Just over a year ago, the Prime Minister stood on the steps of Number 10 Downing Street and boldly committed to 'tackle the burning injustices' that impact low income communities. Since that moment a lot has happened, but one thing that has not changed is the existence of the Poverty Premium in Britain.
The poorest in society still pay more for those basic goods and services that we all rely on compared to those who are better off. With recent economic trends such as an increase in the average household debt being racked up, this is not a problem we can ignore any longer. A recent academic study into the Poverty Premium, produced by the Bristol University Financial Exclusion and Poverty Unit, found that on average the Poverty Premium cost the households on the lowest incomes £490 per year but this cost could be much higher if people inadvertently made the wrong choices. For some, that amount is the equivalent of a month's rent, or the cost of insuring their car for the year - necessary costs which many people take for granted.
The study identified the key components which make up the Premium, including the use of high cost credit, failing to switch to the most affordable energy tariff, choosing certain payment methods to help manage finances (e.g. high cost prepay energy meters) and an unavoidable range of costs relating to where people live (geo-based elements).
My colleagues at PwC and I have been working for over three years now with business, Whitehall and the third sector to encourage the development of new solutions to try to tackle the Poverty Premium - focusing specifically on the energy markets and financial services (we recently highlighted in our report with TheCityUK the role of the financial sector in meeting unmet societal needs).
We've found a genuine desire from business to do the right thing but translating this into tangible measures is more difficult. Two organisations which have participated in our programme of work are seeking to change this. Big Society Capital and the Joseph Rowntree Foundation have now partnered with Ascension Ventures to launch Fair by Design - an investment fund and programme specifically designed to find and support innovative new ways to end the Poverty Premium.
The fund launched this month with £8m of capital ready to invest. The hope is to grow this to £20m in the next 18 months as new investors come on board. It will tackle four areas of the Poverty Premium: energy, finance, insurance and geographical based elements. In time, a programme will be developed to sit alongside the fund which hopes to influence the policy and regulatory changes which will also create a fairer marketplace for the poorest in society. The aim is to fully eradicate the Poverty Premium by 2027.
The first stage of the programme is inviting start-ups with ideas to take part in an accelerator process. The Wyra Fair by Design Acclerator has been opened by Telefónica in Oldham and will support up to seven start-ups a year as part of the Fair by Design initiative. Start-ups accepted to the programme will receive the equivalent of £70,000 in cash and business services, including working space at Open Future_ North and access to investors, mentors and coaches - and also potentially to a global audience through business development opportunities with Telefónica.
This is a ground-breaking opportunity to develop new ways to tackle the Poverty Premium. I would encourage everyone to share this with anyone who you think might be able to bring forward a relevant start-up proposal. If you would like more information about the objectives of the Wyra Fair by Design incubator, or think you have an idea which should be invested in, please click here to register your interest.