Save the Children highlights ‘poverty premium’ paid by low-income families

Families on low incomes are paying a ‘poverty premium’ of £1,000 a year on essentials, such as gas and electricity, because they cannot access cheap deals.

A report by Save the Children and the Family Welfare Association  says many poor families are unable to pay for basic consumer goods up front and rely on costly mail order catalogues.

Doorstep lenders are often used. A recent investigation by the Competition Commission found they lent £1.3bn to 2.3 million customers in 2005.

The plight of low-income families is exacerbated by the need to resort to pawnbrokers or cheque-cashing services, which charge high rates of interest.

Cash Converters, for example, charged £16.50 to cash a £200 cheque.

The report sets out seven steps to reducing the poverty premium. They include reforming the Social Fund and access to financial advice.