Low-income Scots Paying ‘Poverty Premium’ for Basic Services

August 25, 2015

Scottish households that get by on low incomes are paying higher rates than most other people to secure basic services such as energy supplies, banking facilities and internet connections.

That’s according to a new report from Citizens Advice Scotland (CAS) which suggests that Scots on benefits or low wages pay up to 10 per cent more for basic services than those with higher incomes.

For many individuals and families, this so-called “poverty premium” can be the difference between being able to get by on the basis of limited resources and struggling badly to cope at all from a personal finance perspective.

“When the poverty premium impacts people on very marginal incomes it can leave them destitute and in need of emergency assistance such as help from food banks,” explained CAS consumer spokesperson Sarah Beattie-Smith.

“The poverty premium does not just make life more expensive for the financially less well off, it often pushes them over the edge and into crisis.”

CAS’ report highlights how paying extra for some basic services can lead to financial problems being compounded for people who are struggling to retain any measure of financial flexibility at a particular time.

The report explains that not having internet access, for example, can make it more difficult for individuals and families to use online banking services or to avoid paying a premium for their utility supplies.

“Pricing structures developed within the energy market – despite recent reforms – continue to discriminate against low-use customers, leaving some CAB clients with debts for utility services they do not use,” Beattie-Smith said as the new CAS report was launched.

She went on to note that while efforts have been made by governments, regulators and service providers to offset the impact of the “poverty premium” in Scotland and elsewhere that the problems continue to cause real hardship for low-income households throughout the country.

Last month, CAS responded to the chancellor George Osborne’s Budget announcements by saying that the planned cuts to welfare payments will impact Scotland’s poorest people disproportionately.

“We are very concerned about the impact these cuts will have on the poorest and most vulnerable Scots – many of whom have already been hit hard by the previous welfare reforms,” said CAS head of policy Susan McPhee. “Once again it looks like the burden is falling on those who are least able to cope.”

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