Reducing the cost of essential goods and services is as important as increasing incomes for reducing poverty in the UK. The less people must spend on meeting their needs, the more cash in their pocket. But unfair poverty premiums mean the poor are paying more for some essentials, exacerbating poverty and straining the budgets of the just about managing.
New research by Bristol University has laid bare the scale of the poverty premium for the first time. They estimate that on average the poverty premium is costing low-income households £490 per year. This research enables us to quantify for the first time the number of households subject to different types of poverty premium (see table).
Some premiums seem inconsequential, such as paying an extra £5 per year for a paper copy of an electric bill because you’re not online, or find it easier to keep on top of your budget with a paper copy. Others are eye watering, such as paying £540 over the odds for a doorstep loan because you can’t access mainstream credit or an additional £120 for a payday loan.
Averages can hide a multitude of different experiences, and the researchers found examples of families paying considerably more. Take the single earner couple with one child who had an income of £16,500 per year, but were incurring a poverty premium of £1,860 because they had a prepayment meter for both electric and gas, paper billing for telecoms, monthly payments to spread the cost of home contents and car insurance and several forms of high cost credit. In another example an out-of-work family with an annual income of £9,800 was incurring a £1,300 poverty premium. Only an estimated 1% of low-income households were not incurring any sort of poverty premium…
Source – Joseph Rowntree Foundation