Paying more for being poor

The Poverty Premium

The Scotsman reports people living in poverty pay around 10 per cent more than average for essential goods and services – a “poverty premium” which can push people on low incomes into crisis.

Citizens Advice Scotland’s Poverty Premium study found that people with low incomes end up spending more on services such as metered utilities because they are unable to take advantage of cheaper pay in advance deals or direct debit discounts across a range of services and utilities. Citizens Advice Scotland warned that a lack of internet access or a landline telephone creates extra costs and more barriers for clients trying to contact both public and private sector service providers, which are supposed to help vulnerable people in times of need.

Meanwhile, low income households are paying up to £112 a year more for their energy due to a lack of ability to take advantage of switching or finding cheaper tariffs.

The investigation warned that people in poverty are more likely to use pay-as-you-go options for mobile phones, which tend to be higher per unit than those for customers on contracts, adding to costs. Around a fifth of all households in Scotland lack an internet connection, with the lowest income groups least likely to have one.

Meanwhile, low-income households are more likely than others to use pre-payment meters (PPM) for their energy supply. Despite action by energy regulator Ofgem to address price discrimination against PPM users, who were paying inflated costs far above the additional costs of supplying them, a difference still remains as meter customers are less likely to be able to find – and switch to – the best tariff. The study warned that even if poorer households were able to carry out research on lower tariffs, they would often still be unable to take advantage of them because of a lack of basic banking facilities. The report said: “The market relies on consumers having the ability to research tariffs and identify and secure the best deals. But access to that information is heavily dependent on internet access.”

Norman Kerr, director of Energy Action Scotland, said: “This is something which has been highlighted to us by our members. The regulator has taken action to cut the discrepancy, but it still exists. When you are talking about access to the internet it often means smartphones and even those with a smartphone may not have the £30 a week to be able to access the internet to browse price comparison websites. Also, a lot of cheaper tariffs require things such as bank account for direct debits and things like paperless billing, which means again, people need access to the internet.”