Low-Income Households Pay Over £430 More A Year For Life Essentials

Further proof that it's more expensive to be poor in the UK than it is to be wealthy.
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The cost of living crisis is affecting everyone – but no-one more so than low-income homes in the UK.

A new study from Fair By Design has found the average low-income household pays more than £430 – but can pay up to £541 – more every year for essential services and goods compared to wealthier households.

Simply put, the data suggests that it is more expensive to be poorer in the UK than to be more affluent.

According to Fair By Design’s data, poverty premium affects one in eight UK households – and has an astonishing £2.8 billion cost to the UK economy.

This additional cost, dubbed “poverty premium”, means basic services like energy access, insurances and goods like fridges cost more for certain households because of where they live.

By mapping out the poverty premium across the country, Fair By Design discovered it’s a significant problem in more deprived parts of the UK, such as northern England and the Midlands.

For example, pre-payment metres to pay for gas and electricity costs £131 a year more than paying through cheaper direct debit methods, the route usually favoured by wealthier households.

Car insurance in deprived areas also costs £298 more than less deprived areas, while buying rent-to-own TV costs £182 more than if the TV were brought outright.

Using high cost credit through loans or credit cards contributes to poverty premium too, as does paying to access cash through ATMs or pre-paid cards.

Low-income households in the constituency of Birmingham Hodge Hill pay the most, according to Fair By Design, up to £541 extra per year, while the highest proportion of people paying a form of poverty premium live in Liverpool Walton.

This “poverty premium cost” affects some regions significantly more than others.

“People shouldn’t have to pay more for life’s essentials because they are on a low income,” Martin Coppack, director of Fair by Design.

“Industry, government and regulators need to come together to make sure everyone can access the products and services they need at a price that is fair.”

“People talk about how they feel really discriminated against. Industry calls it ‘risk-based pricing’ but people will say: ‘I’m discriminated against because of where I live.’”

He wanted measures introduced to curb it, including a social tariff for low-income customers who face high energy bills, which he claims will not cost the Treasury any more.

A Treasury spokesperson told the Guardian that the government was already lending a helping hand, referring back to chancellor Rishi Sunak’s extra £15 billion package announced in May.

They said: “We know that people are struggling with rising prices and are worried about the months ahead.

“That’s why we’ve stepped in to ease the burden, helping 8 million of the most vulnerable British families through at least £1,200 of direct payments this year – and giving every household £400 to help pay their energy bills.

“It’s important that financially excluded people are able to access the products and services they need to get on in life – and that’s why the government has provided Fair4AllFinance with £100m to support their work on financial inclusion – and is piloting the No Interest Loans scheme which will give interest-free loans to almost 17,000 people, helping them to deal with unexpected costs.”

But it’s not just services which are climbing in price, but groceries too.

Earlier this year, millions of Brits admitted they were already skipping at least one meal a day due to the cost of living crisis.

Price rises in past 12 months.
PA GraphicsPress Association Images
Price rises in past 12 months.

And it doesn’t look like living conditions are going to get any easier any time soon either.

Inflation has just reached historic levels not seen since 1991, as the Office for National Statistics confirmed this morning that inflation is now at 9.1%.

UK historic inflation rate
PA GraphicsPress Association Images
UK historic inflation rate

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