that the rents charged by an authorityreflect a ‘pooling’ of the debt costs of properties across the whole stock.The current debt costs of propertiesbuilt in, say, the 1930s (for £200 or so, debt costs now zero) can be averaged with the much higher cost ofproperties built in more recent decades.This rent pooling advantage has been eroded as much of the publicstock has been sold off and as a result council rents as a percentage of earnings, a good indicator of the housingcosts faced by lower income people, have increased from 6.9% in 1980 to 13.3% in 2002 (Wilcox 2003).Housing associations cannot follow the ‘rent pooling’ principle since the rents they charge need to be muchmore closely related to covering the cost of the particular development concerned.The overall effect has beenthat HA rents as a proportion of earnings have risen from 11% to over 15% over the last twenty years (Wilcox2003). In comparator EU countries such as Austria, Denmark and France rents have increased much moreslowly in the ‘social rented’ sector.Rent-setting in the private rented sector, upon which poorer households are now increasingly dependent inmany areas, follows a quite different principle.The landlord is seeking a net competitive return (5-8%?) on thecurrent capital value of the property - even if it were built in 1880 at a cost of £100 or so. Compounding thiseffect the second factor discussed, the massive growth of house purchase lending, has served to push up theprice of properties bought to rent and thus the private sector rents resulting. Rents in relation to earnings haverisen fastest of all in this sector with the result that the cost of rent allowances has risen from £2.4 billion in1991/92 to £6.3 billion in 2001/02 (Wilcox 2003).Misleading ComparisonsIn all, the evidence and the international comparisons show that to compare the incidence of poverty indifferent EU countries on a ‘before housing costs’ basis is at best incomplete and at worst misleading.14Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


AN ANALYSIS OF THE INADEQUACY OF £210 A WEEK FOR A COUPLE WITH ONE CHILDBEFORE HOUSING COSTS SELECTED BY THE DWP AS THE ‘ABSOLUTE LOW INCOME’All private tenancies paying rent - England - 2000/2001ODPM Table A5.21 - DETR Survey of English HousingCouncil tax Hackney - 2002/2003Council No of Mean Council Rent JSA 2 adults Rent Absolute ShortfallTax Band households Rent Tax* +CT +1 child +CT+JSA low income*000s £pw £pw £pw £pw £pw £pw £pwA 643 63.00 10.38 73.38 140 213.38 210 3.38B 400 82.00 12.12 94.12 140 234.12 210 24.12C 434 93.00 13.85 106.85 140 246.85 210 36.85Total 1477D-H 631Total 2108Average weekly rents for new Housing Association Lettings in London - 2001ODPM Table 6.12 from NFHACouncil Tax - Hackney - 2002/2003Council Size of Rent Council Rent JSA 2 adults Rent Absolute ShortfallTax Band house Tax* +CT +1 child +CT+JSA low income*£pw £pw £pw £pw £pw £pw £pwB 2 bed 68.07 12.12 80.19 140 220.19 210 10.19C 3 bed 83.02 13.85 96.87 140 236.87 210 26.87*NB Only 5% of Londonerspay Council Tax in Band A62 % in bands B - D*As definedby the DWPAverage LA rent in London £64.29 in 2002Registered social landlords £65.25 in 2002Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 15


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Appendix 2 - Low Pay and PovertyPeter Ambrose(with contributions from Catherine Howarth TELCO, Deborah Littman UNISON and Paul Nicolson)A recent report on poverty and social exclusion (New Policy Institute 2003) showed that in 2001/2 12.5million people in the UK were living in low income households at or below 60% of median income.Thiscompares to about 13.4 million in the mid 1990s so some limited progress has been made. But the figurecompares badly to the middle of the Thatcher years when about 10.0 million were in poverty. In the latestfigures children (3.8 million) and pensioners (2.2 million) were over-proportionately represented in lowincome households but 6.5 million were working age adults.In its recent submission to the Treasury Review on Child Poverty the TUC point out that there have beenmarked changes in the proportion of various types of household living in poverty (TUC 2003). In 1968 24% ofhouseholds with just one person working in a low paid job were poor. In 1996 that proportion had risen to53%. By contrast the incidence of poverty among the workless and pensioners, although high, had hardlyincreased over the period.On coming to power in 1997 the Government was faced with the task of removing a mountain of poverty inthe UK. Low pay and increasing inequalities in income and wealth remain central obstacles to the achievementof the Government’s commitment to end child poverty.The Acheson Report (An Independent Inquiry into Inequalities and Health) published in November 1998, noted:Average incomes grew in real terms by about 40 per cent between 1979 and 1994/5, but this growth wasfar greater (60-68 per cent) amongst the richest tenth of the population. For the poorest tenth averageincome increased by only 10 per cent (before housing costs) or fell by 8 per cent (after them).Similarly the TUC submission to the Treasury argues that the main factor underlying the increasing relativepoverty of those in work has been the growing dispersion of wages.This is confirmed by official data. For everyyear since at least 1987 the earnings of the top decile of full-time workers have been increasing faster than thoseof the bottom decile (Social Trends, 2003, Figure 5.6).This has had a very marked and cumulative effect onincome dispersion. It also translates into growing differentials in wealth. Between 1981 and 2000 the share ofmarketable wealth (disregarding dwellings) held by the richest 10% increased from 56% to 72% (Social Trends,2003,Table 5.26).A comparison between the findings of the LCA studies carried out so far (Parker 1998,Wills 2001, Parker2002b, Ambrose 2003) and the latest figures from the New Earnings Survey illustrate the shortfall between theincome of substantial proportions of the population nationally and the income necessary to live at LCA level,itself a minimal standard, in the various areas studied:Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 17


LCA level updated Approximateto early 2004 (hourly) % of FT(2 adult household, adult workers1 working FT, 1 PT)* below this (NES)York £5.80 12%East London £6.83 25%Swansea £5.78 12%Brighton and Hove £6.51 22%* assumes a 37.5 hour working weekThe level of income required in the Brighton and Hove case would apply in many other high cost areas outsideLondon. LCA is a stringent level.To live at or below the LCA level inevitably means poverty (as explained inAppendices 6 to 8).The adverse health and other consequences of living below this level, and the costs thismust impose on various public budgets, were spelled out in the Brighton and Hove study. In this case, and inother high cost areas, the National Minimum Wage affords virtually no protection. On this evidence a verysignificant proportion of the working population are living at earnings levels that pose a threat to health andsocial inclusion and produce heavy cost consequences for the national economy.Various types of job are characterised by low pay:Job typeTypical range ofhourly pay ratesCare Assistant £4.31 to £6.33Catering Assistant£4.20 to £7.15 (night shift)Cleaner £4.31 to £5.80Nursery Nurse £4.15 to £5.60Restaurant Worker£4.20 to £6.01 (supervisor)Sales Assistant £4.20 to £7.63www.idspaybenchmark.co.uk/payjobs/prod/jobslistresultsMost of these jobs are done predominantly by women (see also Scottish Low Pay Unit 2003). In some of thesecases the entire range of hourly rates shown falls below the ‘LCA’ levels identified in the studies and in others itis necessary to work anti-social hours to reach this level.The cost to the Treasury and Inland Revenue of supplementing the low pay of employers is enormous andgrowing.The Brighton and Hove study carried out a survey of low paid workers whose average hourly rate was£5.95. It was calculated that the cost in means tested benefits and credits of bringing two adult households onthis pay level to the LCA level ranged between £88 and £145 per household per week, depending on workingpattern. For households on a National Minimum Wage level of pay the cost to the public purse ranged from£117 to £168 per household per week. For one adult households with two children the public cost in wagesubsidisation was even higher. Nationally the proportion of working families in receipt of in-work benefits and18Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


credits has risen from about 3.3% in 1994 to nearly 8% in 2002 (New Policy Institute 2003). As means testedbenefits and tax credits rise as a proportion of the income of poorer households, and the proportion derivedfrom pay falls, the public cost of this latter-day Speenhamland system increases.To escape the ‘poverty trap’ altogether, and thus to avoid very high marginal tax rates for the household andheavy cost to the Treasury and Inland Revenue, a weekly income of £435 is required for a two adult plus twochildren household (data from the Children and Housing Analysis Division of the Department of Work andPensions, April 2003).The best evidence available for the Brighton and Hove area indicates that between 20 and25% of local households are living below this income level and are thus caught in the poverty trap.A recent initiative by TELCO, a community-based organisation in east London, has achieved some strikingresults (TELCO 2003).The organisation draws attention to the huge local disparity in incomes and livingstandards between many working in the finance sector itself and most of those providing essential supportservices to that sector in the cleaning, catering, maintenance and security sectors. Some banks are offering newgraduates starting salaries up to £35,000 while cleaning staff and other support workers earn typically between£4.50 and £6.00 per hour.TELCO also draws attention to the marked ethnically based differentiation inincomes, the difficulty of finding low rent housing and the problems faced by local schools.Since almost all the biggest banks and insurance companies in the UK have committed themselves to CorporateSocial Responsibility (CSR),TELCO argues that as employers they should be guided by a number of explicitprinciples.These should include that employees of firms contracted to carry out support services should be ableto meet basic living costs without means tested benefits. In practice a ‘socially responsible’ contract for supportworkers would need to specify a ‘living wage’ of £6.70 per hour (the figure derived from the LCA study carriedout in east London in 2001 updated to 2003 for inflation), a pension with employer contribution, entitlementto compassionate and carer leave and occupational sick pay, Bank Holidays in addition to annual leave,appropriate training and the opportunity to join a trade union. Although changes of this magnitude in employerpractice may not happen overnight TELCO have had marked success in negotiating with some employers andhave engaged the interest of many others.They have made the point that changes of this nature will havepositive effects on the health and welfare of employees and thus on the quality of work they can carry out.Thework of TELCO shows the power of well organised and informed community organisation and it is a model forsimilar work elsewhere.It also raises the question whether public funds, in the form of tax credits, should be subsidising low pay forsome of the most profitable companies in the UK.This may not be the Government’s intention but it iscertainly now the case, and on a widespread scale.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 19


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Appendix 3 - Brief history ofbudget standards workPeter Ambrose(with contributions from Jonathan Bradshaw and Dave Gordon)Anti-poverty measures go back to Elizabethan times. Poverty has been viewed in a number of ways. In theseventeenth and eighteenth century it was seen as a necessary evil to spur people to work.The nineteenthcentury saw the distinction established between the deserving and undeserving poor as written into the PoorLaw reforms. More recently there has been an understanding that poverty may derive from structural factorssuch as technological and labour market change and the response was the mid twentieth century Welfare Statewith its set of safety nets to alleviate poverty. As state intervention and spending on poverty grew, the needbecame more acute to assess accurately at what point support payments needed to be made and how much theyneeded to be in order to achieve some minimal acceptable standard of living.Already by the late eighteenth century some budget standards work was being carried on in a number ofmainland European countries and in 1857 Engel pointed out that the poorer the household the higher theproportion of expenditure on food. By the late nineteenth century modern budget standards techniques werebeing pioneered by the Barnetts, Scott and Booth in both Manchester and London and by Rowntree in hisstudies in York (1901, 1941 and 1951).They were then used by Beveridge (1942) in setting up the NationalAssistance scales which formed part of the post-war ‘welfare state’ settlement.In more recent years the work has been continued by Wynn (1972) and Veit-Wilson (1992, 1994, 1998 and2001). Funding provided by the Joseph Rowntree Foundation led to the setting up of the Family Budget Unit atKing’s College London and subsequently York University and this gave rise to further publications by Bradshaw(1993) and Oldfield and Yu (1993) using the Low Cost but Acceptable formulation. Bradshaw (1993) defines abudget standard as ‘...a specified basket of goods and services which, when priced, can represent a particularstandard of living. Budgets can be devised to represent any living standard.’In the last five years Low Cost but Acceptable studies have been carried out in York, east London and Swansea(Family Budget Unit 1997, Parker ed. 1998, 2000, 2001a, 2001b, 2001c, 2002a and 2002b and Wills 2001) andBrighton and Hove (Ambrose 2003). Some of these studies have constructed living costs at a higher leveltermed Modest but Adequate (deriving from Wynn 1972).During the 1990s parallel work using the Minimum Income for Healthy Living and the Consensual BudgetStandards methodologies was also initiated.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 21


22Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 4 - The need forscientific not arbitrary judgementsJohn Veit-WilsonProfessor of Sociology and Social PolicyUniversity of Newcastle upon TyneDebates about poverty are beset by lack of clarity about concepts, definitions or measures.Veit-Wilson (1998)identified seven different ways of thinking and talking about poverty, often confused with each other. Most ofthem fail to address the issue of what income level is needed to avoid poverty seen as an intolerable level ofliving.They include:• Poverty as deviation from some average level of living (with no reference to the income level at which thedeviation becomes intolerable)• Poverty as statistical expressions of income inequality (again with no reference to the point of demonstrableinadequacy for a tolerable level of living)• Poverty expressed as ‘social exclusion’ (without being able to define what income level causes it)• Poverty expressed in terms of concepts drawn from economic theory (without reference to people’s owndefinition of inadequate income)Veit-Wilson makes the point that none of these address the question of where the boundaries of poverty are inany robust social scientific sense. All these forms of discourse, and the ‘poverty lines’ they may produce, arerelative to the values and standards of the society in which they occur.The statistical expressions, such as 60% of the median income (adopted by Eurostat and many governments),are relative to nothing more substantial than some arbitrarily chosen point on an array of values.This form ofdefinition takes no account of any scientifically valid contribution to the understanding of poverty and itseffects. It is both socially uninformative and politically uninformed about the degree of suffering inherent inwhatever point is chosen. It also lacks sensitivity, when using national datasets, to the wide variations evident inregional and sub-regional costs of living. It has the advantage of simplicity and, so long as definitions do notchange, can be used to measure changes in income inequalities over time.This definition may also be currentlyfavoured in view of its apparent, although not real, value neutrality.A better way of defining poverty is lacking the resources needed to acquire socially-defined necessary indicatorsof social participation, whether goods, service or experiences (Townsend 1979). Mack and Lansley (1985)found that there was a correlation between low income and the enforced lack of three or more sociallyperceived necessities.The Poverty and Social Exclusion Survey (PSE) has extended the scope of these methods(Gordon et al 2000).Bradshaw and Finch have tried to explore the degree of overlap between certain concepts of poverty (2003).Using the PSE they calculated the proportion of poor under three measures - deprivation (lacking four or moresocially-defined necessities), subjective poverty (having a household income a little or a lot below the levelwhich is necessary to keep the respondent’s household out of poverty), and ‘income poverty’ (or, rather,Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 23


unequal income, meaning a net equivalent household income less than 60 per cent of the median).Whileroughly similar proportions (just under one fifth) of the population said they were poor on at least one of thesemeasures, only 5.7 per cent said they were poor on all three (Bradshaw and Finch 2003).This does not indicatethat poverty cannot be measured, but that tools measuring disparate characteristics do not necessarily producematching results.The debate would be more productive if the problems of poverty were clearly analysed into their causes,conditions and consequences, and the factors taken into account were distinguished between those which aredirect (such as unsatisfactory levels of living or outcomes of behaviour or experience) and those which areindirect (resources, especially incomes, needed to avoid the direct conditions).The analysis also needs to clarifythe various dichotomies upon which definitions and measures can be based, for example:• Empirical versus normative approaches• Scientific evidence of effects versus statistical distributions as a substitute for explanations• Experiential or consumer-driven approaches versus social science based methodsQuite separate from definitions of poverty derived in these ways is the minimum income level that thegovernment of the day from time to time determines and implements by means of programmes such as IncomeSupport or Minimum Income Guarantee. For many decades in the UK this has invariably been set in response toa large number of other factors such as the state of the economy, other calls on public spending and the politicalor electoral stance the government wishes to project and it bears no logical relationship to any povertythreshold which could be determined in some more scientific or consumer-oriented way.The Zacchaeus 2000 Trust coalition argues that this separation reflects the failure of government to make use ofstrong available evidence in an important area of policy-making.24Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 5 - What budgetstandards work can deliverPeter AmbroseBudget standards work can deliver a range of new ideas and information that is crucial to the formation of a soundevidence base for policy-making and investment decisions.These include:Stimulating the debate on the necessities for healthy and inclusive livingIn the process of developing and implementing budget standards studies very fruitful debates have beengenerated about what level of access to goods and services are necessary in order to promote good health andwell-being and to reduce ill health and social and economic exclusion. In particular careful and expert attentionhas been paid to nutritional needs and the most cost-effective ways of meeting them.Much thought has also been given to other matters that relate to the protection of health including the need foran acceptable housing standard, the safety of persons and property, the benefits of social interaction and culturaland recreational activity and the needs of children in relation to their education and play.This wealth of information is now available to inform Government, households and those in advisory oradvocacy roles.Assessing the relevance of the National Minimum WageThe National Minimum Wage (NMW) was one of the ‘flagship’ anti-poverty measures introduced by NewLabour and the Minimum Income for Healthy Living (MIHL) budget standards work (Appendix 6) was initiatedpartly in response to its introduction. In particular the MIHL team wished to assess its value in ensuringsufficient income to protect a healthy lifestyle.At the outset of the work the team noted that the NMW was set without reference to any scientific assessmentof the level of income needed for healthy living.Their study found that the level of NMW at the time (£3.00per hour at age 18-21 and £3.60 at 22 plus) was not sufficient, given a normal 38-hour working week, toensure a healthy lifestyle even with the rather conservative assumptions about spending made in themethodology. It was found that the single man aged 22 plus would have to work 42.5 hours per week to earnthe required net MIHL and the younger man 51 hours per week. Clearly working weeks of this length arethemselves detrimental to health and social interaction. So in this case the NMW was found to have no healthprotectiveeffect.The LCA study in Brighton and Hove found an even more dramatic mismatch between the April 2003 NMWlevel (£4.20 for the older age, £3.60 for the younger) and the rate of pay necessary to reach the LCA standard.The rate of pay required for the LCA needs of the household specified (two adults and two children aged 10 and4), given a standard 38.5 hour working week, was found to be £7.83 per hour if one adult were working fulltimeand £6.38 per hour if one were working full-time and one part-time.The NMW was short of what wasrequired by £3.63 in the former case and £2.18 in the latter. In fact in the round of interviews with 24 low paidworkers the average contracted hourly rate of pay at £5.95 was found to be £1.75 above the NMW.Yet thisZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 25


group of workers were clearly experiencing a level of income shortfall that was having damaging effects onhealth, welfare and family and social life (Ambrose 2003, section 3.3).The clear conclusion is that in a high living cost area such as Brighton and Hove the NMW provides next to noprotection.Providing benchmarks through timeBudget standards work has made it possible to make chronological comparisons that cannot be made by anyother means. Using the LCA methodology (Appendix 7) a comparison between on the one hand the ‘bottomline of poverty’ (the cost of living at the LCA standard after rent, Council Tax and work-related costs have beensubtracted) and on the other the Income Support/Job Seekers Allowance level was made between the 1998LCA study in York and the 2003 study in Brighton and Hove.Whereas in the 1998 York study there was a shortfall between the IS/JSA level and the LCA standard afterhousing costs of £39.07 this shortfall was shown to be only £0.97 in the 2003 Brighton and Hove study.Thisdecrease in the shortfall stems from the very considerable increase in IS/JSA between 1998 and 2003 and bythis measure progress is being made in the fight against poverty.Assessing how many are below the ‘poverty trap escape point’At the time of the Brighton and Hove LCA study (Spring 2003) the gross weekly household income required tomove above the eligibility level for means tested benefits for the ‘standard’ family (two adult and two childrenaged 10 and 4) was £435 per week or £22,620 per year (data supplied by the Children and Housing AnalysisDivision of the Department of Work and Pensions).The best evidence available locally indicated that theproportion households living below this level of income in the area was between 20 and 25% (Ambrose 2003,section 3.1.4).The study found that the cost to public funds of means tested benefits and tax credits, if fullyclaimed, varied from £4,500 to £15,000 per household per year depending on the type of household. If housingand other living costs are further overheated by campaigns such as ‘Brighton - the place to be’, which areexplicitly geared to attracting in a higher income population, then the problems faced by poorer households canonly get more severe and the benefits and tax credits cost to public finances greater.At present there is no systematic means of assessing what proportion of the population in different areas iscaught in the ‘poverty trap’ and therefore to what extent regions and sub-regions are imposing differentialburdens on the economy in terms of benefits, allowances and tax credits.Yet such information would seem tobe central to the formation of inter-regional investment decisions concerning issues such as job creation andinfrastructural development.Identifying levels of disincentive in moving from benefits to workData derived from budget standards work prompt further questions about the disincentive effect of movingfrom benefits to work for those below the poverty trap escape point. For the majority of households livingabove this income level the marginal rate of taxation is effectively 33% (22% standard rate of tax plus 11%National Insurance).The significant minority of households living below this level are subject to much highermarginal tax rates.In the Brighton and Hove study (Ambrose 2003) it was found that for the LCA ‘standard’ household with oneadult working full-time at the NMW level the excess income was only £20.94 if working 38.5 hours per week26Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


compared to not working and living on benefits.This works out at 54p per hour worked. Compared to thehourly rate paid of £4.20 this represents a marginal rate of taxation of 87%. Marginal rates of taxation of up to97% were calculated for other situations.Identifying key local income datum pointsIf the minimum income required to live at some defined acceptable and/or health protective level is found tovary considerably from area to area (and the application of the LCA method in a series of studies has indicatedthat this is so) then the application of scales of benefit and tax credits that are nationally undifferentiated mustbe leading to varying degrees of fit between income so supplemented and the level of income required to livelocally.What is required in the way of income supplement or support in one part of the country may be quite different(higher or lower) from what is required in another. At the moment we do not know enough about the minimumincome required for a health-protecting lifestyle, or about variations in living costs, to be sure that the levels ofbenefit and tax credit being paid really do ensure that poorer people in all parts of the country can avoid levelsof deprivation that, the evidence suggests, generate very large costs on statutory public services.Another key datum point is the level of pay required to live in the area, at the LCA level (or such other MISlevel as may be agreed), without reliance on long hours of work (detrimental to health) or means testedbenefits (which carry various drawbacks including the ‘poverty trap’). In Brighton and Hove this level, using theLCA calculation for the two adults plus two children household, is £6.38 per hour if one adult is working fulltimeand one half-time and £7.83 per hour if only one adult is at work full-time. In another part of the country,with lower living costs, the required rates might be lower.This is clearly important information for Government, for unions who may wish to use it in bargainingsituations and for employers who may need to know more systematically how much they will need to offer toattract workers.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 27


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Appendix 6 - Minimum Incomefor Healthy Living (MIHL)Jerry MorrisEmeritus ProfessorDepartment of Public Health and PolicyLondon School of Hygiene and Tropical MedicineThe Minimum Income for Healthy Living (MIHL) standard was developed by a team led by Professor JerryMorris of the Health Promotion Research Unit at the London School of Hygiene and Tropical Medicine(LSHTM).The study (Morris et al 2000, Morris 2002, Morris 2003) was triggered by the introduction of theNational Minimum Wage.The team pointed out that during the intensive preliminary discussion of the NMWthere was no proper consideration of the health needs that such an income should be capable of meeting. As theteam observed, this is all the more surprising in view of the accumulated knowledge of decades of world-widebiomedical and social research relating rates of morbidity and mortality to incomes and living standards and to aby now comprehensive understanding of the major requisites for healthy living. Clearly, argued the team, itshould be an elementary principle that a policy setting a minimum wage, and therefore a household income,should take account of the amount of income required to be healthy.For the sake of simplicity in the first instance the team took the case of a healthy single man aged between 18and 30 living on his own, having left the family home.The methodology has currently been adapted to the studyof people aged 65+.MethodologyThe method adopted was a composite one. Some elements of the income required were arrived at fromscientifically-based calculation of what is required to protect health (for example Food and Physical Activity),some by drawing on official sources reporting actual household expenditures (Housing) and some by makingstated assumptions about lifestyle requirements and the consequent costs (Social Integration).These were thespecific ways in which this team approached the problems common to all attempts to arrive at a requiredminimum income.The balance to be adopted between ab initio calculation, nationally observed expenditurepattern, and the assumptions to be made for the client group about matters such as holidays and ‘socialintegration’ consumption outside the home, are among the conundrums faced by all constructors of minimumincome standards methodologies and of course entail major issues of research resources.The LSHTM team was especially experienced in terms of food and nutritional requirements, physical activityand housing and the study drew upon a large literature in relation, for example, to consensually accepteddietary guidelines about issues such as the intake of fats, sugars, fibres, vitamins and minerals.The requirednutritional intake was then costed (for a man of specified weight and activity) by a detailed survey of food pricesin shops in a deprived area of London.Two sets of food costs were constructed - one reflecting prices in all 205local shops and the other based on prices in the cheapest superstore in the area.The local shops were 28% moreexpensive (1999 prices). It was pointed out that the non-home food and drink consumption was also importantas a medium of social interaction.The figures here were specially derived from the UK National Food Survey.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 29


To complement the food cost calculations assumptions were made about exercise and recreation. Jogging, fastcycling and swimming, to confer aerobic benefits, were built in as necessary health-protective activities andcosted on representative samples in the budget. No allowance was made for muscle strength or weights trainingwhich were not considered essential at this stage.In relation to housing costs the team pointed out that less scientific attention had been given to the healtheffects of housing compared to those of other major factors. Crowding, indoor air quality, indoor temperature,damp, food, personal and other hygiene are all significant in affecting well-being and health. Problems lie inassessing the cost of accessing an acceptable and health-protective standard of housing in view of the rentdifferentials between the public and private sectors and the variation by a factor of two or more in regional andsub-regional housing costs.The team adopted the slightly uncomfortable compromise of using housing costdata, including rent, Council Tax and fuel costs, from the most recent Family Expenditure Survey and of takingthe average of the bottom third of this age/sex group in the rent figures, etc. stated.The need to deal moresatisfactorily with this major item of household expenditure is discussed in Appendix 1.‘Other costs of living’, including health costs, holidays, personal care, clothes, fares, household goods andservices and non-state pension contributions were derived mostly from the Family Expenditure Survey.Thedental check-up cost assumes the availability of an NHS dentist, the holiday allowance amounts to £167 a yearand the private pension contribution was 2% of income. But all these issues were dealt with in the context ofproducing unarguably minimal figures.A final category of expenditure is ‘social, cultural and psychosocial integration’ and the team stressed theevidence on both the significance of such activities for personal wellbeing and good health and the role they playin maintaining social cohesion, social roles, communication and other health-enhancing factors.The costsassumed, including TV, telephone, trade union and club membership and outings costs, were derived from avariety of sources.The team point out that their budget excludes any ‘possible personal margin’ for personal choice, contingenciesor emergencies, for training and self-improvement activities, for attending fooball matches or other sportingevents and for hobbies or interests not covered under the main categories of spending. It also concludes that thecosts of ‘Reciprocal arrangements with women friends are too variable to call’. In these, and in several otherrespects, the team regard the budget as constructed to be an under-statement of the real minimal costs forhealthy living.Net incomes requiredThe final minimum net income required using this methodology was presented as a ‘lower estimate’ (£106.47per week), a ‘higher estimate’ (£163.58) and a national/regional ‘baseline’ (£131.86).These widely varyingfigures reflect differences in area of residence, shop type used, recreational activities undertaken and so on. Itshould be noted that the higher figure is nearly 54% more than the lower. The ‘baseline’ figure of £131.86 isthen compared with the net income if working at the National Minimum Wage (at that time £3.00 per hour for18-21 year olds, £3.60 for 22 years plus).Working a 38 hour week the higher rate of NMW is still about £10short of the MIHL level. At age 18-22 the man would have to work 51 hours per week, and if 22 or over 42.5hours per week, in order to reach the MIHL level.30Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Extending the workThe paper concludes that the team took a relatively simple case to establish a principle. Currently they aredeveloping a MIHL study for pensioners and intend to extend the work next to family households.Theyconcede that there should be more discussion about the specifics of what should be included and what not andthat much will depend anyway on the level of people’s understanding and motivation if the aim is to be healthyat any particular income level.But the key point, strongly made, is about a lack of competence in the policy-making process.We haveextensive understanding about what quality of food intake, housing provision and other aspects of life can bereliably associated with the protection of health. But the policy process that produced the NMW took nocognisance of this knowledge and has not attempted to relate the wage level set to the expenditure required toremain healthy. In this it is typical of the vast field of official social protection in pensions, allowances, taxcredits, etc.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 31


32Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 7 -Low Cost but Acceptable (LCA)Jonathan BradshawProfessor of Social PolicyDirector of the Family Budget UnitDepartment of Social Policy and Social WorkUniversity of YorkThe Low Cost but Acceptable (LCA) budget standard was produced following eleven months intensive work in1997/98 by a multi-skilled team forming the Family Budget Unit (FBU).The Unit was established in 1987 andwas based in the Department of Nutrition and Dietetics in King’s College London and subsequently at YorkUniversity.The 1997/98 and subsequent work was led by Professor Jonathan Bradshaw and the funding wasraised by the Zacchaeus 2000 Trust. For a full account of the development of the thinking behind the standardsee Parker et al. (1998).The team reviewed the history of budget standards studies starting with Rowntree’s work in York in 1901 andcontinuing in recent decades with the work of Wynn (1972), Bradshaw (1993) and Oldfield and Yu (1993). Italso took account of work in the US, Sweden, the Netherlands and Australia (Saunders et al. 1998).The groupdecided to base the standard on two model families - a two adult household with two children aged 10 and 4and a one adult household with children of the same ages.Work is proceeding on a new budget for a singleyoung worker.The recent studiesThe first study was carried out in York and later studies have been carried out in east London, Swansea andBrighton and Hove (Family Budget Unit 1997, Parker ed. 1998, 2000, 2001a, 2001b, 2001c, 2002a and 2002b,Wills 2001 and Ambrose 2003). Some of these studies have constructed living costs at a higher level termedModest but Adequate (deriving from Wynn 1972).Standard and variable costsIn constructing the weekly income necessary to live at the LCA level the FBU team distinguished between twosets of costs - ‘standard costs’ such as food, clothing and personal care expenditures which were deemed not tovary in different areas and ‘variable costs’ such as housing, fuel, transport and so on that clearly do vary by area.Later studies have been carried out by updating the York standard costs for inflation and then carrying outresearch to establish the local level of the variable costs (see Appendix 2 of Ambrose 2003 for sources ofrelevant local cost information).Constructing the budgetsThe FBU team made it clear that the budgets were not constructed to have any prescriptive force but simply torepresent reasonably common patterns of behaviour and expenditure.The food budgets were very carefullyworked out, with illustrative weekly menus, in order to provide Dietary Recommended Values.The menus werechecked for consumer acceptability with low income families in 10 locations and they can be used foreducational purposes with both children and parents.The fuel budgets were similarly based on recommendedZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 33


thermal standards. Costs for items such as personal care, clothing, furniture and even postage, telephone anddry cleaning were worked out with equal care and considered in focus group discussions in the local areas.National pricing levels were set after reference to retailers such as Sainsburys and KwikSave and to mail ordercatalogue suppliers. A modest level of social drinking was included (two thirds of the healthy limit set by theHealth Education Authority cost was not included. More serious reservations might be expressed about basinghousing costs on the assumption that all families will have access to local authority housing (only 6 of the 24 lowpaid workers interviewed in the 2003 Brighton and Hove study lived in this low rent form of housing).Themodel also assumes access to an NHS dentist, that the household will be free of debt and that they will not bebuying into any private or personal pension scheme.There is no allowance for looking for work. All these pointsmay require reconsideration in the re-basing process (see also Ambrose 2003, Appendix 1).34Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 8 -Consensual Budget Standards (CBS)Sue MiddletonDirectorCentre for Research in Social PolicyLoughborough UniversityThe methodology began to be developed in 1994 at the Centre for Research into Social Policy at the Universityof Loughborough as part of the development work for the ‘Small Fortunes’ survey of the lifestyles and livingstandard of British children, undertaken for the Joseph Rowntree Foundation. The methodology has beensignificantly developed and refined since then.Alternative ways to approach the issueThe team distinguished three different ways of approaching the issue of setting a minimum income standard andprovided their own commentary on each:1. Self-assessed - measures which ask questions which are variations on the theme of ‘what level of income issufficient to keep family like yours out of poverty’. The advantage is that real people are being asked to setMIS but the approach is problematic because it asks people to do a very difficult task.The evidence suggeststhat this method produces inconsistent results according to how the question is asked and it also producesvery high MIS figures.2. Democratic - this method asks which of a list of goods and services, that more than 50 per cent of thepopulation believe to be necessary, people don’t have because they can’t afford them. This has the advantageof getting societal endorsement for what is essential. The disadvantage is that however carefully the list isconstructed its contents will always be criticised. It is difficult to produce a MIS from this methodology.3. Budget standards - this usually depends upon committees of experts who define a basket of goods andservices for a household to reach a particular standard of living and check their consumer acceptability withlow-income focus groups. The advantage is that it seeks to specify what people actually need to live on.Consensual Budget Standards (CBS) MethodConsensual budget standards methodology tries to bring together the advantages of these three methods, whilstavoiding their disadvantages (Middleton 2000). It uses a variant of focus group methodology to define budgetstandards. People who live in the household circumstances for which it is aimed to construct a minimumessential budget standard (pensioners, lone parents, single males and so on) are brought together to act as theirown budget standards committees. Each group is carefully sampled to include people from differing socialbackgrounds and economic circumstances. Similar methods developed in New Zealand have included in groupsonly people in deprived economic circumstances. CRSP’s view is that mixed groups are essential. The aim ofthe research is to achieve a consensus and this cannot be done by isolating people in differing socio-economiccircumstances from each other. Furthermore, asking deprived people to set poverty lines is simply asking themto define their own poverty.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 35


The method has at its heart the belief that if society is to accept a definition of a minimum living standard, andthe consequent financial cost of ensuring that people do not fall below such a standard, then there needs to beagreement or ‘consensus’ in society about what constitutes a ‘minimum’.The methodology has a number of phases:1. Orientation: participants develop a ‘case study’ of the person for whom they are drawing up a budgetstandard. This includes the assumptions which the groups agree to make about the person’s lifestyle, such asthe size and type of their accommodation, the number and ages of any children in the family, and so on.2. Task group meetings: task groups meet and draw up agreed lists of essential goods and services through aprocess of discussion and negotiation.3. Costing: these lists are then costed by researchers, at outlets agreed by the groups, to produce draftminimum budget standards.4. ‘Check back’:groups discuss the uncosted lists, reach agreement on any outstanding issues, test the strengthof the agreement or consensus and explore the financial implications of the budget standard for society.5. Final Budget Standard Groups are held when necessary to finalise the budget standard. These may beneeded, for example, to negotiate differences between budgets for men and women that may have emerged,or to consider the economies of scale involved in having more than one child.The lists are then adjusted and re-costed to produce a final agreed minimum budget standard.The definition usually adopted by groups is adapted from the United Nations definition of an adequate lifestyle:Things which are necessary for a person’s physical, mental, spiritual, moral and social well-being.It will be noted that this definition does not mention the financial resources available to households and theorientation and task groups are also encouraged to avoid considerations of cost as far as possible. There are anumber of reasons for this, the most important of which is that as soon as people begin to discuss incomes andcosts issues of spending patterns arise. This gives rise to judgements about whether some groups of thepopulation are more ‘deserving’ than others. Since the aim of the research is to produce budget standardswhich apply to all people in similar household types, such discussions need to be avoided.There are at least four further important points to bear in mind about the method. First, rigorous selection ofthe groups is vital so that, for example, professional recruiters are often used who recruit to a carefully laiddown quota - usually 9 per group. Second, groups make decisions so that input into the groups fromresearchers is limited as far as possible. As well as defining ‘minimum essential’ goods and services participantsset the parameters of the case study, choose how items and activities should be costed and at which outlets.They also decide replacement rates for ‘periodic purchase’ items such as clothes,‘white goods’ and furniture.This is particularly important because budget standards are also produced for these periodic items ofexpenditure separate to the ‘weekly’ budget standards. Third, the completion of expenditure diaries andhousehold inventories in advance of attending the groups is vital to ensure that the consensus reached is‘informed’. Most people do not consider in great detail what they actually have and consume and they need36Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


this knowledge if they are to consider the minimum essential needs of the case study individual. The finalbudget standards, because they are based on such detailed information, are relatively quick and easy to re-coston an annual basis. CRSP suggests that the exercise would need repeating every five years in order to takeaccount of changes in consumption patterns.CBS studies producedStudies have been produced for specific groups of the population including:• British children - the first CBS produced for Family Fortunes (Middleton et al. 1994)• British children with severe disabilities - (Dobson and Middleton 1998)• CBS for all individuals/household types in Jersey (Middleton 2001)• single pensioners• couple pensioners• working age single adults - no children• working age couples - no children• lone parents (the adult’s budget)• couples with dependant children• children aged under 2 years; 2 - 4 years; 5 - 10 years; 11 - 16 years• adults with disabilities (to provide a disability component)• British adults with disabilities - in progress for the Joseph Rowntree Foundation.The Jersey work is the most comprehensive and has shown the advantages of producing budgets for individualswithin families that can then be combined to produce budgets for particular family types.The States of Jerseyasked CRSP to produce these budget standards so that they could get a better understanding of poverty on theIsland and move towards a less discretionary and more transparent benefit system.Advantages of CBSThe CBS method is based on an informed consensus reached by ordinary people who are living - and spending -in the circumstances for which each budget standard is set. It therefore avoids expert judgements that may havelittle relationship with how people actually spend and consume. It can be regularly up-rated by re-costing thebudgets annually and, perhaps every five or ten years, re-running the research as priorities and expectationschange. It allows the adequacy of each component of benefits to be assessed and because the standard has beenagreed by ordinary people there is a better chance of the results being widely accepted. Furthermore,experience with the methodology has shown that people are more than capable of constructing, for example, ahealthy diet for themselves.Disadvantages of CBSThe method has not yet been tested for all household types or used extensively on the UK mainland.Therewould clearly be a need to take careful account of geographic variation, particularly in relation to transportneeds.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 37


38Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 9 - Triangulating themethods used in budget studies.Peter Ambrose(with contributions from Neera Sharma, Barnardo’s)Various methods are used in budget studies to define the particular set of goods and services required to achievean acceptable lifestyle and to work out the subsequent costing that enables recommendations to be made abouta MIS.The main distinctions are between scientifically validated ‘needs-based’ methods,‘statistically observed’methods and ‘preferred behaviour’ methods:• ‘needs-based’ methods use specialist scientific knowledge to identify a minimum required level of, forexample, food intake or indoor warmth and then costs it in the immediate purchasing environment• ‘statistically observed’ methods derive the expenditure on many of the items, for example holidays, fromofficial data such as the Family Expenditure Survey, relating it to households at the appropriate income level• ‘preferred behaviour’ methods make judgements based on the preferences and spending pattern of theparticular group of consumers under review.For example the MIHL methodology makes assumptions about the behaviour and spending preferences of their18-30 year old man which were not then tested by focus group work. In some of the LCA studies the‘presumed behaviour’ was subjected to a ‘reality check’ in the form of ‘focus groups’ of local consumers. In theCBS methodology the spending pattern adopted arose directly out of discussion with groups of consumers.This‘consensual’ method draws heavily on judgements made about expenditure needs by those groups best placed tomake them rather than on scientifically validated specifications about, for example, the nutritional needs orindoor temperatures required for health.The overall aim is to develop robust and scientific methodologies that can be applied to derive national MISlevels, locally applicable MIS levels and MIS levels applicable to various population subsets such as differenthousehold types, different ethnic groups, different age groups, etc.To achieve these aims it seems desirable toadopt some composite methodology.There needs to be a merging of the scientific value underlying the ‘needs-based’ logic with the morebehaviourally-based understanding derived from close contact with actual consumers and with more generalisedpatterns of spending behaviour. At the same time careful attention must be paid to the local purchasingenvironment and the capability of the relevant groups to access it.As an example a recent study by Barnardo’s (Sharma 2002) indicates that many of Britain’s 360,000 disabledchildren and young people and their families still live in poverty and are socially excluded from theircommunities.The in-depth survey carried out on seventeen households showed that on average it costs threetimes as much to raise a child with severe impairment compared to a non-disabled child. Lack of suitableaffordable childcare prevents many parents from these families from working. At present the benefits availabledo not meet these needs and in any case claiming procedures are over-complicated - described as a ‘minefield’by one exasperated parent - and uptake is limited.The report calls for the establishment of a Minimum IncomeZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 39


Standard which includes targeted support to meet the full extra costs of caring for a disabled child.40Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 10 - Market forcesdiscriminate against the poorPeter AmbroseThe operation of market forces leads to marked variations in living costs around the country and the StrategicAudit (Appendix 15) pointed out that regional disparities in GDP per capita are growing more marked.Incomes also vary considerably (Berthoud 2001). Local pay weightings are often poorly matched to thesevariations.Thus national trends in poverty and household incomes give little indication of the comparativeextent of difficulty experienced by those on low incomes in different parts of the country and different localareas. National data show that the South East Region has the lowest percentage of people living in householdswith an income below 60% of the median (Social Trends 2003,Table 5.21). But this obscures the problems ofthose on low incomes who do live in this so-called ‘more prosperous’ region.The situation in Brighton and Hove provides a good example. A high proportion of the workforce is in low paidsectors of employment such as the retail, hotel and restaurant sectors.The 2000 Index of Multiple Deprivationdata showed that over 58,000 people in the area were living in households deemed to be ‘income deprived’ inthat they were entitled to means tested benefits.This could mean that in the order of 20-25,000 households fellin this category (out of a total of about 114,000 households).The 2002 New Earnings Survey shows that nationalaverage earnings were £26,449 in 2002 and had risen 6.0% over the previous year.The average earnings inBrighton and Hove were £23,051 (or £443.29 weekly) and had risen by just 1.8% over the previous year.Thelowest decile of Brighton and Hove workers were earning below £229.40 in 2002 (the average weekly earningsfound in the survey were £202.63). A study in 2001 (Brighton and Hove Council 2001) found that 10% of localworkers earned less than £184.40 per week and 32% less than £250 per week (compared to 22% for the SouthEast as a whole). In combination these data show that, together with the Isle of Wight, Brighton and Hove hasthe worst low pay problem in the entire South East Region.Housing costs, by contrast, are very high and rising sharply. According to Land Registry House Price data, theaverage property price in Brighton and Hove was £181,184 in Quarter 3 of 2002, an increase of 19.4% onQuarter 3 of 2001. In 2001 an average earner first time buyer on 95% mortgage could afford something like£55,000 and the average price of 1 bedroom flats at about £102,000 was nearly twice that figure.The priceposition has worsened since then. In fact house prices have risen in the area by 126% over a five year period andthe ratio of average house prices to average earnings has increased from 6.7 in 2001 to 7.9 in 2002 (comparedto the national ratio of 5.9 in 2002).The figures understate the problem for poorer households in Brighton and Hove who aspire to own.Whileaverage prices might be broadly comparable to the rest of the South East the price of ‘entry level’ properties,flats and maisonettes, are 27% higher than the South East average and terraced houses are 47% higher (Brightonand Hove UNISON 2002).To compound the problem the stock of low rent council accommodation has shrunkover the last two decades under the Right to Buy policy and this has materially reduced the housing prospectsfor lower income people.Lower income people often have to pay more for utilities and other services. It is often assumed that gas andZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 41


electricity charges will be paid by direct debit. Many lower income households may not have access to bankingfacilities that permit this mode of payment and may be paying for the energy used by more expensive methodssuch as pay as you go meters.The preferred means of communication is now the pay as you go mobile phone forwhich there are no freephone calls. In addition, as Appendix 13 shows, many lower income households areburdened with debt reflecting previous years of poverty. Some of this debt may be carrying interest rates thatreflect the operation of ‘loan sharks’.When making international comparisons of poverty levels (as in the DWP’s Measuring Child Poverty) it shouldalso be borne in mind that there are differences between countries in what a given income will buy.Comparative Price Levels (CPLs) vary widely and by this measure the UK is the third most expensive countryin the EU after Sweden and Denmark. In 2001 these countries had, respectively, only 10% and 5% of childrenliving below 60% of median income compared to nearly 25% in the UK.This indicates that it is quite possibleto have a high-price/low-poverty economy. In 2000 prices in four EU countries were more than 20% lowerthan in the UK (Social Trends 2003, Figure 6.17).42Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 11 -Hunger and poor diet in the UKPeter AmbroseThere is considerable evidence of hunger and poor diet in the UK. One recent survey carried out in a deprivedarea of Leeds (Wrigley et al. 2003) showed that 13.2% of those questioned cut the size of meals or skippedmeals due to lack of money. Of those surveyed 26.1% said they could not afford to eat balanced meals. Inaddition Dowler and colleagues have written much about the relationship between poverty and poor nutritionand about ‘food deserts’ (Dowler, 2001, Dowler et al. 2001, Dowler and Finer 2003).The Food Standards Agency (FSA) found in their survey of the eating habits of 4-18 year olds carried out in2000 that poorer children more often ate white bread, whole milk, meat pies and pasties and sugar and had alower than average intake of fruit, fruit juices, salads, vegetables and semi-skimmed milk.This eating pattern,coupled with a higher intake of fizzy drinks which has doubled in the past fifteen years (National Diet andNutrition Survey 2002) helps to explain why in the past 10 years obesity among 6 year olds has doubled to8.5% and among 15 year olds has trebled to 15% (Health Survey of England 2001). Maturity-onset diabetes(type 2), previously seen only among adults, is now affecting schoolchildren. Obesity levels have trebled inEngland over the past 20 years and they are rising more rapidly than in most other parts of the European Union(Tackling Obesity in England,National Audit Office 2001).There is a clear link between adult and childhood obesity since overweight adolescents have a 70% chance ofbecoming overweight or obese adults (Parliamentary Office of Science and Technology Postnote 2003, No 205).The International Obesity Task Force fear that 40% of the UK population could be obese within a generationand Professor Philip James of the Task Force warns:The evidence is so compelling that we must now act rapidly and decisively to deal with thisepidemic...The first step must be to start protecting the health and well being of our young children, whoare being damaged because we are not yet willing to provide them with a safe environment where theycan experience and learn the value of good food and play...Instead their well-being is systematicallyundermined by the intense marketing and sales of foods and drinks high in fat, sugar and salt.The link between socio-economic status and food intake is evident in relation to adults.The FSA survey ofadults (Food Standards Agency 2001) found that poorer adults had a higher intake of white bread and meatproducts and a lower intake of fish, fruits and vegetables. Only 4% of women living on benefits eat therecommended five portions of fruit and vegetables per day compared to over four times that proportion of therest of the female population.This helps to explain the finding in the Government’s Tackling Health Inequalitiesdata that a woman in social class V is twice as likely to be obese as a woman in social class I (28% compared to14%).Many lower income people need to work long hours to make ends meet. In the Brighton and Hove study(Ambrose 2003) the 24 low paid workers interviewed were working an average of 44 hours per week and mostof those with children said that this affected their capability to shop and prepare meals at home.This is probablyZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 43


one of the factors leading to the increased dependence on ‘fast foods’. In 2001 around two billion meals wereeaten at ‘quick service’ catering outlets in the UK (Chief Medical Officer, Annual Report 2002) and the numbersare rising.Meals and snacks eaten outside the home tend to be higher in fat with about 40% of calories coming from fat(National Food Survey 2000).The amount of energy in an average chicken nugget takeaway meal (707kcal perportion) is 30% higher than a traditional cooked meal (542kcal) and a quarter-pounder with cheese meal(826kcal) is 52% higher than a traditional cooked meal. In addition portion sizes are getting larger, particularlyin ‘energy-dense’ snacks and fast foods.‘Supersizing’ of fast foods is an increasingly popular trend in the UK(Chief Medical Officer, Annual Report 2002).A World Health Organisation/Food and Agriculture Organisation expert group found ‘convincing’ evidence thateating a lot of energy-dense foods is a risk factor for obesity and that the heavy marketing of fast foods andsugary drinks were ‘probable’ risk factors (Diet, Nutrition and the Prevention of Chronic Diseases,Joint WHO/FAOexpert consultation,WHO, Geneva, 2002).There is also a link to tooth decay, one of the most commonchildhood diseases. In the UK 51% of 11 to 14 year olds and 67% of 15 to 18 year olds have dental decay.Themain cause of dental decay is the sugar found in foods commonly consumed by young people, such as softdrinks, confectionery and cakes.Sales of snacks and confectionery continue to rise in the UK, outstripping those in all other European countries(Chief Medical Officer, Annual Report 2002). It is hardly surprising that the average amounts of saturated fat andadded sugars eaten by 4 to 18 year olds are above recommended levels (National Diet and Nutrition Survey,YoungPeople, 1997). By contrast most of the 24 respondents in the Brighton and Hove survey reported that they couldnot afford to buy as much fruit and vegetables as they wished. Nationally children in Britain eat on average onlytwo portions of fruit and vegetables a day, with one in five eating no fruit at all (National Diet and NutritionSurvey,Young People, 1997).The Executive Board of the World Health Organisation is meeting early in 2004 to consider the growing burdenof non-communicable diseases and to seek to reduce the inappropriateness of much food marketing for childrenand the use of misleading messages in advertising (World Health Organisation 2003).44Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 12 -Poverty and ill healthPeter Ambrose(literature search by Julia Stone, Research Officer, University of Brighton)Numerous studies over the years have established correlations between, on the one hand, poverty and lowsocio-economic status and, on the other, various negative ‘outcomes’ in terms of poor health (see especiallyGraham, ed. 2000), lower educational achievement and a higher incidence of crime. In his review of evidencelinking socio-economic status with health, Syme (1994) points out that:...a gradient exists in the rate of disease from the top of the social hierarchy to the bottom, for almostevery disease that has been studied, practically everywhere in the world.Some key studies relating to the United Kingdom include the Black Report Inequalities in Health (1980), theAcheson Report An Independent Inquiry into Inequalities and Health (1998), the annual Health Surveys for England,produced by the Department of Health, the Audit Commission’s 2002 report Tackling Obesity in England.All these official reports found clear evidence of substantial socio-economic differences in morbidity rates. Sinceit is safe to assume that the vast majority of people access the best housing conditions they can afford it isreasonable to believe that bad housing will also show strong associations with various negative health outcomes.An annotated literature review has discussed a number of studies linking poor housing and living conditions notonly with poor health but also with negative outcomes in education and with higher rates of crime experienced(Ambrose, Barlow et al. 1996). A more recent discussion of work on urban regeneration and health (Popay2001) has drawn attention to the urgent need to move towards a better resourced and systematic research driveon this issue while the most recent review (Thomson et al. 2002) has found that so far there are only a handfulof valid studies linking a housing improvement intervention and health gain. Much more work is needed on thisissue.There is no shortage of studies demonstrating correlative links between socio-economic group and variousaspects of health. Key findings from the Health Survey for England 1996 (Prescott-Clark and Primatesta 1998)include an observed social class gradient for obesity in women with 25% of women in Class V classified as obesecompared with 14% in Class I, an annual accident rate of 38% for non-manual males in the 16-24 age groupcompared with 52% for manual males and 89% of women in Class I self-reporting their health as good or verygood compared with 59% in Class V.Marmot and his research group at University College, London conducted two major British cohort studies,Whitehall and Whitehall 11 (Marmot et al. 1991).These looked at morbidity amongst British civil servants fromthe bottom through to top grades.Whitehall 11, set up in 1985, found evidence of increased risk ofcardiovascular disease and respiratory disease as one went down the civil service grades. Coleman’s research(Coleman 1999) was the first major study of cancer and socio-economic factors and looked at the survival ratesof 3 million adults and 18,000 children in England and Wales who had been diagnosed with cancer between1971-1990 and followed their progress up to 1995.The research findings revealed a disparity in survival ratesZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 45


etween rich and poor of between 5% and 16% for fourteen adult cancers, including breast, bowel andmalignant melanoma (the Office of National Statistics deprivation index was used as the basis for distinctionbetween rich and poor.) A sample finding was that the rich were sixteen times more likely than the poor tosurvive for five years after getting tongue cancer.A study by Gravelle and Sutton (2001) measured and decomposed income related inequalities in self-assessedhealth, reported pro-rich inequality increasing in England, Scotland and Wales during the period underinvestigation and concluded that reductions in this pro-rich inequality in health could be achieved by reducingincome inequality thus reducing the effect of income on health.Airey et al. (1999) collected data on the incidence of coronary heart disease by social class. A key finding oftheir report was thatCHD patients differ from the general population in that a higher proportion is from manual social classes- about half compared with two-fifths of the general population. Among male patients... the proportion iseven higher - 55%. (Airey et al. 1999, p.5)Poverty and poor housing conditions are frequently associated with low indoor temperatures.There has beenmuch research on the effects on health of low temperatures in the home. Baker (2001) from the Centre forSustainable Energy has produced a review of evidence linking living in a fuel poor home with increased risk ofillness.This shows in particular a strong association between cold environmental conditions and increased risk ofstrokes, heart attacks and respiratory illness. Evidence is also reviewed on the impact of cold stress causingcardiovascular strain, the increased incidence of dust mites in poorly ventilated homes affecting asthma andeczema, particularly in children, and the effect on mental and physical health of the presence of damp andmould growth in the home.The relationship between inadequate indoor heating and excess winter deaths hasbeen extensively studied (for example Eurowinter Group 1997).Research has also linked poverty and low socio-economic status with a greater risk of low birth weight (lowbirth weight has traditionally been set at 2.5 kg or under, although this is currently being re-examined).TheNew Policy Institute indicators (New Policy Institute 2003), which are drawn from a variety of official sourcesand are published annually, show that babies from parents with manual backgrounds are more likely to have lowbirth weight than those from non-manual backgrounds, (8% compared to 6.5%).Low birth weight can well have a number of negative implications. A Canadian Public Health Associationdiscussion paper (1997) cites research which asserts that poor children are disadvantaged relative to their peersin numerous ways. In particular they are more likely to be born prematurely and to have low birth weight. Alink between birth weight and IQ has been suggested by studies including a New York study (Matte et al. 2001)which looked at 3,484 babies born of 1,683 mothers between 1959 and 1966.The children were tested, using 3performance tests and 4 verbal tests, at the age of 7.They found that in general, higher birth weight meanthigher IQ.The average difference between babies of less than 2.5kg and those of up to 4kg was 10 IQ points.Similarly research from a cohort study by a team from University College London (Richards et al. 2001) linkedbirth weight with achievement at school and university, and found that big babies are more likely to do well andtend to achieve higher scores in tests to measure powers of reasoning than small babies.This cohort studylooked at 3,900 men and women and found this link between cognitive development and birth weight at ages 8,11, 15 and 26, although the link was less clear at 43. Low birth weight has also been linked to higher than46Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


average risk of heart disease and stroke in adult life.Research has also been carried out on some social implications of low birth weight (Phillips et al. 2001).Thisstudy, carried out by the Medical Research Council’s environmental epidemiology unit at SouthamptonUniversity found that men who had a low birth weight were less likely to marry than other baby boys. Lookingat a sample of 5,000 men born between the two world wars, they found as many as one in five low birth weightboys did not marry compared with fewer than one in ten of those with a higher birth weight.Another study found that children’s social backgrounds were even more important than low birth weight indetermining how well they do at school (Jefferis et al. 2002) The team, from the Institute of Child Health inLondon, studied nearly 11,000 children born from March 3 to 9 1958 and measured their maths, reading andother abilities at ages 7, 11 and 16, recording their highest educational achievement at age 33.The team foundthat over time, the gap in educational attainment between children in different social classes widened, beingmost pronounced by the age of 33.They also looked at birth weight and found that though maths scoresincreased for every kilogram of birth weight, the differences based on birth weight alone were relatively smallcompared to those based on social class background.More attention is now being paid in officially sponsored research to the analysis of causal linkages between poorconditions and poor health.The Acheson Report An Independent Inquiry into Inequalities and Health (1998) wascommissioned to review the evidence on inequalities in health and to update the findings of the Black Reportsome eighteen years previously. Like Black, Acheson stressed the need to address factors outside the NHS, andsome of his recommendations called for measures to reduce poverty and improve education and housing. Hereported continued inequalities in morbidity citing, for example, that in 1996 in the 45-64 age group, 17% ofprofessional men and 25% of professional women reported limiting long standing illness compared with 48%unskilled men and 45% unskilled women (Office of National Statistics 1996).It should also be noted that there are other connecting mechanisms between poverty and poor health. A recentstudy by Barnardo’s on the effects of poverty in the summer holidays specifically has drawn attention to theadditional problems faced (Gill and Wellington 2003). A survey of 43 families with children in the 5-13 agerange in three semi-rural locations found that in the summer holidays there were increased food costs due tothe absence of free school meals, outings and even swimming trips cost a very large proportion of low weeklybudgets, only a third of children could access a playscheme, over half the children had never had a summerholiday and for most of those who had it took the form of a visit to grandparents or a non-custodial parent.Theresult is long hours ‘...stuck in front of the telly’, fighting, arguing and getting bored, reduced self-image aschildren learn of the exciting holiday experiences of their peers and increased worries for parents as they facethe inevitable extra costs of the new school year. All these conditions clearly have health implications.Thereport calls for a Minimum Income Standard that incorporates targeted help to enable poorer children to haveaccess to leisure and other recreational activities as set out in the United Nations Convention on the Rights of theChild.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 47


48Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 13 -The growing burden of debtPaul NicolsonThe minimum incomes standards methodologies used so far make no allowance for debt.Yet the repayment ofdebts out of statutory minimum incomes in or out of work makes them even more inadequate for healthy living.For most low-income households debt is unavoidable.The law makes a bad situation worse in the draconianenforcement of unavoidable rent and council tax debts against vulnerable people.The Debt on our Doorstep campaign states the problem as follows:1. In 2000, over 1 million individuals approached local Citizens Advice Bureau for help with debt problems2. 1 in 10 households have no building society or bank account3. Over 3 million households are reliant on the services of moneylenders, who routinely charge in excess of150% APR for cash loans4. The Government’s own Social Fund has been widely criticised for offering loans rather than grants foressential goods to people already suffering financial hardshipIn July 2002 the ESRC published the report How People on Low Incomes Manage their Finances.The report featuredseven papers by leading researchers on aspects of financial management in low-income groups.The mainfindings were:1. In general, poor people manage their finances with care, skill and resourcefulness.There is no evidence tosuggest that there are two types of poor families - those who can cope and those who can’t (work byKempson and Middleton).2. People adopt various strategies when incomes are low, but no money management strategy can be sustainedif income is too low to make ends meet (work by Kempson).3. The vast majority of people on low incomes are borrowing money regularly for essential items and to makeends meet.The last resort is the Loan Shark (work by Jones).4. Borrowing from the Social Fund is, on the whole, seen as second best, largely because there is a reluctanceto ask for money from the Government. Borrowing in the alternative credit market is usually the mainoption for people unable to raise the money they need more cheaply (work by Kempson).5. Financial hardship and debt is unavoidable for many, particularly lone parents. Children inevitably suffer theconsequences in terms of their behaviour, aspirations and longer-term outcomes. However hard parents try,the consequences for children of long-term poverty remain severe, not simply as a result of materialdeprivation but also because they grow up without the financial skills and knowledge that are an increasinglyimportant part of life (work by Middleton).6. Households with lower incomes have less confidence in using the new technology.They seem to beincreasingly at a disadvantage, which is reproducing, and in some cases reinforcing, traditional inequalitiesbetween and within households (work by Pahl).Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 49


The Lord Chancellors Department publishes the following information about possession orders:1999 2000 2001 2002Number of actions 139,067 147,519 150,563 151,162Suspended orders 72,106 69,352 100,643 98,583Orders made 24,202 27,168 N/A N/AODPM written answer to Lord Morris of Manchester.Hansard 8 Jul 2003 : Column WA26The number of suspended prison sentences for council tax arrears are not collected by the ODPM but they arereported by local authorities to the Chartered Institute of Public Finance & Accountancy.The estimated figuresfor England, for the latest three years for which information is available, are:2000 2001 2002Suspended prison sentences 15,900 17,600 22,400ODPM written answer to Lord Morris of Manchester.Hansard 13 June 2002: Column WA76These figures are the tip of an iceberg. Underlying the recorded actions are millions of threats of eviction orimprisonment by housing associations, local authorities and bailiffs that force households with inadequateincomes into the hands of licensed moneylenders and illegal loan sharks and thus over the edge into petty andserious crime.This stress for household members has mental health consequences leading in one case to asuicide. Debtors are never told that only the magistrates can imprison, that it cannot be done without theexamination of a means statement, that they can remit the debt in cases of financial hardship or that can makearrangements to pay with the debtor.In their response to the LCD White Paper ‘Effective Enforcement’ the Enforcement Law Reform Group drawnfrom bailiffs companies and advice groups reported that the number of cases they receive from creditors isrunning at 3.4 million a year 1.2 1 million of which are council tax arrears.They expect their total market tohave risen to 3.8 million cases by the end of 2004.The enforcement of rent and council tax arrears is complicated by the mistakes of job centres, inland revenue,local authorities and employers in the administration of income support, housing and council tax benefits andtax credits.The Auditor General has repeatedly qualified the accounts of the Department of Work and Pensionsdue to errors in the administration benefits that create overpayments and underpayments both of which causetrouble for the recipients. A mistaken cancellation of income support by the DWP automatically cancels housingand council tax benefits.Therefore the two accounts get into arrears. Computer driven enforcementprocedures for as little as £250 are triggered. As a result totally unnecessary threats of eviction andimprisonment are sent to vulnerable people receiving inadequate incomes. The National Association of CitizensAdvice Bureaux reported on this oppressive muddle in Undue Distress published in 2002 and in Possession action -the last resort? published in February 2003.The annual renewal of applications for rent and council tax benefitsfrom to the local authorities is another cause of much distress by the authorities.Single mothers with several children receiving income support have been fined £150 one for the truancy of adeaf child and the other for a child with emotional and behavioural difficulties.The bailiffs have enforced the50Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


fines until legal advice or voluntary help from Zacchaeus 2000 has intervened. Income support for familiesremains inadequate. £150 is the equivalent of food for a family of 5 for two weeks or the school clothes for agrowing child for a couple of termsThe large-scale escalation of housing debt over the past two decades has contributed to the problemsexperienced by many households and has been a factor driving many into other forms of debt (this issue is fullydiscussed in Appendix 1). In terms of the effects on levels of poverty it has meant that more households havebecome more overstretched financially, for longer periods and with ever more draconian consequences if one ofa number of commonly occurring events, such as unemployment, family break-up or rising interest rates, meanthey have to default on repayments. The debts of vulnerable people 2 in the UK have created a national crisiscausing family and social disintegration and massive unnecessary expenditure by local and national government,the courts and the prisons.—1 Their source is the Chartered Institute for Public Finance & Accountancy.They point out that the LCD had underestimatedthe number of council tax cases sent to bailiffs at 779,000.They also point out that the total activity of bailiffs at 3.2million cases is 151% of the LCD stated activity of 2.7 million. A similar blind spot exists in the absence of any officialrecord of the number of unlawful imprisonments for local tax default. Zacchaeus 2000 was able to tell LCD that the numberis over 1000 in the past 12 years because one of their trustees took those cases to the High Court. LCD does not know howmany more there have been. Unlawful imprisonment is such a gross violation of human rights that it deserves greater officialcare.2 The only official definition of vulnerable people there is can be found on page 9 Vulnerable Situations of the NationalStandards for Enforcement Agents issued by the Lord Chancellor’s Department in April 2002. It requires bailiffs to refer backto the creditor when they visit the elderly, people with a disability, the seriously ill, the recently bereaved, single parentfamilies, pregnant women, unemployed people and those who have obvious difficulty in understanding, speaking or readingEnglish.With the addition of those with mental illness or who are on National Minimum Wage the definition of vulnerabilitywould be reasonably comprehensive.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 51


52Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 14 - Savings to public fundsfrom a reduction in povertyPeter Ambrose(literature search by Julia Stone)There is growing research activity around the world aiming to assess the costs associated with poverty.Thiswork gives some indication of the order of magnitude of the cost savings to a range of public budgets that couldlogically be expected to flow from a reduction in the incidence of poverty.This appendix reviews just a few ofthe cost-assessment studies that have been carried out recently. Other literature concerning the ‘health gradient’and the clear connection between poverty and conditions such as pre-term low birth weight babies, childhoodobesity and diseases related to indoor winter cold has been referred to in Appendix 12.• Better housing saves public money on many budgetsAs a generality most people seek to access the best possible standard of housing they can afford. In this sense tobe in very poor housing normally reflects poverty. In a series of reports on the ‘health gain’ associated with theSRB1 regeneration of parts of Stepney in east London a set of over 40 ‘exported costs’ specifically related topoor housing and living conditions was tentatively identified following a series of surveys of both residents andservice providers (Ambrose and MacDonald 2001 and Ambrose 2002).Some preliminary attempts were made to measure some of these cost effects (Barrow and Bachan 1997). Forexample it was found that in the base year of the study (1996) the costs generated per household and falling onthe budgets of the providers of primary healthcare and policing services were five to seven times heavier in thearea of unimproved housing (Stepney) than in a comparable area of improved housing (in Paddington).The‘health gain’ evaluation found that once the area of bad housing had been improved the rate of self-reportedillness days among the returning population fell from 37 per 100 person/days to 5 per 100 person/days(Ambrose 2000) with a consequent sharp fall in calls on NHS resources.• Unaffordable rents produce indirect public costsA subsequent study (Ambrose and MacDonald 2001) found that while there had been undoubted gains in healthand lifestyle arising from the regeneration the change of housing tenure, the increases water costs and thehigher Council Tax bandings now applicable had increased the weekly housing costs of a sample of householdsby 27%.The survey responses indicated that this has led to reduced expenditure on food, recreation and the useof heating systems. All these forms of expenditure are themselves health-protective and the lesson is thathousing improvement in itself is not enough unless the issue of affordability is kept firmly in mind.• Poverty generates more NHS costsA recent UNISON-funded report on Brighton and Hove (Ambrose 2003) has documented the problems oftrying to live on low pay in this very high cost area.The survey carried out on a sample of low paid workersshowed clearly how low income adversely affects health, diet, safety, recreational activities and holidays, familylife, neighbourliness, volunteering and other activities. Many if not all these adverse effects work through tohigher costs on one public budget or another. One financial effect was shown in a study in east London whichdemonstrated that the annual cost of primary health care per person at risk varied from £107 for those in SocialZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 53


Classes I and II to £256 for those in Social Classes IV and V (Worrall et al. 1997).• More preventative interventions would save public moneyIn a recent ground-breaking study by the children’s charity Barnardo’s (Hughes et al. 2000) the life stories ofseven young people aged from 13 to 30 were considered. Each is facing or has faced severe difficulties. Usingverified costings from the health, social, law enforcement and other relevant services, the actual costs onservices generated by these young people was compared with the much lower cost of the preventativeinvestment which, had it taken place, could well have reduced or completely prevented their later difficulties.The Barnardo’s report gave only the individual case study costings but it seems possible to generalise a little.The aggregate cost of the failure to invest came to just under £1 million for all seven combined.Their aggregateage came to 127 years so the cost of failing to invest was of the order of £7,870 for each year for these seven orabout £1,125 each per year.There are about four million children in poverty in this country. If it is assumed thateven only one in four of these is at risk of running into the same kinds of difficulties then the annual cost of thisfailure to invest in our poorer children equates to over £1.1 billion per year.The figure is suggested purely asindicative of the order of magnitude of the public costs involved.• Reducing indoor cold saves public moneyOther research has begun to identify the cost of fuel poverty and indoor winter cold. A pilot study has beencarried out by the Low Energy Architecture Research Unit, at the University of North London (Rudge 2001).It produced positive correlations between low income, poor building characteristics and admissions to hospital.The aim is to develop a methodology for evaluating some of the benefits, in particular health improvements,which would result from investment in affordable domestic warmth. Similarly a study of the housing situation inAustralia (Berry et al. 2002) argues that inadequate housing and ‘broader exclusionary forces’ generate socialand other problems that are producing fast rising fiscal costs for governments.• Lack of holidays costs public moneyIn a study of parenting in poor environments recently commissioned by the Family Holidays Association (Ghateand Hazel 2002) it was found that about one third of the UK population do not have an annual holiday.Thiscontrasts with a holiday participation rate of over 75% in Germany, the Low Countries and Scandinavia.Themost commonly cited reason for not taking a holiday is low income so this adds another dimension to socialexclusion.The Briefing Paper produced by the FHA points out that Social Tourism is much more developed onmainland Europe with higher government subsidies and greater participation in provision by employers andunions.The FHA argue that the benefits of family holidays take many forms and include relief and renewal, combatingdepression, improving physical health, reducing social isolation, broadening experiences, helping to bondfamilies and developing informal support networks.The Association points out that there has been no rigorouscost-benefit analysis of the financial gains to be derived from a greater public investment in helping poorerpeople to take a holiday but they suggest that there are clear indirect benefits of support of this kind, forexample in reducing the cost to the exchequer of youth crime. It is also highly likely that the better healthderiving from taking holidays would reduce calls on NHS resources.54Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


• Reducing stresses on family stability saves public moneyThe stress associated with inadequate income, long working hours, debt, poor diet and crowded housingconditions has been linked by many observers with an increased risk of family tensions and breakdown and evenof child abuse. Much more systematic and co-ordinated research is required to firm up these linkages but whatis beyond doubt is that many of these outcomes are not only grievous for those concerned - they also generateheavy long-term costs for publicly funded services.• Discussions of NHS funding needs overlook preventative actionIn view of the weight of evidence building up about the ways in which poverty and poor living conditionscontribute to the demand for, and therefore the cost of, health and welfare services it is perhaps surprising thata recent report on the long term funding needs of the NHS (Wanless 2002) concentrates almost entirely on thesupply side of the health equation. It spends comparatively little time considering the ways in which policyinterventions to reduce inequalities and provide better housing at more affordable access cost might work tomoderate the growth in demand for healthcare provision.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 55


56Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 15 - Weaknessesidentified by the 2003 Strategic AuditPeter AmbroseDuring the first half of 2003 the Strategy Unit at 10 Downing Street worked on an audit to consider strategicchoices and priorities across departmental boundaries.The analysis drew on a wide range of sources to facilitate theconsideration of long term trends. It also included a review of strengths and weaknesses in the UK compared tothose in other EU and comparable countries.The intention was to identify the main challenges and opportunitiesfacing the country and the choices to be made in addressing them.The need for MIS as a measure of poverty isimplicitly endorsed by some of the Audit’s findings.Weaknesses identifiedThe audit identified persistent poverty and inequality as major weaknesses.The income and wealth gaps havewidened since the late 1970s and the UK stands with the US as the most unequal of the countries reviewed andthe ones in which inequalities were widening.Poverty is found to be strongly linked with educational failure.Whereas the top 25% of our children are amongthe best achievers in Europe there is a long tail of under-achievement among poorer children. Low incomehouseholds are far more likely to suffer from crime and the poorer sections of society are far less ‘engaged’ andshow lower levels of trust in those around them.In terms of health there is a clear and widening gap between rich and poor in life expectancy, smoking ratesremain high among lower income women in particular and this group are found to suffer far more from stressthan other groups. Growing obesity is a more serious problem in the UK than elsewhere and this is partlylinked to the much lower rate of engagement in sport and other forms of physical recreation among the poor.The regeneration of poorer urban areas is not proceeding as fast as was expected and is not so far producing theexpected benefits for deprived inner city populations.Poverty as an underlying causePoverty is a major factor underlying most of the negative findings of the Strategic Audit and it is clear thatprogress towards the Governments targets in areas such as health, education and crime reduction will beseriously impeded unless the issue of reducing poverty is more forcefully addressed.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 57


58Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 16 - Determining GovernmentMIS elsewherePeter Ambrose(based largely on various works by John Veit-Wilson)This appendix is designed to give some necessarily brief idea of the variety of methods used elsewhere todetermine governmental MIS. In a comparative study carried out in ten countries in the early 1990s Veit-Wilson(1998) grouped the policy measures then in current or recent use into three tiers.The Upper Tier,which includes anti-poverty measures relating to income maintenance (for example Minimum Wage) was usedin Belgium, France, the Netherlands and Sweden.The Middle Tier of measures that deal with long term socialsecurity dependency (such as a minimum pension or basic benefit level) were in operation in Australia, NewZealand before 1990, Finland and Norway.The Lower Tier included ‘social assistance’, short term dependencymeasures as used in New Zealand after 1990, Germany and the US.These different types of measures cannot bedirectly compared in terms of effectiveness in ensuring a minimally healthy or participative standard of livingbecause they are designed to serve somewhat different purposes.Veit-Wilson points out that whatever the intention of the instrument there will be as time passes a need forrebasing (changing the composition of the goods and services defined as required), updating (bringing thecostings up to date) and uprating (amending the level of income maintenance benefit payments).Upper TierThe Belgian MIS was an attitudinal poverty line based on empirical research and reflected the level of income atwhich people considered that ‘they could make ends meet with some difficulty’.The French instrument,deriving from a measure dating back to 1950, was the Salaire Minimum Interprofessionel de Croissance or SMIC.Thisis a standard weekly wage ‘assumed to be a family wage and varying slightly by region’. It is taken as a datumpoint against which allowance and benefits are expressed. In the Netherlands the statutory weekly or monthlyminimum wage also has a long post-war history and is assumed to be what is required to enable a main wageearner to keep a family at an acceptable level of living. Equivalence scales were used to adjust for different typesof households.The Swedish measures were based on household budgets for a ‘reasonable’ standard of living.Discussions about ‘reasonableness’ have arrived at the view that such a level of living ‘...must offer sufficientresources for full independent participation in normal social life, prevent deprivations from arising and combatsocial exclusion’.The budgets adopted derived from empirical studies of expenditure patterns and socialattitudes mixed with expert advisory inputs on some issues.Middle TierIn Australia the Henderson Poverty Line (HPL) was first devised in 1966 based on a statutory minimum wageplus the benefits payable to a household with one earner and two dependent children. It continued in use aswhat Veit-Wilson describes as a ‘tacitly official MIS’. Australia also uses a statistical construct, the Index of AllMale Total Average Weekly Earnings (AWE) as a benchmark for setting income maintenance and benefitsstandards for, for example, pensioners and children. In Finland the MIS instrument was the Minimum Pensionfor an Individual payable to all over the age of 16 who left the labour market on grounds of disability or age.This has been intended, since 1954, to be at such a level that the recipient could live decently withoutZacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 59


supplementation from social assistance.The Minimum Pension level has been used as a benchmark for settingother income supplements such as social assistance.In New Zealand from 1972 up to 1990 the governmental MIS was the Basic Benefit Level (BBL).This wasdesigned to ensure that ‘...everybody can participate in and have a sense of belonging to the community’ andhave a fair share of the country’s wealth and resources. It was recommended that this level was set either as aproportion of the earned income of building and engineering labourers or at some proportion of the lowerquartile of adult male earnings. In Norway as in Finland the MIS instrument introduced in 1967 was theMinimum Pension for an Individual required by law to provide a reasonable level of living taking into accounttrends in general levels of welfare and prices. Again some proportion of the level adopted has been used as abenchmark for other social benefits and as an income level below which debt repayments cannot be enforced.Third TierIn Germany the federal government issues guidelines to the Länder for setting social assistance rates. Since 1961there has been a legal requirement (in West Germany) for benefits to be set at a level which preserved ‘humandignity’. (In the former German Democratic Republic the multiple between highest and lowest incomes was afactor of only about three, manual workers were advantaged by the tax system, rents were set at between 4%and 10% of earnings and there was a statutory right to housing). Until 1990 the federal guidance was using theofficial income normative budget calculations for a minimum decency standard carried out by a quasiindependentorganisation. Since 1990 the guidance about MIS has been based on a statistical construct using theofficial income and expenditure data of suitable reference groups with items costed automatically throughannual price survey data.In New Zealand after 1990 the former participatory approach was supplanted and some benefits were set at aminimum subsistence level recommended by a US Treasury consultant.The political emphasis turned towardsself-sufficiency, individual responsibility and away from dependency.The New Zealand ‘subsistence’ approachwas derived from the US Orshansky Poverty Line (OPL).In the United States a number of governmental MIS measures were in place at the federal level each based in adifferent department of state.The OPL devised in 1965 took a 1950s dietary requirement designed for shortterm use and multiplied its cost by the 1955 average food-share factor of three to produce a minimum incomefor a stereotypical four person household (Orshansky 1965).The OPL has subsequently been used as adefinition of poverty for planning purposes and for political initiatives such as the War on Poverty. Other MIS inuse in the US have been based on actual dietary consumption and food expenditure patterns.In Canada Human Resources Canada have recently contracted Statistics Canada to price the four components ofthe Market Basket Measure (MBM). MBM was developed to complement other measures of poverty to helpevaluate the effectiveness of the National Child Benefit in reducing child poverty.The components in the MBMare food, clothing and footwear, shelter and transportation and the calculations are made for a reference familyof two adults, a boy aged 13 and a girl aged 9 (not dissimilar to one of the LCA reference households).Uses of Governmental MISThe review shows that governmental MIS have been used as guidelines for setting income maintenance benefits,as criteria for assessing the adequacy of these benefits and as means of identifying and counting the poor, and asan income level below which debt repayments cannot be enforced. In several countries the MIS goes back forty60Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


or fifty years and in some the original more generous standards have been lowered in the light of economicaffordability.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 61


62Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


IntroductionPaul Nicolson - Letter published by The Times, 3 November 2003‘There are twin United Nations conventions to which the United Kingdom is a party. The first is theInternational Covenant on Civil and Political rights.The second, much less well known than it should be, is theInternational Covenant on Economic, Social and Cultural rights which includes ‘the right of everyone to be freefrom hunger’The UK persistently fails to respect its commitment to the convention in that our statutory minimum incomesforce a competition for inadequate weekly money between food and fuel, or clothes, rent, council tax. Hungeris a frequent and scandalous reality in Britain. In addition laws are being introduced that deliberately makepeople destitute. If young people do not match up to the new deal their statutory right to an income is legallycurtailed.The new deal works for some but for others the hassle involved is a barrier.Asylum seekers that do not toe the line are similarly forced into hunger. Under new Home Office proposalsstarvation in the UK or torture in their country of origin is the choice some will be given.There is a naive belief in Whitehall that coercion by destitution works. Nevertheless hungry people and otherswith no prospects of work or no right to work do not jump the way intended. So the prisons and the hospitalsfill up with poverty related crime and ill health.The tax payer's money would be better spent housing andfeeding the destitute and observing international commitments.’IS/JSA for a single childless adult UK citizen (Asylum seekers in brackets) is £43.25 (£29.89) a week aged 18-24, and £54.65 (£37.77) aged 25-60 and for a couple aged 18-60 £85.75 (£59.26). Research at the LondonSchool of Hygiene and Tropical Medicine suggests a stringent minimum for healthy living of £84.76 a week forsingle childless adults.International Obligations (list compiled by Professor John Veit-Wilson)Appendix 17 -International obligationsThe UK is bound by a number of internationally agreed declarations, covenants, conventions and charters thatplace an obligation on signatory states to ensure an adequate standard of income for all their citizens.Theseinclude:United Nations: Universal Declaration on Human Rights 1948; reconfirmed at the WorldConference on Human Rights 1993 and the 1966 International Covenant on Economic, Socialand Cultural Rights.25. Everyone has the right to a standard of living adequate for the health and well-being of himself and hisfamily, including food, clothing, housing and medical care ... and the right to security in the event ....Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 63


Council of Europe: European Social Charter 196113 [1] to ensure that any person who is without adequate resources and who is unable to secure suchresources either by his own efforts or from other sources, in particular by benefits under a social securityscheme, be granted adequate assistance, and ...Council of Europe: Revised European Social Charter 199630.With a view to ensuring the effective exercise of the right to protection against poverty and socialexclusion, the parties undertake: to take measures ... to promote the effective access of persons who live orrisk living in a situation of social exclusion or poverty ... to ... social ... assistance.United Nations: International Covenant on Economic, Social and Cultural Rights 196611. [the right] to an adequate standard of living for himself and his family, including adequate food, clothingand housing, ...United Nations General Assembly: Declaration on the Right to Development 19861. ... an inalienable human right by virtue of which every human person ... [is] entitled to participate in ...and enjoy economic, social, cultural and political development, in which all human rights and fundamentalfreedoms can be fully realised.United Nations: Convention on the Rights of the Child 1989Article 31 states that all children should have equal opportunities to recreation and leisure.Communication from the Commission concerning its action programme relating to the implementation of theCommunity Charter of basic social rights for workers. COM [89] 568 final; Brussels, 29 November 1989.5. Social protection: Recommendation on common criteria concerning sufficient resources and socialassistance in the social protection systems. [p 28].The resolution of the Council of Social Affairs Ministers of 29 September 1989 concerning social exclusionstates that the existence of a means guarantee is a fundamental component of the fight against social exclusion.In an opinion of 16 September 1988, the European Parliament for its part requested the Commission topromote the introduction of a minimum integration income as a factor for the integration of the poorestcitizens of the Community.Community Charter of the Fundamental Social Rights of Workers, 19895.Workers shall be assured of an equitable wage, i.e. a wage sufficient to enable them to have a decentstandard of living.10. Every worker of the European Community shall have a right to adequate social protection and shall,whatever his status and whatever the size of the undertaking in which he is employed, enjoy an adequatelevel of social security benefits.Persons who have been unable either to enter or re-enter the labour market and have no means ofsubsistence must be able to receive sufficient resources and social assistance in keeping with their particularsituation.64Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


25. Any person who has reached retirement age but who is not entitled to a pension or who does not haveother means of subsistence must be entitled to sufficient resources and to medical and social assistancespecifically suited to his needs.Council Recommendation of 24 June 1992 on common criteria concerning sufficient resourcesand social assistance in social protection schemes [also known as the Minimum IncomeRecommendations]; 92/441/EEC.[2] Whereas respect for human dignity is one of the fundamental rights underlying Community law, asrecognised in the Preamble to the Single European Act;[6] ... whereas the right of the least privileged to sufficient, stable and reliable resources should therefore berecognised ...;1. Hereby recommends Member States:A. to recognise the basic right of a person to sufficient resources and social assistance to live in a mannercompatible with human dignity as part of a comprehensive and consistent drive to combat social exclusion,and to adapt their social protection systems, as necessary, according to the principles and guidelines set outbelow;B. to recognise this right according to the following general principles: 3. every person who does not haveaccess individually or within the household in which he or she lives to sufficient resources is to have access tosuch right [... subject to conditions];C. to organise the implementation of this right according to the following practical guidelines:1. [a] fixing the amount of resources considered sufficient to cover essential needs with regard to respect forhuman dignity, taking account of living standards and price levels in the Member State concerned, fordifferent types and sizes of households;2. granting, to people whose resources taken at the level of the individual or the household are lower thanthe amounts thus fixed, adjusted or supplemented, differential financial aid to bring them up to theseamounts;3. taking the necessary measures to ensure that, with regard to the financial support thus granted, theimplementation of the regulations in force in the areas of taxation, civil obligations and social security takesaccount of the desirable level of sufficient resources and social assistance to live in a manner compatible withhuman dignity;D. to guarantee these resources and benefits within the framework of social protection arrangements.Council Recommendation of 27 July 1992 on the convergence of social protection objectivesand policies; 92/442/EEC1. Hereby recommends that Member States should:A.1.a ... guarantee a level of resources in keeping with human dignity.Revised Social Charter of the Council of Europe 1996 article 30... the right to protection against poverty and social exclusion.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 65


Charter of Fundamental Rights of the European Union 200134 [3]. In order to combat social exclusion and poverty, the Union recognises and respects the right to socialand housing assistance so as to ensure a decent existence for all those who lack sufficient resources ...European Commission, Joint Report on Social Inclusion; Employment and Social Affairs 2002Page 27 [5] Guaranteeing an adequate income and resources to live in human dignity.The challenge is toensure that all men, women and children have a sufficient income to lead life with dignity and to participatein society as full members.66Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


Appendix 18 - A Minimum IncomeStandards CommissionPaul NicolsonMinimum Income Standards1. Minimum Income Standards (MIS 1 ), as discussed here, are decisions in principle, made by an independentpanel of experts, after weighing up all the available evidence and in the light of the findings of rigorousresearch, about the minimum incomes needed to maintain the good health, provide an adequate diet andcover all the needs that society defines as essential including participation in the life of the community ofmen, women and children through the life cycle from pregnancy to old age.2. A Minimum Income Standard is a reference point. Parliament or Government retains the politicaljudgements about how far above or below the MIS the levels of local and national taxation, social securitybenefits, national minimum wage, tax credits or pensions should be set.3. The courts are required to set fines and debt repayments that are proportional to means but there is noguidance available about adequate means. MIS will provide them with that information.They retain the rightto decide how the debts of the poor should be repaid or remitted, and at what level fines should be set.4. Employers, with trade unions where there are negotiating rights, retain the right to set minimum pay levelsbut would have official guidance about adequate minimum incomes. MIS should take into account thecombined effect on adequacy of minimum wage and tax credits.5. Minimum income standards are set in the USA both nationally and by individual states, the Netherlands,Sweden, Norway, Finland, Belgium, Germany, both nationally and by the states, France, New Zealand,Australia and the Channel Islands that vary in their methods and attention to specific areas of need.They haveset MIS as guides to policy makers and courts on setting the levels of benefits or of irreducible incomes, forjudging the adequacy of the different levels of the income maintenance system, and for counting those inpoverty.6. The UK should draw on national and international experience and determine its own methodology.Minimum Income Standards Commission (MISC)Independence7. The independence of the MISC should be as inviolable as the independence of the Auditor General, the ONSor the Monetary Policy Committee of the Bank of England but without the executive powers of the MPCResponsibilities8. The MISC should consist of an independent panel of experts, together with a small permanent staff toservice the panel.9. Its role should be to review all the available evidence about poverty, deprivation, market-based exclusions,morbidity and mortality statistics and all other poverty-related matters, and to triangulate this informationin order to enable it to make recommendations about the minimum incomes required by individuals andhouseholds of varying size and composition, ages and abilities, to take part in UK society and to lead ahealthy life from conception to old age, gross and net of housing costs and taxes.—1 Veit-Wilson,J. (1998) Setting adequacy standards: How governments define minimum incomes, Bristol:The Policy Press.Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004 67


10.It should make use of the findings of all available types of poverty research and the findings of research intonutrition and health and their relations with income levels, as well as taking account of the views of peopleliving in low-income households and in isolated areas. It should examine the effect on adequacy of housingand council tax benefits and the minimum income standards it sets after rent and council tax.11.It should consult people on low incomes.12.It should establish a rolling programme that publishes each year at five yearly intervals the minimum levelsof incomes for at least two groups of citizens (for example pensioners, childless couples, people withdisabilities, etc.), each group to be re-based at five year intervals.13.The work of the MISC should be transparent at all times.The data it draws on, the methods it uses, the basisof the judgements it makes and its conclusions on the material available to it, should be made available andpublished in as far as the data sources allow.The status of the data and the means by which it is processedshould be subject to constant open review and outside advice from experts in the fields it represents.14.The MISC should also take account of all international conventions to which the UK has subscribed relatingto economic rights.Membership15.It is suggested that the MISC should be accountable to a Parliamentary Committee either through theAuditor General or the ONS who should be responsible for selecting the membership. An appropriatebudget should be made available by Government. It should be established by Act of Parliament.Permanent staff16.The secretariat of the MISC should collate all the available research and make papers available to the MISCmembers. It should also make the minutes, research and recommendations of the MISC available to thepublic using all appropriate means.68Zacchaeus 2000 Trust - Memorandum to the Prime Minister - February 2004


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Zacchaeus 2000 TrustSignificant cause of debt in the UK is the inadequacy of statutory minimumincomes for people in work, unemployed or pensioners. The Zacchaeus 2000Trust provides and trains volunteer advocates for people who are facingdraconian enforcement of rent and council tax arrears against the inadequateminimum wage, unemployment benefits, tax credits, and state pensions, or whoare being exploited by door-to-door lenders at up to and over 300% APR.We are petitioning the government for independent and transparent researchinto the minimum incomes needed for healthy living with the support of 66 NonGovernmental Organisations with 10 million members, who include the BMA,the Royal College of Nursing, the Faculty of Public Health at the Royal Collegeof Physicians and the UK Public Health Association.In addition the General Synod of the Church of England, The MethodistConference, the General Assembly of the Church of Scotland and UNISON haveunanimous conference decisions supporting the petition. The list also includesThe Catholic Agency for Social Concern, the Muslim Council of Great Britain,the Children’s and the Pensioners’ Charities and the National Consumer Council.We are a Christian Trust committed by our constitution to work with people ofgood will of all faiths and of none.Rev Paul NicolsonChairmanZACCHAEUS 2000 TRUST93 Campbell Road,London N17 0BFtel: 020 8376 5455 · mobile: 07961 177 889email: zacchaeus2000@blueyonder.co.uk

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