Huffington Post – Designing Out The Poverty Premium

Just over a year ago, the Prime Minister stood on the steps of Number 10 Downing Street and boldly committed to ‘tackle the burning injustices’ that impact low income communities. Since that moment a lot has happened, but one thing that has not changed is the existence of the Poverty Premium in Britain.

The poorest in society still pay more for those basic goods and services that we all rely on compared to those who are better off. With recent economic trends such as an increase in the average household debt being racked up, this is not a problem we can ignore any longer. A recent academic study into the Poverty Premium, produced by the Bristol University Financial Exclusion and Poverty Unit, found that on average the Poverty Premium cost the households on the lowest incomes £490 per year but this cost could be much higher if people inadvertently made the wrong choices. For some, that amount is the equivalent of a month’s rent, or the cost of insuring their car for the year – necessary costs which many people take for granted.

My colleagues at PwC and I have been working for over three years now with business, Whitehall and the third sector to encourage the development of new solutions to try to tackle the Poverty Premium – focusing specifically on the energy markets and financial services (we recently highlighted in our report with TheCityUK the role of the financial sector in meeting unmet societal needs).

We’ve found a genuine desire from business to do the right thing but translating this into tangible measures is more difficult. Two organisations which have participated in our programme of work are seeking to change this. Big Society Capital and the Joseph Rowntree Foundation have now partnered with Ascension Ventures to launch Fair by Design – an investment fund and programme specifically designed to find and support innovative new ways to end the Poverty Premium…

Source – Huffington Post

 

Digital Agenda – £20m anti-poverty initiative

Telefónica-owned Wayra UK opens its latest tech accelerator programme this week, supported by a new multi-agency fund worth up to £20m with a focus on helping eliminate the ‘poverty premium’ by 2027. Wayra’s Open Future_ North facility is based in Oldham.

Fair By Design LogoA new tech accelerator programme with a focus on tackling UK poverty opens its doors in Oldham, Greater Manchester, this week – confirming the news of a fund supporting the programme reported in DigitalAgenda last month.

Wayra Fair By Design will support up to seven tech startups a year across the north, based in the town’s Open Future_ North accelerator. It will back startups seeking to tackle the ‘poverty premium’, which sees people from low-income households paying more for the same products or services – including energy, insurance, borrowing, transport and food – than those who are better off financially.

“It should not cost more to be poor,” said Gary Stewart, director of Wayra UK…

Source – Digital Agenda

Techcrunch – Wayra UK launches accelerator to tackle the ‘poverty premium’

Wayra, the Telefónica backed accelerator network, is launching a new startup program in the UK that aims to tackle the so-called ‘poverty premium’ — whereby people on low incomes pay more for some goods and services.

The program, called Wayra Fair By Design, will support seven startups per year, falling into four broad areas: energy (primarily electricity and gas); finance; insurance; and geo-based costs which can be imposed due to someone’s geographical residence, such as paying higher prices for food, transport and insurance. Wayra says digital exclusion may also factor in this category.

Accepted startups can expect to receive around £70,000 in cash and services, including access to Wayra’s mentoring and investor network, as well as opportunities to work with Telefónica and its partners; and full access to co-working space at the Open Future_ North building in Oldham, which opens tomorrow.

Wayra says the program will invest in a combination of Community Interest Companies and charities, as well as private limited companies, including tech businesses. Start-ups developing solutions to open up more affordable credit options would be ideal candidates for the program, it adds.

Commenting in a statement, Gary Stewart, Director of Wayra UK, said: “It should not cost more to be poor. An entrepreneur’s central task is to offer a compelling, sustainable solution to big problems, and we can think of fewer problems bigger or more worthy of a solution than this one. We are eager to work with start-ups to make real progress in the battle against inequality.”

The program is backed by a new investment fund — called the Fair By Design Fund — which Wayra says has £8 million ready to deploy now, and a goal of raising £20 million in total — to invest in companies tackling the poverty premium, both via the accelerator program and in separate investments across the UK.

Funding is coming from a partnership between financial institution Big Society Capital, social policy research charity the Joseph Rowntree Foundation, investment fund manager Finance Birmingham and VC Ascension Ventures. The latter two will be managing the new fund.

The fund will invest in companies from seed through to Series A stage and beyond, including seeking deal-flow and co-investment opportunities from other funds, VCs and angel investors.

In another supporting statement, Chris Goulden, deputy director of policy and research at the Joseph Rowntree Foundation, added: “Reducing the cost of essential goods and services is critical for solving poverty in the UK. The poverty premium costs low-income households on average £490 a year. With higher inflation and low wage growth, tackling these premiums is vital for families struggling to make ends meet. This fund is an important step towards finding viable solutions to reducing extra costs faced by those on low incomes.”  
Source – Techcrunch

£15m fund to fight poverty premium

A new £15m venture fund for businesses working to eliminate the poverty premium is set to be unveiled next month, as a new accelerator programme opens in the English north to support tech startups working to reduce poverty at home and abroad. Julian Blake reports.

Some cheer for the one in five UK citizens living in poverty. Early-stage VC firm Ascension Ventures is to manage a new £15m ‘Fair by Design’ fund, created to help eliminate the ‘poverty premium’ by 2027.

Government statistics show that 14m people – more than 20% of the population – in the UK now live in poverty. The poverty premium sees people in poverty or on low incomes paying more for the same products or services than those better off financially.

Ascension will run the fund alongside long-standing investment partner Finance Birminghamand others.

Ventures supported by the fund will be working to eliminate the poverty premium across four sectors: financial services, energy, insurance, and food/household goods. The fund will support a combination of community interest companies and charities, as well as for-profit companies including tech startups.

Since 2013 Ascension has invested, across four distinct funds, in over 40 early-stage companies across the UK. It has backed several social impact businesses, including Edukit, Flashsticks, GiveVision, Highbrow, Looop, Night Zookeeper, Percent and The Skills Academy.

Ascension is recruiting for two roles to help manage the new fund – a programme director and an investment manager. Both will be based out of Manchester.

The initiative is also backed by Big Society Capital and the Joseph Rowntree Foundation…

Souce – Digital Agenda

The Independent – The ‘poverty premium’ pushing the Just About Managing to the edge

Poverty isn’t cheap. A combination of effects, including being unable to take advantage of the cheapest ways and opportunities to pay for goods and services, means that low-income households pay an average of £490 more for essentials each year compared to households where money isn’t quite so tight.

And that is just the average premium; for some households it is far, far higher. According to the study carried out by the University of Bristol, poorer households typically pay between £350 and £750 in “poverty premium” each year. Single-adult households were the hardest hit, followed by lone parents.

While the £490 figure is a smaller amount than previous estimates – Save The Children had previously suggested it could be as much as £1,300 a year – it is a significant sum for just-about-managing families.

As the report states: “The average poverty premium of £490 per year is undoubtedly a significant sum to low-income households. It might represent a family holiday, enough clothes and shoes for the children, keeping the home warm in the coldest winter months, all things considered important for a reasonable quality of life and avoidance of social and material deprivation.”

Not-so-premium products

The reasons for the extra expense vary, but they range across a wide number of essential goods and services – like paying to withdraw cash (£9 a year), using a pre-payment meter (£38 a year), using higher-cost credit like payday loans (£55 a year) and paying higher insurance premiums because of living in riskier areas (£84 a year).

However, those are just the average costs. Depending on what services or products each household needs, the costs can be eye-watering. If a household is unable to qualify for mainstream credit then they may have to turn to a doorstep loan costing an extra £540 or a payday loan that costs an additional £120.

Katie Schmuecker, head of policy at the Joseph Rowntree Foundation (JRF) explains: “Sometimes the preferences of, and constraints faced by, low-income consumers compound the problem – such as when people can’t afford to pay upfront for insurance and must pay extra to pay monthly; or the need to keep a tight control over a limited budget leads to the avoidance of direct debit, even though it’s usually cheaper.

“Lacking the internet, transport or affordable credit, all of which help people to get a better deal, makes matters even worse. The picture changes, with new poverty premiums emerging – and some disappearing – as products and markets change.”

The poverty premium doesn’t just hurt the households it directly affects. By tipping just-about-managing families into poverty it costs the taxpayer a significant sum as well.

Research from the JRF suggests that poverty costs the UK £78 billion a year, which translates into £1,200 for every person – equivalent to 4 per cent of our GDP. £1 in every £5 spent on public services goes towards supporting people in poverty or dealing with the fall-out.

Ending the poverty premium was the foundation’s very first step in its recent ambitious plan to end UK poverty by 2030.

Ms Schmueker elaborates: “Tackling the higher costs faced by lower income households is vital if we are to bring down poverty levels. To achieve this, Government should task regulators with identifying and eliminating poverty premiums in sectors like energy. We also need to see new products that are designed to meet the needs of people on lower incomes and, where this isn’t possible, provide other ways of compensating people for unfair additional costs.

“We also need people living in poverty to be given a bigger voice in the debate, which requires consumer organisations to have more funding, capacity and information to tackle the poverty premium.”

Source – The Independent

Acting on unfair poverty premiums must be a 2017 priority

The poverty premium costs low-income households on average £490 a year. With higher inflation forecast for 2017, tackling these unfair premiums on essentials will be even more vital for those who are just about managing, says Katie Schmuecker.

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

The Poverty Premium – When low-income households pay more for essential goods and services

Authors: Sara Davies, Andrea Finney and Yvette Hartfree
Funded by: Oak Foundation
Published by: University of Bristol
Publication date: November 2016

In the UK the poverty premium, the idea that poorer people pay more for essential goods and services, has been highlighted as an important social policy concern for low-income families.

This 2016 study revisits and advances earlier research conducted in 2010 by Save the Children. It reflects markets and household behaviour as it exists today, and, for the first time, explores how manylow-income households are actually affected by the poverty premium, and by how much.

The Poverty Premium (Key Findings) (PDF, 434kB)


Paying to be poor: uncovering the scale and nature of the poverty premium (PDF, 1,365kB)

Paying to be poor (Methodological Appendix) (PDF, 720kB)

Paying to be poor (Costing Appendix) (PDF, 665kB)

Source – University of Bristol

Big Society Capital – Poverty Premium

People in poverty or on low incomes often pay more for the same products or services than people who are better off financially.

This is called the “poverty premium” – the extra cost of being poor.  The poverty premium is often dubbed the ‘double penalty’: in addition to not being able to buy many goods and services, people in poverty also end up paying more for the ones they can buy.

There is not one ‘poverty premium’, but many increments in cost that when added together can represent a significant drain on tight personal budgets. Such increments or premiums are most concentrated in four sectors and are typically centred around a specific set of issues: in energy & utilities and telecommunications, poverty premiums are paid through prepaid tariffs and/or lack of being an ‘actively switching consumer’; in financial services, the poverty premium manifests itself mostly through high-cost credit and issues around financial exclusion; and finally, in household goods, the rent-to-own model of buying household goods financed by extremely high-cost weekly payments (e.g. through shops such as BrightHouse) results in people paying high amounts for essential items, often three or four times the original price.

Potential social investment solution

Big Society Capital in partnership with Joseph Rowntree Foundation is developing a targeted holistic programme designed to eliminate the poverty premium by 2027.

It will do this in two main ways. First, it will develop a Venture Development Programme underpinned by research and evaluation, impact monitoring, and a strong advisory network of sector experts and mentors. This will support ventures primarily working to eliminate the poverty premium in the four key sectors of financial services, energy, telecommunications and household goods, but will also consider cost reducing ventures in areas of large wallet share for people in poverty (e.g. food). We are currently considering applications from fund managers to run this fund. Secondly, it will build a strong campaigning arm to advocate for better policy, influence corporate behaviour and inspire the public to rally around this issue.

Source – Big Society Capital

Chief Executive of Big Society Capital – Huffington Post

Cliff Prior CBE is Chief Executive of Big Society Capital. Prior to that he was CEO of UnLtd, the UK Foundation for Social Entrepreneurs. UnLtd has supported 13,000 people to start new social ventures.

Before UnLtd, Cliff was CEO of Rethink, the charity for people affected by severe mental illness. His earlier career includes work in counselling, youth, civil rights campaigning, social housing, supported housing, community care, offender resettlement, learning disability, dementia, research and development, and mental health.

Cliff is also a founding trustee of Clore Social Leadership, a non-exec at health innovation agency UCLPartners, and Comic Relief’s UK Grants Committee. He chaired the mission alignment group for the G8 Social Impact Investment Taskforce.

He has been an adviser to Government on health and medicines regulation, NHS modernisation, skills, and civil society.

Source – Huffington Post

The Guardian – Poverty premium: why it costs so much more to be poor

Being poor comes at a cost. The best bank accounts, borrowing rates and energy tariffs are all reserved for people who are in a position to shop around. And if you do not have a clean credit file or access to up-to-date technology you can expect to pay more for almost everything you buy.

In the summer, Citizens Advice Scotland reported that people living in poverty were paying roughly 10% more for essential goods and services, while according to a report from 2014 by the east London charity Toynbee Hall, residents of Tower Hamlets pay a “poverty premium” of up to £1,014 a year, consisting mostly of higher energy costs, car insurance and loans.

This isn’t a matter of not being a savvy shopper or failing to compare prices before you buy. It is a matter of not having access to the best deals. When every penny counts, being charged more than the next person for the same goods and services can cause bigger problems further down the line.

The cost of being poor

Higher energy costs can be the hardest to avoid. Energy bought through prepayment meters is still more expensive than that bought on a standard tariff paid for by direct debit, and the premium over online accounts is even bigger. In July, Citizens Advice said prepayment customers were paying on average £226 a year more for their energy than those on the cheapest online deals.

Householders can switch between prepayment tariffs, but there is little competition so the choice – and saving – is limited. To get the best deals, as well as internet access, you need a good credit record. Even with these, private renters can find it hard to switch payment types. While the regulator Ofgem says a landlord cannot prevent you switching meters, you may have to switch back at the end of the tenancy, and the associated costs could be off-putting…

Source – The Guardian

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