Tommy Broughan (Dublin North East, Labour)
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Question 170: To ask the Minister for Social and Family Affairs the basis on which he believes that figures from the EU and the Central Statistics Office showing that up to one fifth of the population are at risk of poverty are flawed and overstated the extent of poverty here; and if he will make a statement on the matter. [31723/06]

Séamus Brennan (Dublin South, Fianna Fail)
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The 'at risk of poverty' indicator identifies persons or households who fall below the relative income threshold, which in the EU has been set at 60 per cent of median income. Results from the first two years of the EU Survey on Income and Living Conditions (EU–SILC) show that there has been a slight decrease in the percentage of persons classified as 'at risk of poverty' from 19.7 per cent in 2003 to 19.4 per cent in 2004. This rate, however, does not reflect the enormous improvements made, especially over the past decade in improving living standards, especially of those on low incomes.

One of the main difficulties with the "at risk of poverty" indicator is that it measures relative poverty and is thus related to two income streams. The first income stream is average household income. In Ireland as a result of our economic success there has been a major increase in overall incomes due to the fall in unemployment, more and better paid jobs, increasing female participation in the workforce leading to more two income households, and tax reform, to name the main ones. The second income stream relates to those on lower incomes.

Although there were major increases in real terms in social welfare payments, including pensions, these incomes did not increase at the same rate as those of people in employment, and therefore, the proportion on relatively lower incomes, classified as at risk of poverty, was increasing at a time when their standard of living was substantially improving.

Income measures of poverty also provide only a snap shot of the situation of individuals. They include people who may only be temporarily on a low income such as students, as well as those who are more persistently poor. Neither do they indicate the level of poverty intensity, namely the extent to which levels of income on average are below the 60% median threshold. Poverty intensity in Ireland is shallow compared to the EU average, with many people classified as at risk of poverty having incomes close to the threshold. This applies especially to the elderly. The indicator does not provide either a full picture of a person's command of resources in relation, for example, to consumption of public services such as education, health, housing, care services, transport, or to home ownership, ability to benefit from shared living expenses with family, and to draw from accumulated savings. Home ownership, for example, is relatively high in Ireland especially for older people and the income saved from not having to pay a market rent or a mortgage adds significantly to a person's real income.

In order to establish who are actually in poverty, Ireland has developed an indicator, consistent poverty, which measures actual deprivation relative to prevailing basic standards of living. This has been developed by the ESRI in consultation with my Department and the Combat Poverty Agency.

The latest EU SILC survey found that 6.8% of our population continues to experience poverty, hardship or deprivation in some form in their lives. This mainly includes those who live in households which are jobless and primarily dependent on social welfare for their incomes, particularly families with children, especially lone parents and large families, people with disabilities, the unemployed, and the elderly, especially those living alone. These findings clearly indicate what the priorities should be in our strategies to combat poverty and social exclusion.

International organizations such as the EU and the OECD are also examining the possibility of developing indicators based on deprivation. The findings of preliminary studies by both organizations show that levels of deprivation in Ireland compare favourably with other developed countries, in contrast to the outcomes for the "at risk of poverty" indicator.

A recent article in the prominent journal "Development and Transition", published by the UN Development Programme and the London School of Economics and Political Science, concluded that relative poverty indicators can not be used for international comparisons, unless countries are similar in their level of economic development. The article concluded that reliance on the "risk of poverty" indicator causes a number of problems which include that

The results too often belie common sense;

The "at risk of poverty" label sends the wrong signal to the public and policy makers;

The "risk of poverty" logic does not lead to effective national policy.

No single indicator can capture the full complexity of poverty, which is why the EU uses a range of such indicators.

The "at risk of poverty" indicator, however, has become a headline indicator. As indicated, all the evidence shows that it gives a misleading impression of poverty, and its application to Ireland has now become an example at international level of its limitations. I consider that it is important that these limitations are recognized here in Ireland as well, and especially the distorting effect it can have on policy debate, discourse and, most important, on the future direction of measures targeted at tackling poverty.