Context

The Scottish Government estimated that 18% of Scots live in relative poverty. Among the many consequences of poverty is the ‘poverty premium’, where lower income customers pay higher costs to access services than the more affluent. The report explores the causes and manifestations of this poverty premium in areas including energy, telecoms, credit, loans, insurance and others. The aim of the study was to help identify recommendations for key stakeholders to show how they can reduce this financial burden for lower income households.

The study

Citizens Advice Scotland (CAS) commissioned Ipsos MORI to conduct independent qualitative and quantitative research. For the quantitative phase, Ipsos MORI interviewed 1,000 Scottish consumers (aged 16+) to explore differences between audiences with lower, middle or higher household incomes. For the qualitative phase, they carried out in depth interviews with 32 low income respondents (defined as earning less than £15,600 per year), that were recruited from the telephone survey. The respondents encompassed different ages, working status and living environments.

The report combines the primary research with further quantitative and qualitative evidence from the CAS network, gathered from their bureaux. The report uses the findings from all elements of the study to make a range of recommendations on how the poverty premium can be minimised in future.

Key findings

• Low income households are more likely to use pre-payment meters (PPMs), with 27% using a PPM, compared with 12% of middle income and 1% of high income respondents).
• A fifth (20%) of low income households spent over £100 per month on energy, rising to 24% among those with a PPM. Qualitative research suggests many with PPMs underestimate the price premium that they are paying for energy.

• Access to the internet from home varies by income, with 69% of lower income households and 98% of higher income households having this utility.
• Although mobile phone ownership was very high (98% across the entire sample), those on low incomes were more likely to be on expensive Pay As You Go (PAYG) tariffs (47% of lower income respondents were on these in comparison to 9% of higher income respondents).
• Not having access to the internet also seems to correlate with switching behaviour between utility providers. Those without access to the internet were less likely to switch (for both telecoms and energy suppliers).

• 53% of lower income respondents were not using credit or loans, whilst 11% of this audience were paying over £100 per month towards credit/ loans. Qualitative research suggests lower income groups may be paying more for their home and motor insurance, and may be foregoing some types of insurance altogether (e.g. contents) due to the cost.

• 43% of respondents reported cutting back on expenditure, due to bills and/or repayments. Nearly 10% of lower income respondents had cut back on food expenditure due to their financial circumstances (in comparison to 1% of higher income respondents), with possible impacts on physical health. 30% of lower income respondents experiencing stress because of their financial circumstances (vs. 5% of higher income respondents), indicating that people's mental health could also be negatively impacted.

• 17% had gone to a CAS bureau for advice in the past, and among those who have not sought advice 40% of lower income respondents and 29% of higher income respondents would expect to use CAS bureaux should they need advice in future.

• Raising awareness of the cost associated with particular payment methods and types of credit;
• Ensuring information and support is available to people without internet access;
• For suppliers to be more proactive in supporting people in financial difficulty.

Points to consider

• The quantitative research is based on a telephone survey of 1,000 consumers in Scotland (aged 16 and over), but no information is provided about the sampling for this survey. The report does include an appendix with the questionnaire used for this survey, and the charts presenting the data do not show the question wording used in the survey.
• This report contains information relevant to many different areas including the pricing of utilities, financial services (such as credit and loans), digital skills and access to digital services, health and well-being.
• Although focussed on Scotland, many of the energy and telecommunication products and providers also serve consumers in the rest of the UK. It is likely that many of the conclusions about these and their impact on lower income households should also apply to other parts of the country. Many of the recommendations made by CAS within the report are also likely to be transferable outside of Scotland.
• This report is applicable to anyone with an interest in the poverty premium, and how it affects lower income households.

Full report

Paying more to be poor - full report