Poverty Premium: Paying More Because You Have Less

The poorer you are, the more you pay.

In Britain today, falling into financial hardship can feel like stepping onto a conveyor belt—one that speeds up the worse your situation becomes. From higher charges for basic services to aggressive debt collection tactics, companies often penalize those who can least afford it, pushing them deeper into a cycle of poverty and anxiety.

But it doesn’t have to be this way. Many European countries handle debt very differently—and often more humanely.

How is it Britain? Companies Charge More and Chase People Who Can’t Pay Harder—Creating a Debt Spiral

It starts with the “poverty premium”—a term that describes the higher costs faced by low-income individuals for essential services like energy, insurance, credit, and even mobile phone contracts.

In the UK:

• Prepayment energy meters (common in low-income households) often charge higher rates per unit than direct debit accounts.

• Those with poor credit scores—often due to missed payments caused by poverty—are offered only high-interest financial products.

• Car insurance premiums can be significantly higher for people living in deprived postcodes.

According to Fair By Design, the average low-income household in Britain pays over £490 more per year just for being poor.

Compare that to countries like France and Germany, where utility regulation is stricter. In France, energy disconnections during winter months are banned under the “trêve hivernale” (winter truce), and there are government schemes to ensure equitable access to energy regardless of income.

The Debt Collection Culture: Punishment Over Support

When people fall behind on payments in Britain, companies often escalate quickly:

• Debt is sold to aggressive collection agencies.

• Court orders (CCJs) are issued without sufficient attempts at resolution.

• Bailiffs—now called enforcement agents—are still widely used, often adding hundreds of pounds to the original debt and causing significant stress and fear.

By contrast, in Sweden, debt enforcement is handled by a government agency: Kronofogden. This public service model ensures that collection processes are transparent, regulated, and focused on realistic repayment plans. The emphasis is on rehabilitation, not punishment.

In The Netherlands, debtors are given access to municipal debt counseling services, and there's a statutory “debt rescheduling scheme” (WSNP) that allows people to clear debts over three years while receiving guidance and protection from creditors.

Why Does Britain Choose the Hard Way?

The UK’s model reflects a long-standing belief in individual financial responsibility, often ignoring the structural issues—low wages, insecure work, high housing costs—that lead to debt in the first place. This moralistic tone (“you got into debt, you get yourself out”) justifies harsher collection practices.

In more social-democratic European countries, there's greater emphasis on collective responsibility. Debt is seen as a societal issue—closely tied to inequality, unemployment, and cost of living. Their systems are built around preventing people from falling into unpayable debt, not punishing them once they have.

Breaking the Spiral: What Needs to Change

1. Regulate essential service pricing: The UK should end the poverty premium by mandating fair pricing across utilities, insurance, and credit.

2. Reform debt collection laws: Stop the use of bailiffs for consumer debts. Introduce independent oversight of collection practices with an emphasis on ethical standards.

3. Invest in early intervention: Like in Denmark, where municipalities are required to offer help before debts are escalated.

4. Support statutory debt solutions: Streamline and simplify debt relief processes like Debt Relief Orders and Individual Voluntary Arrangements (IVAs) to make them more accessible and less expensive.

   
   

It Doesn't Have to Be This Way

Britain’s debt system penalizes the poor at every turn. But other countries prove that it’s possible to manage personal debt with dignity, fairness, and support.

If we are serious about tackling poverty, we must stop treating debt as a personal failure—and start treating it as a structural issue that demands structural reform.

Because right now in Britain, the poorer you are, the more you pay—and the harder you fall.