Poor forced to pay £1,000 extra for basic services
Poor families have to pay on average a £1,000 annual poverty premium for the most essential goods and services according to a new report published today.
Monday 5 March 2007
Poor families have to pay on average a £1,000 annual poverty premium for the most essential goods and services such as gas, electricity and insurance, according to a new report published today.
The report, The Poverty Premium by Save the Children and the Family Welfare Association, shows that low income families can pay around:
- 150% more for basic goods such as an oven bought on credit;
- 10% more on gas bills paid through pre-payment meters rather than by direct debit.
Other areas where poor families end up paying more is for electricity bills (8% more) and for home and car insurance in deprived areas.
Poor families are forced to pay more because of how they pay for goods and services - they are more likely to opt for prepay options, which make budgeting easier, and less likely to be able to afford to pay for an item in full at the point of purchase. Poor families are less likely to have bank accounts and more likely to have poor credit ratings. The report illustrates that a poor family may have to pay over £1,000 more during a year for the same essential services as better off families. For an average low-income family of 2 adults and 2 children where one parent is in work, this premium represents nearly 10% of their income after housing costs.
Save the Children and the Family Welfare Association outline seven steps in the report to eradicate the poverty premium. These steps include calls on gas and electricity providers to match prepayment meter rates with direct debit rates, improving access to financial advice for low income families and vital reform of the Social Fund which could deliver affordable credit to those who need it most. However, the report also calls for the Government to tackle the fundamental problem of income poverty by investing the necessary £4.5 billion to meet the 2010 target of halving child poverty in the UK.
Colette Marshall, UK Director of Save the Children, said: "It is a matter of gross injustice that the families who are struggling most to get by from week to week are being forced to pay more for essential things like heating their homes. Children in these families are missing out on the best possible start in life, because their parents are being unfairly charged. As part of the End Child Poverty campaign, we demand that companies and Government must work together to stop this deeply unfair financial punishment of families."
Helen Dent, Chief Executive of the Family Welfare Association, said: "The Government expends significant amounts of time and energy exploring the most effective ways to get more money into the pockets of low income families. Yet they spend very little time addressing the unequal way in which it comes out of those families' pockets. This has to change, and the Government must commit to tackling this poverty premium if it is to meet its target of ending child poverty."
