Bargaining on a low income: A better deal for consumers

Although inflation has subsided in recent months, the spending power of those on low incomes is still a long way below its pre-recession level.

Low income consumers can face the additional disadvantage of paying more for the same goods and services as compared with higher income consumers. Attempts have been made by regulators and the government to address some of these problems. But some policies have fallen short because of an incomplete understanding of how low income consumers interact with different markets.

This report draws on new data analysis, interviews and focus groups, and a nationally representative poll to provide an in-depth understanding of low income consumers’ experiences of value in different markets. Where there are disadvantages, it sets out why these exist along with different strategies that low income consumers can adopt to overcome them. Based on these insights, the report sets out four key areas to be addressed by policymakers to ensure markets are better tailored to the needs and demands of low income consumers.


  • The report finds that only 30% of households with annual incomes of £14,000 or less had switched telecoms or energy provider in the past two years, compared to 57% of households with annual incomes between £41,000-£50,000.
  • Many low income consumers reported they felt frustrated that it was sometimes necessary to threaten to leave an existing provider before being offered a better value deal.
  • Low income respondents viewed the fees charged for landline internet as particularly bad value – only 49% of households with annual incomes below £14,000 reported these landline charges as good value, compared to 78% of households with annual incomes between £41,000-£50,000.
  • Low income households were less likely to feel that running a car offered good value compared to higher income households – only 35% of households with annual incomes below £14,000 reported running a car as good value, compared to 49% of households with annual incomes between £41,000-£50,000.
  • In the energy market, low income respondents felt suppliers didn’t communicate billing or pricing information clearly and that the information they did receive could, at times, be ‘misleading’.
  • However, low income respondents identified public transport and grocery shopping as areas in which they felt able to extract better value for money.


  • The SMF calls on regulators to allow reverse auction schemes in UK consumer markets – such as energy or telecommunications. This would shift responsibility onto companies to generate competition, rather than relying on consumers to shop around for the best deal, creating a mechanism to drive competition and value. The report points to a similar successful reverse auction scheme in the US energy market (the Energy Auction House), where suppliers bid online in real-time against each other to provide consumers with the best quotes for their requirements.
  • Increase consumer access to information: Provide a barcode or quick-response (QR) code with each bill consumers receive to allow them to compare prices more easily using mobile technology. Require companies to give comparison information at the point of sale (as already happens in many supermarkets for grocery shopping).
  • Encourage greater use of collective switching: Collective switching schemes increase the bargaining power of consumers by negotiating as a group and could be implemented by housing associations, local authorities and other trusted intermediaries
  • Move towards charging per unit, rather than having fixed cost tariffs: For example, reduce or eliminate the per-day costs for gas and electricity which result in poor value for those using small quantities
  • Provide better value for those budgeting in the short term: Policymakers should put pressure on companies to increase product flexibility for those budgeting weekly

Podcast of the launch event:

Download The Report: PDF

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