Is it possible to deliver decent good and services to people on low incomes that don’t cost an arm and a leg?
Is it possible to reduce the ‘excess costs’ of food, fuel, finance and a whole host of other household essentials, and thereby ease pressures on family budgets at a time when household incomes are increasingly constrained?
As John Taylor, CEO of the US Community Reinvestment Coalition once memorably said to me: “Our task is to make markets work for the poor”
Whereas conventional anti-poverty strategies have principally focussed on measures to boost household incomes, is it possible to find ways of tackling poverty by reducing household costs?
Whilst many people on low incomes are undoubtedly struggling to make ends meet, this does not mean that they do not purchase goods and services – but it does mean that the can ill afford to pay over the odds for them. The market for goods and services for people on low incomes is worth multiple £ billions annually. Yet perversely, because of the way the market is currently structured, people on the lowest incomes end up paying the most for many goods and services, including food, fuel, finance services, funerals, furnishings and white goods.
In 2010 Save the Children estimated the cost of the ‘Poverty Premium’ for the average low income household to be up to £1,280 per annum. Assuming at least 3 million households were affected this would equate to an annual Poverty Premium of £3.6 billion. Church Action on Poverty’s own research on ‘Paying over the Odds‘ graphically illustrates the impact this had on the lives and livelihoods of seventeen families in Goldthorpe, South Yorkshire.
“I was borrowing off Peter to pay Paul, then back off Paul because I had to pay Peter again.”
With incomes stagnant, benefit levels due to be cut in real terms by up to 5% over the next three years and the cost of essential goods and services (notably food and fuel) escalating, families can ill afford to pay the Poverty Premium.
The cost of market failure…
The majority of these goods and services are provided by the private sector – at significantly higher cost than to other higher income groups. As the Competition Commission found in its 2005 Home Credit inquiry, there was significant market failure: An absence of effective competition, or affordable alternatives, meant that the main providers of home credit were able to make excess profits (estimated then to be £60-70 million pa) at the expense of low income consumers.
- Does this have to be the case, or is it possible to develop alternative approaches which will make markets work for the poorest, by providing goods and services at more affordable rates?
- Is it possible to develop effective business or alternative models for delivering essential goods and services to people on low incomes in ways which would significantly reduce the poverty premium?
- What role can existing businesses, social enterprise, cooperatives, public and third sector organisations – or communities themselves – play in developing and delivering practical solutions, which can be delivered at scale?
- What changes in regulation, legislation, funding regimes or business models would be required?
“If I got extra money, a year or a week or whatever, I would be loads happier because it would help bring these bills down. It will help, once I have got my bills down, to go have more fun somewhere, take kids places, take kids on daytrips and things like that, do you know what I mean? It would make family life a lot better as well, because there would be less stress and pressures.” A parent in Goldthorpe, when asked what she would with an extra £1,000 a year in her pocket…
These are some of the questions we hope to be exploring at Church Action on Poverty over the next few months (and years)… If you’ve any thoughts, suggestions, or bright ideas – please let me know!