Can we make markets work for the poor?

Is it possible to deliver decent good and services to people on low incomes that don’t cost an arm and a leg? 

Over the odds 2

Is it possible to reduce the ‘excess costs’ of food, fuel, finance and a whole host of other household essentials, and thereby ease pressures on family budgets at a time when household incomes are increasingly constrained? 

As John Taylor, CEO of the US Community Reinvestment Coalition once memorably said to me:  “Our task is to make markets work for the poor”

Whereas conventional anti-poverty strategies have principally focussed on measures to boost household incomes, is it possible to find ways of tackling poverty by reducing household costs?

Whilst many people on low incomes are undoubtedly struggling to make ends meet, this does not mean that they do not purchase goods and services – but it does mean that the can ill afford to pay over the odds for them. The market for goods and services for people on low incomes is worth multiple £ billions annually. Yet perversely, because of the way the market is currently structured, people on the lowest incomes end up paying the most for many goods and services, including food, fuel, finance services, funerals, furnishings and white goods.

In 2010 Save the Children estimated the cost of the ‘Poverty Premium’ for the average low income household to be up to £1,280 per annum. Assuming at least 3 million households were affected this would equate to an annual Poverty Premium of £3.6 billion.  Church Action on Poverty’s own research on ‘Paying over the Odds‘ graphically illustrates the impact this had on the lives and livelihoods of seventeen families in Goldthorpe, South Yorkshire.

“I was borrowing off Peter to pay Paul, then back off Paul because I had to pay Peter again.”

With incomes stagnant, benefit levels due to be cut in real terms by up to 5% over the next three years and the cost of essential goods and services (notably food and fuel) escalating, families can ill afford to pay the Poverty Premium.

The cost of market failure…

The majority of these goods and services are provided by the private sector – at significantly higher cost than to other higher income groups. As the Competition Commission found in its 2005 Home Credit inquiry, there was significant market failure: An absence of effective competition, or affordable alternatives, meant that the main providers of home credit were able to make excess profits (estimated then to be £60-70 million pa) at the expense of low income consumers.

  • Does this have to be the case, or is it possible to develop alternative approaches which will make markets work for the poorest, by providing goods and services at more affordable rates?
  • Is it possible to develop effective business or alternative models for delivering essential goods and services to people on low incomes in ways which would significantly reduce the poverty premium?
  • What role can existing businesses, social enterprise, cooperatives, public and third sector organisations – or communities themselves – play in developing and delivering practical solutions, which can be delivered at scale?
  • What changes in regulation, legislation, funding regimes or business models would be required?

“If I got extra money, a year or a week or whatever, I would be loads happier because it would help bring these bills down. It will help, once I have got my bills down, to go have more fun somewhere, take kids places, take kids on daytrips and things like that, do you know what I mean? It would make family life a lot better as well, because there would be less stress and pressures.”  A parent in Goldthorpe, when asked what she would with an extra £1,000 a year in her pocket…

These are some of the questions we hope to be exploring at Church Action on Poverty over the next few months (and years)… If you’ve any thoughts, suggestions, or bright ideas – please let me know!

4 thoughts on “Can we make markets work for the poor?

  1. One of the problems is that we can do things but people don’t use them. We could open the church meeting room as a warm place to be during the day, but I’ve been told people wouldn’t come and use it. We could encourage food ‘cooperatives’ where people buy in bulk and share it out – it’s something I used to know in London but it was a very middle-class-hippy sort of thing, it would be hard to put it across to our local working-class conformist population. For credit, there is a credit union locally but the loan-sharks and credit shops are still operating. There is a furniture recycling centre that sells quality 2nd hand furniture and half-price to low-income households, but Bright-House are still doing well with HP-sales. How can it be overcome?

  2. Surely a return to the orignal principles of the Co-operative Movement and the Rochdale Pioneers could be one solution. In fact I guess that some primary producers could benefit
    by sellin to Co-ops.

  3. It’s not the market that’s the problem, it’s the currency. Syd is half right. We need an ethical marketplace with shared ownership, shared values & principles, shared profits and above all, shared purpose.

    The trick is using local assets to meet local needs. The mechanism is a community currency.

    This isn’t pie in the sky. Why the mayor of Bristol is taking his whole salary in Bristol Pounds? Why is the city of Nantes is introducing its own local currency in 2013? Why do some German regions already have strong regional currencies, alongside regional banks and a strong local business sector. Regions can now begin to take control of their own economic destiny and identity.

    Local authorities, businesses and voluntary organisations in every corner of the country could uncover the hidden wealth at the heart of our Communities and get it circulating to benefit everyone, if only they were aware of what Community currencies are capable of.

    Experts tell us that Community and regional currencies can:
    • Keep wealth circulating within the region
    • Multiply the value of local income and investment by supporting local people and businesses
    • Value underused resources of all kinds
    • Support the businesses and activities that local people value
    • Create opportunities for new small businesses

    So this I believe is part and parcel of the alternative approach that you touch upon in your piece.

    Communities are full of underused resources. They include individuals with time and talents; businesses with spare capacity in the form of restaurant tables, hire cars, printing services, theatre seats; voluntary associations with underused vehicles and rooms; local authorities with underused community and leisure centres. Finances might be limited, but needs and the ingenuity and skills of our businesses and communities isn’t. Can local and regional currencies become tools for unleashing this creativity?

    Regional currencies mobilise these resources without burdening taxpayers either at the national or regional level but above all, they have the power to democratise health, wealth and happiness.

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