The Poor, Accountability & Responsibility

A snap exchange on Twitter drew my focus to the following Daily Filler article about "the poverty premium":

POOR families are being charged almost £1,300 a year more for basic goods and services, a report reveals today.

Power bills are nearly 30% higher because the less well-off tend to use prepayment meters instead of direct debit.

They pay up to three times the real price for items such as cookers by getting them on hire purchase. And insurance is also dearer as they live in high-crime areas, Save the Children found.

Financial expert Martin Lewis, who helped compile the study, said: 'It is ridiculous but true - it costs more to be poor.'

He runs the website MoneySavingExpert.com but said needy people often lacked the access to the web, bank accounts and credit facilities to take proper advantage of his financial tips.

As a frequent user of Mr. Lewis' website I can honestly say it has proven a boon in the past; it has made life cheaper & enriched mine and Mrs. Tomrat's experience.

It is saddening that such a thing exists as a poor premium but it should be pointed out that these are not actually poor premiums at all; these are risk/administrative premiums.

Take the power meter premium; it costs a large amount of capital expenditure to simply install and run a prepayment scheme; capital which must be recovered somehow & sadly that comes down to the user of that service, & with everyone being hard pressed in their power bills by government premiums on power usage and the general mismanagement of our power grid it would be balked at to even consider mitigating the cost of these meters against other bill payers.

Look at hire purchases: we have one of these shops close by to us that I stepped foot into once when my wife and I saw a couch we liked at a decent price...only to find they wouldn't sell us it outright bit instead tried to pull us into a purchase agreement; I can imagine as a user of credit what the conversation must be like:

"I'd like to hire/purchase this cooker"

"certainly; do you have any credit history?"

"yes; all bad."

"do you have evidence that you regularly pay bills or are responsible for managing a household budget?"

"no...does having 12 kids by different fathers, living on handouts count as household management?"

Now let's try a thought experiment; would you give either person above access to your goods and services? Astonishingly some businesses have managed just this because they mitigate all the risk against higher costs for all their items: couple 1 get that new cooker but pay partially for couple 2's inability to keep paying for that 50in plasma they laughably thought they could afford on minimum wage.

Save The Children's Sally Copley said households on less than £12,700 a year were having their health jeopardised by being charged more for essentials such as heating.

She said: 'There is a clear link between living in cold, damp conditions for long periods and children's health being put at risk.

'We believe the poverty premium is totally unfair and is ripping off low-income families already struggling to make ends meet.' The charity's report, The UK Poverty Rip-Off, revealed that almost 700,000 low-income households do not have bank accounts.

Sally has actually identified a wonderful thing here: where exactly the tax free bracket should be - £12700, enabling all of that persons take home pay to go towards paying towards that money.

As for the second point there can be no excuse for not having a bank account with the expansion in financial services we have seen in recent years; you can pop into Tesco and pick one up with your milk so there really is no excuse for the majority.

As for the vanishing minority who lack the faculties to open a bank account as a youth group leader I come across such vulnerable individuals all the time and where private charity fails there is a vast network if public services that pick it up.

I must ask the obvious though: if Save The Children are so worried about access to financial advice for the poorest and sound then why are they not setting up financial institutions to help people? Why not provide non-profit services to enable the poorest in society to lower this "poverty premium"?

Probably because the answer may lead them to the same point; the dealing with some groups carry additional risk which simply cannot be absorbed.

1 comment:

Uncle Marvo said...

Good points.

What one CAN do, for instance with credit cards, is to "buy" one. You put credit on it and must not (will not be allowed to) exceed the amount deposited.

Same should be true of phones. Contracts should be given but there's nowt wrong with putting a month's credit in the pot.

I am happy to lend poor people the month's credit. Although the rate would be exorbitant.