Poorest ‘paying 10pc premium’ for services

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The poorest households pay a “premium” of up to 10p more for every £1 on essential goods and services, a report has estimated.

The extra charges cannot always be justified and the Government and regulators must nudge firms towards making costs fairer for consumers, the study by Consumer Futures and the Joseph Rowntree Foundation said.

The Addressing the Poverty Premium report found that paying higher prices for utilities and credit could raise the cost of a minimum household budget by around 10 per cent.

It acknowledged that some customers could be costlier for firms to serve than others, but said that people on low incomes were in a “weak bargaining position” because they had less choice about how they paid for services.

The way firms set their tariffs meant that people who did not have access to direct debit and online banking ended up paying more, the report said.

Some consumers used pre-payment meters that cost more because they feared the high credit costs they would face if they went into debt, the study said.

The report identified key ways in which low-income families paid a “premium”: higher utility tariffs, possibly because they were billed quarterly rather than paying online; or having to take out a phone deal with a package of add-ons they did not particularly use.

The analysis in the report was based on charges for utilities, phones and the internet and financial services. It assumed that someone on a lower income could pay around £19 more a week than the average consumer’s weekly household budget of £193.