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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Carwyn Jones is preparing for a fight with the UK government

From Labour's soft-nationalist wing, Jones has thought carefully about constitutional politics. 

This week's 20th anniversary of the 1997 Yes vote on devolution in Wales was a rather low-key affair. But then while there are plenty of countries around the world that celebrate an Independence Day, few nations or regions around the world would make much fuss about "Partial Autonomy Day".

The most important single event of the day was, almost certainly, the address by First Minister Carwyn Jones at the Institute of Welsh Affairs’ 20th anniversary conference. The sometimes diffident-seeming Welsh Labour leader has rarely been on stronger form. Much of his speech was predictable: there were his own recollections of the 1997 referendum; some generous reflections on the legacy of his now-departed predecessor, Rhodri Morgan; and a lengthy list of identified achievement of devolved government in Wales. But two other features stood out.

One, which might have struck any observers from outside Wales was the strongly Welsh nationalistic tone of the speech. In truth this has long been typical for Jones, and was a very prominent element of the successful Labour general election campaign in Wales. A fluent Welsh-speaker and long a part of the soft-nationalist wing of Welsh Labour, the First Minister briefly considered what would have been the consequences of the achingly-close 1997 ballot having gone the other way. Wales, we were told, would no longer have had the right to be considered a nation – it might even (gasp!) have lost the right to have its own national football team. But this theme of the speech was also linked to devolution: why should Wales not have parity of treatment on devolved matters with Scotland?

The most striking feature of the speech, however, was the confidence and combativeness with which the First Minister set about attacking the UK government on constitutional matters. This territory has often appeared to be the area which most animates Jones, and on which he is most comfortable. He has clearly thought a great deal about how to protect and develop the constitutional status of devolved Wales. The First Minister was clearly deeply unimpressed by the UK government’s handling of Brexit as a whole, and he linked Brexit to broader problems with the UK government’s approach to the constitution. Brexit was declared in the speech to be the "biggest threat to devolution since its inception" – and the audience were left in no doubt as to where the blame for that lay. Jones was also clearly very comfortable defending the joint stance he has taken with the Scottish National Party First Minister of Scotland, in opposing the EU Withdrawal Bill and much of the UK government’s approach to Brexit negotiations. This high level Labour-SNP cooperation – extraordinary, given the otherwise utterly toxic relations between the two parties – was argued to be the necessary consequence of the UK government’s approach, and the threat of a power-grab by Westminster of powers that are currently devolved. 

Finally, the First Minister had one new card up his sleeve. He was able to announce a Commission on Justice in Wales, to be chaired by a figure of impeccable authority: the soon-to-retire Lord Chief Justice of England and Wales, John Thomas. The clear intention of the Welsh government seems to be to use this commission to advance their agenda of a distinct Welsh legal jurisdiction. This is another matter on which there appears to be little current common ground with the UK government.

Carwyn Jones emerged from the general election as a greatly strengthened figure: having led the Labour campaign in Wales when it appeared that the party might be in difficulty, he deservedly accrued much political capital from Welsh Labour’s success in June. The First Minister has been thinking imaginatively about the UK constitution for some years. But for a long time he failed even to carry much of the Welsh Labour party with him. However, he succeeded in having many of his ideas incorporated into the Labour UK manifesto for June’s election; he is no longer a voice crying out in the wilderness. On the anniversary of devolution, Jones said little that was wholly new. But the combination of everything that he said, and the tone and confidence with which he said it, was striking. This was not the speech of a man looking to back away from a confrontation with the UK government. Wales seems up for a fight.

Roger Scully is Professor of Political Science in the Wales Governance Centre at Cardiff University.