London Challenge Poverty Week: Cost of living – The Poverty Premium
For London Challenge Poverty week, we’re providing a platform for a range of people to share their experiences and give their perspectives on poverty, and on how we could make London fairer for everyone.
Throughout the week we will be sharing the views of people in Tower Hamlets who are facing different challenges, and sharing their views on employment support, the social security system, health, housing and the experience of children and families.
People on low incomes face huge barriers – but they also have ideas and solutions for how things could – and should – be made better. We hope you enjoy hearing from them and will give your backing for their ideas.
Toynbee Hall’s Financial Health Research Manager, Jen Durrant, writes about the work we’re doing in partnership with Fair by Design to bring people experiencing the poverty premium together with the innovators and investors.
Everyone deserves to pay a fair price for essentials. But right now, being poor means paying more: paying more for food because you can’t afford to bulk-buy, paying more for insurance because you live in a high-crime area with higher premiums, paying more for energy because you can’t risk a direct debit payment bouncing, paying more for transport because you don’t have the money upfront for a monthly or annual travel card, paying more for white goods because you can’t afford to buy outright and have to use rent-to-own, paying more for credit because your credit score judges you as a risk to be avoided – or exploited … in short, paying more in almost every area of daily life.
“You’re always having to budget… It’s sleepless nights and the worry of having to pay. Depression and anxiety, any time the phone rings or a letter comes, and there’s nobody there to help you.” – Abdul
You pay more simply because you are poor, and don’t have the safety net of savings, a stable income and suitable services that many of us take for granted. This is what’s known as the poverty premium, and it’s something we at Toynbee Hall – along with many others – are working to change.
Too often when talking about financial problems, our society puts all the emphasis on the individual. Certainly individuals can do a lot, but most people affected by the poverty premium are already doing everything they can to minimise the impact. They keep a careful budget, shop around, limit their spending, prioritise necessities and reach out to friends and family in times of crisis.
“A lot of people manage their money but you can still have problem with making ends meet.” – Issa
All of this takes a lot mental and emotional energy, not to mention reliable internet access to get the best deals and a level of financial capability rarely taught in our schools. What’s more, even when you do everything you can to manage your finances, the fact remains that prepayment meters, rent-to-own, short-term credit, pay-as-you-go and smaller, more frequent purchases – often the only options available to people on low incomes – cost more. There’s a limit to how much individuals can do in a system that’s simply not designed with them in mind.
That’s why, in partnership with Fair By Design, we are bringing people experiencing the poverty premium (Experts by Experience) together with the innovators and investors who have the power to change it – so that together they can develop products and services that truly fit the reality of people’s lives, and create a fair system that works for everyone.
In the last 10 months our Experts by Experience have held discussions with a range of companies to address issues including energy bills, credit scoring, wages, transport, savings and the cost of household goods. They’ve challenged founders to make businesses more inclusive, provided designers with new ideas for product development and given investors key insights into how companies could better serve people on low incomes.
“If someone loses their job and goes onto benefits, they’ll have very little money. How do they pay you back, what if I can’t repay everything all at once?”- Manisha
They’ve highlighted the importance of flexible payment options, pushed firms to improve accessibility for elderly and disabled users and argued for a shift away from one-size-fits-all towards recognising the varied needs and circumstances of people affected by the poverty premium.
“How would you pay for it if you haven’t got a bank account? That’s the reality here.” – Amy
Perhaps most importantly of all, they’ve shown the immense value of working in partnership with the people experiencing a problem as the key to truly start solving it. People are by nature problem-solvers; who knows better the precise detail of what’s wrong and what good would look like than the people affected?
“The thing is those type of people who run these companies have never had their heating gone off because they’ve run out of electricity on their meter.” – Rachel
If more companies could listen to those on low incomes, take what they say seriously, and work with them to co-design products and payment systems that truly fit the reality of their lives, then the poverty premium could become a thing of the past.
*All names have been changed to maintain confidentiality.
Toynbee Hall is currently working with young and older people to support them to find ways of improving their experience of housing in east London, including working with private and social landlords. Read more about this work.
There’s a range of events taking place this week where people across the capital are coming together to push for action on poverty, including at our ‘Designing principles together: Co-producing solutions to poverty’ event on Friday. Find out more.