UK pricing models penalise low-income households by £600 a year

Low-income households in London are paying a poverty premium of more than £600 a year to access standard goods and services, according to a new study by Fair by Design. The research, funded by Trust for London, found that in areas like Peckham, affected families pay an average of £493 extra annually compared to wealthier residents for identical items.

This premium is driven by structural biases in retail and utility markets that disproportionately penalise poverty. The largest factor is food shopping, where 39% of poorer families are forced to rely on higher-priced local convenience stores rather than cheaper supermarkets. Beyond groceries, energy and insurance markets actively extract higher margins from those least able to pay.

Consumers using prepayment meters for their energy supply pay £129 more a year than those on fixed direct debit tariffs. Similarly, drivers living in deprived postcodes face an average £153 surcharge on their motor insurance. Trust for London chief executive Manny Hothi urged regulators to address how their markets impact people in poverty, calling to "end the unfairness of people having to pay more because they pay monthly or don't sign up to direct debit."

The financial strain is compounding a broader housing crisis in the capital, where politicians are locked in a dispute over both the causes and solutions to the hardship. Labour MP Miatta Fahnbulleh pointed to a £150 energy bill reduction and a £39bn investment in social and affordable housing, acknowledging that "the cost of living is biting." Conservative MP Julia Lopez countered that public finances are in an "unsustainable position," claiming housing starts fell 84% under Mayor Sadiq Khan. "I'm not entirely sure what their policy is going forward, but I suspect it involves spending a lot of money," she added.

A government spokesperson said ministers were "determined to turn the tide on poverty after years of rising hardship" and that their policies were working. They pointed to a £1bn crisis and resilience fund, which includes nearly £150m for London, alongside the removal of the two-child benefits limit affecting approximately 240,000 children in 65,000 households in the city. The spokesperson claimed recent statistics show real-term household incomes rising 5%, alongside falling food bank usage and food insecurity.