Is targeting deprived areas an effective means to reach poor people? An assessment of one rationale for area-based funding programmes

Area-based programmes have long been a feature of urban policy in the UK. One rationale is that they are an effective means to target poor people. Area deprivation indices are used to identify areas for targeting. This paper reviews the different results produced by these indices. It then examines the effectiveness of the current Index of Multiple Deprivation in targeting the poor, demonstrating that area targeting using the IMD 2000 is a more complete way of reaching the poor than has been claimed by opponents of area-based targeting in the past. However, it is more effective in reaching some sub-groups, particularly children, than others, and is also relatively inefficient. There is a trade off between efficiency and completeness. The use of area targeting should depend on the type of intervention, the costs and benefits of producing complex targeting mechanisms, and the particular balance between completeness and efficiency in each case.