The poor are still paying more for basic utilities and financial services

Payment structures and price plans in utilities and financial services continue to inflict higher costs on the poorest in society. Regulators and the government need to do more.

The poor pay more. It is a well-worn phrase but we must not let that undermine the impact of what it means in real life for real people.
A new report, published today, calculates the premium paid by poor people on essential utilities and access to financial services is as much as 10p in the pound - a significant extra cost for those that are already struggling to make ends meet.

This has a hugely detrimental impact on people's living standards, risking hardship and poverty. Taking what the public determine as an acceptable minimum standard of living in the UK today as its basis, the research shows a single person working full-time earning the minimum wage already falls £52 a week short of having a sufficient income to reach an adequate standard of living. If they're living in a house with high energy needs and subject to a poverty premium, this shortfall increases to £77 per week.

The gap is even greater still for those out of work and in receipt of benefits. If they live in a house with high energy needs, their low-income and the poverty premium combines to leave them some £135 per week short of a socially acceptable standard of living.

These additional costs are driven by a number of factors. For example, in some instances general market failures result in uncompetitive or unfair practices that hit low income consumers particularly hard, as they are less likely to have access to good information and more likely to be risk averse. In particular, worse off consumers are often unable to access the best deals obtained by the most "active" consumers that suppliers are keen to attract. This generates a cross subsidy in favour of better-off groups that is hard to justify.

Specific market failures and lack of competition can also result in the failure to supply products to meet the needs of low income groups at competitive prices. Low-income households can find themselves disadvantaged by the payment methods they tend to favour, different patterns of usage or different credit needs. In some instances cost-reflective premiums - where there is an additional cost of supplying low-income families - result in them facing higher prices, but it is not always clear that the additional price is justified by the additional cost.

So while regulation aims generally to protect consumers by ensuring that markets work in a fair and transparent way, this report begs the question: do low-income consumers need additional protection? And if so, what should regulators and government do?

One response is to ensure fair trading and promote competition, with adequate information for the consumer: this is the central role of regulators. However, it cannot be assumed that this alone will provide sufficient protection to consumers in a weak market position.

At the very least, regulators should monitor the position of low income consumers, looking closely at the products they disproportionately use and whether they are fairly priced. Where problems are identified in the supply of essential services, regulators should have a remit to investigate the structure and level of pricing. In these instances regulators and the government should look together at the case for intervention to ensure basic products are available at affordable prices.

With the cost of living uppermost in many minds, and at a time when many incomes - whether from earnings or benefits - are either static or shrinking, regulators may find themselves with an increasingly important role to play in seeking out and removing poverty premiums. Tentative steps in this direction are already being taken in the financial services and energy markets. Where they are leading, others should follow.

Katie Schmuecker is a Policy and Research Manager for the Joseph Rowntree Foundation (JRF).

New research shows many already falling £52 short of an adequate standard of living. When in a house with high energy needs, this increases to £77. Photograph: Getty Images.
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UK election results: your guide to what's happened so far

Everything you need to know about the local and regional elections.

Scotland

  • To little surprise, the SNP will be staying in government at Holyrood as the largest party by an overwhelming margin.
  • Nicola Sturgeon’s party looks set to narrowly lose its majority, yet given that the electoral system intentionally militates against majority governments, that shouldn’t be an enormous shock.
  • It was a dreadful night for Scottish Labour. Despite winning Edinburgh Southern from the SNP, the party has almost certainly slipped into third place behind the Scottish Conservatives. Kezia Dugdale, the party’s 6th leader in 8 years, vowed to carry on as party leader.
  • The Conservatives, wiped out north of the border in 1997 and barely ever a force in Holyrood since 1999, are now the assembly’s main opposition. Ruth Davidson, the party’s leader, won a constituency seat in Edinburgh from the SNP. The party also took Eastwood, long a Labour stronghold – perhaps hinting at broader problems for the Labour party nationwide with Jewish voters.
  • The Liberal Democrats are not dead yet. Willie Rennie, whose campaign highlights included being interviewed in front of a pair of romping pigs and launching his manifesto in a soft play area, took the seat of North East Fife from the SNP, while his party also held seats in the Scottish islands comfortably.

 

Wales

  • Labour remains the largest party, albeit probably in a minority, and should govern alone fairly comfortably.
  • Leighton Andrews, a long-serving member of the Welsh government, was unexpectedly defeated by Plaid Cymru leader Leanne Wood in his Rhondda constituency.
  • The Conservatives failed to make significant gains, with party sources blaming the row over Port Talbot’s steel.
  • UKIP won its first seats in the assembly, picking up at least 4 assembly seats through the list, including former Kent MP Mark Reckless – with disgraced former Conservative MP Neil Hamilton also expected to win a seat later on.
  • Labour retained the Ogmore seat at Westminster in a by-election, with UKIP in seco nd place.

 

England

  • Labour have become the first opposition party to lose seats in midterm elections since 1985 – when Neil Kinnock’s Labour Party still lost fewer seats than the Conservative government.
  • That said, the party’s results were probably not quite as bad as some feared – the party retained control of Crawley and Southampton, though lost Dudley to no overall control.
  • The Conservatives gained some council seats, taking control of Peterborough council, but losing Worcester to no overall control.
  • UKIP became the joint-largest party on Thurrock council, drawing level with the Conservatives – and missed out on taking a further seat from the Conservatives by just 1 vote.
  • Labour won the Sheffield Brightside by-election, with UKIP in second place.
  • Joe Anderson won re-election as Mayor of Liverpool with more than 50 per cent of the vote.

 

London

  • The count for London Mayor and the Greater London Assembly began at 8am, with the result expec ted to be announced in the late afternoon.
  • Campaigners on all sides predicted record low turnout. 

Henry Zeffman writes about politics and is the winner of the Anthony Howard Award 2015.