Three ways to reduce the cost of living

The Joseph Rowntree Foundation and Bevan Foundation’s review of ‘what works’ to reduce poverty is generating some valuable ideas.  They are at an early stage, but we are sharing them now to encourage discussion and debate.

The more it costs people to meet their essential needs the more income they require to escape poverty.  Analysis shows that people on low incomes spend a greater share of their budget on essential goods and services (such as food, housing, bus fares and heating) than those on high incomes, and that the cost of essential goods has risen very much more rapidly than other items since 2008.

The emerging ideas about what works to reduce the cost of living fall into three main areas.

1.  Creating active consumers

Well-informed and empowered consumers actively shop around, switching suppliers of everything from energy to food to reduce their costs.  Yet low income households are often less likely to do so – the Which? Consumer Insight Tracker shows that in the energy market, the proportion of those switching supplier is 40% higher in the top than in the bottom quintile, while the proportion of households who have never switched broadband providers is 50% higher in the bottom quintile than the top.

Many of the emerging ideas relate to UK-wide regulation of markets.  But other things that could be done in Wales include:

• developing the roles of trusted intermediaries – organisations such as advice centres, credit unions, and collective purchasing can help and support individuals to shop around for the best deals;
• strengthening financial capability – particularly around life events which are often associated with a change in circumstances e.g. redundancy, retirement, birth of a child, and also as part of a ‘citizen’s curriculum’;
• developing low-cost, accessible financial products – bank accounts with low charges, low-cost credit, incentives to save and affordable basic insurance can improve the ability of low-income consumers to get the best deal.

We recognise that the Welsh Government has an active programme on financial inclusion covering most of these types of interventions; the evidence suggests that this should be enhanced further.

2.  Energy

The worst-off fifth of households spend 8% of their budget on energy compared with 4% of the best-off fifth. The options for making energy affordable for low income consumers involve:

• reducing the costs of energy;
• reducing the consumption of energy e.g. through energy efficiency measures;
• compensating households e.g. discount schemes.

Fuel poverty is within the current environment portfolio, and the 2010 fuel poverty strategy predates the recent rise in fuel poverty and in relative income poverty. While there has been some success, it is likely that all the targets will be missed by a considerable margin.  The Welsh Government should consider:

• developing new, achievable targets to reduce fuel poverty;
• developing actions based on evidence of ‘what works’ of sufficient scale to achieve the targets;
• locating action on fuel poverty alongside other ‘tackling poverty’ measures.

3. Access to Decent Food

Food accounts for 20% of the expenditure of the poorest fifth of households compared with 11% of the richest fifth.  Some low-income neighbourhoods are some distance from affordable supermarkets, with only lower quality and higher cost food available locally (if at all).

The Welsh Government should review its policies and actions on food as they straddle several different portfolios (e.g. agriculture, public health and education), to ensure that they focus on improving access to affordable, nutritious food for low-income families. There is potential for the Welsh Government to be much more innovative in its approach.

For the full report on the emerging findings, please visit our publications page.

To find out more about what we are doing on poverty, check our projects page.

To keep up-to-date with all our work, sign up to our monthly e-newsletter. 

Victoria Winckler is Director of the Bevan Foundation