THE EXTRA COSTS OF BEING POOR
The poverty premium is the extra costs people on low incomes and in poverty pay for essential products and services. Essentials such as energy, through expensive tariffs; loans and credit cards with high interest rates; and insurance that costs more in deprived areas. It costs the average low income household an extra £490 a year, but for more than one in ten of these households it costs at least £780.
Fair By Design’s study of low income households who accessed the services of national poverty charity Turn2us, found they were paying a poverty premium equivalent to 14 weeks’ of food shopping (£478)
The poverty premium is compounded by factors such as digital exclusion; vulnerability e.g. physical and mental health issues; and geography – where someone lives.
It is an injustice that affects the 14 million people in the UK who live in poverty. 1/5 of our population, the people with the least, end up paying the most, just to survive.
The poverty premium is something we can all be vulnerable to. Income ‘shocks’ such as redundancy or ill health can affect everyone. It locks people in a cycle of high costs and inadequate income. It means the market isn’t working well for many consumers. We need to redesign our approach to markets and products/services, involving people in decisions made about them.
The poverty premium can be fixed. Regulators, social policymakers, and businesses all have a role to play in designing products and services that work better for everyone.