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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How did I, obsessed with non-places, not know about the Trafford Centre?

My wife had booked us all in to a showing of the latest Bond film at the IMAX Cinema at the Trafford Centre. “Why the Trafford Centre?” I taxed her. She looked at me as if I were a complete ass, but refused to enlighten me. 

Last year I bought a copy of J G Ballard’s last novel, Kingdom Come, a dystopic tale of the near future in which bored suburbanites descend into anomic violence as they retreat inside a giant shopping mall. Predictably, I bought my copy at the Bluewater shopping mall in north Kent, on the outskirts of London. Bluewater held the title of Britain’s biggest shopping mall for a number of years and it is surpassing large: a huge circular corridor that has become a destination. I asked a police officer where the Waterstones was and discovered she was a good old-fashioned bobby-on-the-beat – her beat having been, for seven years, to walk slowly around and around . . . Bluewater.

But I wasn’t fettered by Bluewater’s surly gravity, any more than I was galvanised by rampant consumerism. Novel purchased, I took a cab over the soaring Queen Elizabeth II Bridge to Essex, where I alighted at Bluewater’s twin establishment: the Lakeside shopping mall in West Thurrock. I headed for the Lakeside branch of Waterstones, where I . . . well, you guessed it: I returned my copy of Kingdom Come. This surreal little exercise was undertaken for the BBC Radio 4 documentary Malled: Sixty Years of Undercover Shopping, and I’ve detailed it here purely in order to illustrate this point: I have more than a passing interest in shopping malls.

This is why the events of a fortnight ago, when Family Self went up to Manchester for what is termed, I believe, a “city break”, seemed quite so bizarre. My wife had booked us all in to a showing of the latest Bond film at the IMAX Cinema at the Trafford Centre. “Why the Trafford Centre?” I taxed her. “It’s in Trafford, which is five miles from the city centre.” She looked at me as if I were a complete ass, but refused to enlighten me. My revelation came later, when we were wandering the rococo halls of the Trafford Centre, marvelling at the lashings of gold leaf applied to the serried columns as our soles slapped on the Italian marble flooring. My wife couldn’t believe that one such as I, obsessed by what the French philosopher Marc Augé has named “non-places”, didn’t know about the Trafford Centre.

But I didn’t – it was a 207,000-square-metre hole in my map of the world. I knew nothing of the bitter and protracted wrangling that attended its inception, as successive planning applications were rejected by ever higher authorities, until our Noble Lords had to step in to ensure future generations will be able to buy their schmutter at TK Maxx and then sip their lattes at Starbucks without having to brave the harsh Lancashire elements. Did I feel small as my savvier spouse led me through these storied halls? You bet your waddling, wobbling, standing-still-on-the-travelator bum I did. How could I not have known about the great central dome of the Trafford mall, which is bigger – and statelier – than that of St Paul’s? How could I have been unaware of the Orient, Europe’s largest food court, with its seating for 1,800 diners, served by a plethora of exciting outlets including Harry Ramsden’s, Carluccio’s and those piquant bun-pushers, McDonald’s?

Actually, the Orient completely bowled me over. The Trafford Centre’s imagineers point to the nearby Manchester Ship Canal as influencing this wholly novel and utterly weird space, which is formed by a sort of Möbius strip of 1930s ocean-liner design, being at once superstructure – railings, funnels, tables arranged to simulate the deckchairs on a sun deck – and interior. However, nothing like this ever cruised by Runcorn. Not that I object to this, any more than I objected to the cluttered corridor full of orientalism – noodle bars, sushi joints, all-you-can-eat Chinese barbecues – that debouched from it and led us back into the weirdly glistering main retail areas, with their ornamental griffins and neoclassical columns bodged up out of medium-density fibreboard.

The Trafford Centre’s imagineers also make great play of design features – such as the aforementioned griffins – that are meant to tie the humongous mall to its hinterland (these are the heraldic symbols of the de Traffords, who used to own hereabouts), and to the north-east’s proud industrial heritage. But this is all ornamental balls; the truth is that the Trafford Centre’s ambience is so sumptuously wacky, it could quite reasonably be twinned with Las Vegas.

While the rest of the family went in search of retail opportunities, I watched the Mancunians process. It occurred to me that if there were any influences at work here – besides the Baudrillardian ones of hyperreality and simulation that underpin so much of the contemporary built environment – it was the presence of a large British Asian community. The only people who didn’t look out of both place and time, wandering about among all the gilded pomp and crystalline circumstance, were women wearing saris, shalwar kameez and burqas. Tracksuit bottoms and hoodies just didn’t cut it – although, I concede, come the breakdown in civil society anticipated in Kingdom Come, this pseudo-sportswear will come into its own as the perfect pillaging outfit.

Next week: Lives of Others

Will Self is an author and journalist. His books include Umbrella, Shark, The Book of Dave and The Butt. He writes the Madness of Crowds and Real Meals columns for the New Statesman.

This article first appeared in the 26 November 2015 issue of the New Statesman, Terror vs the State