News and events
Essential markets failing those on lowest incomes
Tue, 18 Jun 2013 08:57:00 BST
Poorest households in the UK are paying 10p in every £1 more for essential goods and services, according to research by Consumer Futures and the Joseph Rowntree Foundation.
“Addressing the poverty premium”, finds that markets for utilities and financial services are failing those on the lowest incomes. The report calls for regulators to put the needs of low-income consumers at the centre of their thinking about whether markets are working well and to develop and implement Consumer Vulnerability strategies to focus their efforts for consumers.
People on low incomes are in a weak position in any market. This is not just because they have less money. They also lose out because of the way that firms construct products and tariffs, because of the extra costs of paying off line and not having direct debit banking. Some consumers use payment methods, like pre payment meters, that cost them more because they are wary of getting into debt given the cost of credit.
Although some consumers can be “costlier to serve” than others, e.g. those using pre payment meters or paying by cash or cheque for energy, the report finds that extra charges applied cannot always be justified and that regulators should focus on making firms drive down costs for these consumers, reflect those efficiencies in fairer prices and help all consumers access the best value deals in their markets.
Consumer Futures and the Joseph Rowntree Foundation want regulators to develop coherent strategies to tackle consumer vulnerability in their markets by spreading the benefits of competition to all consumers, taking a fresh look at fairer trading and pricing in these markets, and working with governments, to build a genuine cross market approach to consumer vulnerability.
Mike O’Connor, Chief Executive of Consumer Futures, said:
‘Consumers who are poor or vulnerable may always be with us but we can do more to make sure that markets do not make their position worse. The extent to which essential services meet the needs of low-income consumers is a basic test of the success or failure of markets. It is a test that has been failed too often and for far too long.
‘Consumers should be able to access essential services at affordable prices and with appropriate level of service. If essential markets do not deliver accessible and affordable services to consumers on low incomes, then regulators, working with governments, need to intervene to make markets fairer or target support packages to make sure everyone has the essentials of life.
‘The cost of many essentials such as energy and water are likely to rise and whilst we hope for a tide of economic growth which will lift all, poverty and vulnerability is not going to go away and indeed many people who are not seen as “poor” will struggle to meet household bills.
‘Low income households need to spend between a fifth and a third of all outgoings on utilities and on buying larger items that they are most likely to purchase on credit. This research shows that paying higher prices for utilities and credit can raise the cost of a minimum household budget by around 10 per cent.
‘These can be complex issues and regulators and Government lack a common framework to understand how the poverty premium manifests itself and what they can do about it.
‘This report can help establish a shared approach to a stubborn issue that quite simply will not go away by itself and needs determined and focused action by markets, regulators and governments.’
Donald Hirsch, Director of the Centre for Research in Social Policy at Loughborough University, said:
‘People on low incomes can be doubly disadvantaged by having to pay above the odds for essential services and credit - making it even harder to make ends meet. Some regulators have started to recognise that disadvantaged households can be poorly placed to benefit from the market.
‘Where this is the case, they may need additional protection, or regulators may need to take extra steps to create a level playing field.
‘This report shows that the stakes are high for low income households: higher prices can substantially lower their living standards to well below an acceptable level. The challenge that this raises for all regulators is to look systematically at outcomes for low income groups, and where markets have failed them, to consider what additional protections are needed.’
Katie Schmuecker, Policy and Research Manager at the Joseph Rowntree Foundation, said:
‘The poor pay more may be a well-worn phrase, but this report drives home the very real impact of the poverty premium on the living standards of low income families. Households on low incomes already fall short of achieving what the public think is an acceptable standard of living - the poverty premium further compounds this, risking increased poverty and hardship.’
Child poverty costs UK £29 billion a year
Fri, 07 Jun 2013 11:08:00 BST
The high levels of child poverty in the UK are currently costing the country at least £29 billion a year – or £1,098 per household – according to new research released today by Loughborough University expert Donald Hirsch.
The estimate includes the costs of policy interventions required in childhood to correct for the effects of poverty, as well as the longer term losses to the economy which result from poor children’s reduced productivity, lower educational attainment and poorer physical and mental health.
The research, conducted by Donald Hirsch, Director of the Centre for Research in Social Policy (CRSP) at Loughborough University, estimates the current cost of child poverty to be £29 billion a year. The main drivers of the costs are:
- £15 billion spent on services to deal with consequences of child poverty (e.g. social services, criminal justice, extra educational support)
- £3½ billion lost in tax receipts from people earning less as a result of leaving school with low skills, which is linked to having grown up in poverty
- £2 billion spent on benefits for people spending more time out of work as a result of having grown up in poverty
- £8½ billion lost to individuals in net earnings (after paying tax).
The research also shows that if child poverty rises by 50 per cent, as the Institute for Fiscal Studies has recently projected may happen by 2020 as a direct result of the government tax and benefit decisions, the cost to the country would increase to at least £35 billion every year.
Donald Hirsch said:
"However much governments try to redefine poverty or ponder new solutions, the fact remains that millions of children continue to be damaged by growing up in families with inadequate resources.
“The scale of the cost of child poverty to us all continues to dwarf the investment made so far, which had produced major reductions in child poverty in the last 15 years. Because the damage done by child poverty lasts for decades, such investments need to be sustained over a long period."
Alison Garnham, Chief Executive of Child Poverty Action Group, said:
“We always put our children’s needs first in family life, and we should do as a nation too. This research shows that policies which increase child poverty are a false economy, costing the country as well as poor children themselves dear.
“In the last three years families with children have had to bear the brunt of the government’s austerity programme - it is no surprise that child poverty is projected to increase as a result. The spending review later this month is an opportunity to change course and prioritise families with children once again.
“We need spending plans that support rather than undermine a new child poverty reduction strategy. Policies must address low-income families’ concerns such as job creation and job security, living wages, and affordable childcare and housing.
“We know that short-changing children today will short-change the country tomorrow. This research shows that an economy balanced on increased child poverty is not a stable proposition.”
CRSP wins major grant to research Minimum Income Standard
Tue, 07 May 2013 09:16:00 BST
The Centre for Research in Social Policy has been given further funding by the Joseph Rowntree Foundation to extend and step up its pathbreaking research on A Minimum Income Standard for the United Kingdom.
The research, involving detailed deliberation by members of the public to identify what things households need to achieve a minimum acceptable standard of living, is recognised as the UK's leading "budget standards" research. It provides a benchmark used by charities to help people in financial need, and is used to calculate the national Living Wage, outside London, being widely taken up by public and private employers.
The new grant will allow annual updates of the standard up to the end of 2016. These updates take account of inflation, and new research every two years will ensure that minimum household budgets stay up to date, reflecting what the public considers to be necessities.
Since its launch in 2008, the Minimum Income Standard has become nationally and internationally recognised as a powerful method for calculating minimum socially acceptable incomes. The Loughborough team has carried out additional studies in Guernsey, remote rural Scotland, rural England and Northern Ireland, and advised teams applying the same methodology in the Republic of Ireland, Japan, France, Austria and Portugal.
Households below a minimum income standard: 2008/09 to 2010/11
Wed, 24 Apr 2013 16:52:00 BST
CRSP’s latest paper in the Minimum Income Standard programme, funded by JRF was published this morning. The paper examines the changes in the adequacy of household incomes in the early part of the recession, as measured by households’ ability to reach the Minimum Income Standard (MIS).
The analysis, conducted by Matt Padley and Donald Hirsch, is the first in an annual series of reports monitoring how many people live in households with not enough income to afford a ‘minimum acceptable standard of living’ as measured by MIS. The analysis also looks at the probability of falling below MIS, the profile of who is falling below and below half of MIS, and particular groups’ profiles and their overall distribution of income relative to MIS.
The paper sets out a new way of monitoring income adequacy tracking changes in the economic well-being of low-income households relative to socially defined minimum household needs. Unlike poverty measures based on relative income thresholds, MIS does not fluctuate with changing average incomes, but is based on current public views of what is essential. The paper therefore answers the key question ‘how have economic hard times affected the number of households with insufficient income according to agreed public norms?’ in a way that is not possible using other measures.
Will future tax cuts reach struggling working households?
Wed, 03 Apr 2013 17:39:00 BST
A new Briefing paper out today, written by CRSP Director Donald Hirsch, for the Resolution Foundation, looks at how exactly tax cuts interact with Universal Credit and quantifies how little low to middle income working households will keep from a higher personal allowance or a 10p tax rate under UC. It also suggests a simple way in which the Government could ensure that the benefits of tax cuts do flow through to the pockets of the three million taxpayers who claim UC. Any party proposing tax cuts that does not adopt this or an equivalent policy cannot claim to be targeting low to middle income households by cutting taxes.
Child Poverty Map of the UK
Wed, 20 Feb 2013 17:43:00 GMT
End Child Poverty has published new figures (February 2013) on the level of child poverty in each constituency, local authority and ward in the UK.
Compilation and presentation of local data was carried out by Matt Padley and Donald Hirsch at the Centre for Research in Social Policy
Minimum Income Standards And Older Pensioners’ Needs
Mon, 28 Jan 2013 17:52:00 GMT
CRSP’s latest report in the Minimum Income Standard programme, funded by JRF was published this morning.
This research explored whether different needs among older pensioners significantly altered the income they need to reach a minimum acceptable standard of living. The research included: consultation with experts, a review of the literature and focus groups with older pensioners