With an estimated 9.7 million people in the UK living below the poverty line, consumer exclusion from goods and services has emerged as a perplexing issue for private sector providers. Briefing maps out the issues and explores how business is responding.
It is often said that we live in a ‘consumer society’, laden with continual choice for new products and services. Whether it’s the mobile phone, internet shopping or organic food, the competitive instinct of the market to continually invent and improve its offering has left the majority of us better off.
Yet the consumer revolution has passed by a small minority in our society. For millions, the notion of choice represents an unobtainable ideal. The figures of those excluded from essential products and services make for sobering reading. Nearly two million people in the UK today lack the money to heat their houses properly, for example, while four times that number cannot afford one or more household essentials, such as a washing machine.
Why does exclusion happen?
Consumer exclusion stems from a wide range of economic, social and physical causes. A feature of exclusion is that the causes are often inter-connected. A poor credit rating means that it’s difficult to access financial services and credit, which obliges individuals to pay in cash for services, which in turn increases the expense for key products and services. For those without a phone landline, for example, telecommunications bills can be £420 higher per year than the average cost of calls.
It is not just the poor that face exclusion, however. Physical or mental disability also keeps many from enjoying full use of public and private services. Consumers without mobility or in geographically isolated areas, for example, miss the opportunity to shop around for competitive prices. Another major cause centres on the lack of basic skills. Low literacy and numeracy rates, for example, can effectively bar consumers from some services that entail complicated selling methods or access systems. The move to internet-only services is one area where consumers with poor basic skills are set to really suffer. The reduction in local, face-to-face services with the growth of call centres can also intimidate or confuse individuals without core basic skills.
Businesses face criticism from consumer groups, such as the National Consumer Council (see guest editorial), on a number of counts for exacerbating problems of exclusion. Product diversification, it is argued, rarely takes into consideration the needs of disadvantaged individuals or communities, while market complexity often leads to mis-selling or inappropriate purchasing for those unable to negotiate such systems. Other accusations include tailoring marketing campaigns to the better off and pulling out of non-profitable regions.
What approach is the government taking?
Exclusion from the market effectively results in exclusion from society, consumer groups often argue. The issue is therefore rightfully a primary concern for the UK government, with inclusion now emerging as a central theme of consumer policy, public service provision and poverty reduction targets. The response from the government has been to mix legislation, such as the Disability Discrimination Act or the recent Race Relations Act, with improved surveillance of existing regulation, most notably through new regulatory groups such as Ofcom or the Financial Services Authority.
A limited number of industries that provide goods and services deemed as essential, such as utilities, telecommunications and financial services, are set up with a public service obligation of some degree or other. In some cases, the government permits cross-subsidies to ensure that the disadvantaged gain access to critical services. This is the case with telephone, water and energy services, for example, where extending a service network to those living in isolated areas represents a major additional cost for the operator. The cost for such subsidies are generally passed on to better-off consumers. Consumer groups complain, however, that government requirements for regulated companies are often inconsistent (affordable access policies exist for fuel and telephone, for example, but not for water), lack clarity (terms such as ‘essential services’ and ‘affordability’ still lack precise definition) or are simply too weak (as with pressure on banks voluntarily to provide basic accounts).
With the recent emergence of private-public partnerships as a favoured model for basic service provision in areas such as transport, education and health, the private sector will inevitably be drawn further into the debate over inclusion policy.
How is business responding?
Specific responses to the challenges of the contemporary exclusion debate differ widely. Operators of non-essential products and services often show little incentive to engage with the issue. If a company’s business model is orientated towards the luxury or high cost end of the market – be it diamonds, sports cars or safari holidays – then product access is commercially nonsensical. Some companies, on the other hand, express no competitive or moral interest in engaging excluded consumers. Ryanair’s addition of a charge for wheel-chair passengers (something which the courts judged illegal on the grounds of unfair discrimination) provides a classic case in point.
Regulated industries, especially those that once operated under public management, have shown a stronger commitment to equal access. This has come about partly as a consequence of the bar being set higher for them, but also because of their closer operational proximity to consumers of all profiles. EDF Energy, the French-owned gas and electricity supplier, for example recently established a £2 million charitable foundation to help customers that are struggling to pay. Many of the energy utilities, in fact, are working closely with local councils and charities to educate disadvantaged communities on fuel efficiency – the logical extension of which is reduced energy use and, one must suppose, reduced revenue.
Likewise, some financial services are beginning to experiment with low-income services. The Bank of Scotland, for example, using the expertise developed through its community banking division, has a partnership with the Western Hailes community of Edinburgh that has seen over 1,100 previously excluded customers open basic bank accounts. All the major banks now offer accounts without overdrafts or cheque guarantee cards, although take-up remains low due to lack of awareness and of consumer confidence.
‘Skilling up’ those that are excluded from certain products and service is also a feature of corporate inclusion strategies. Again, many of the banks are leading the way, using their community and education programmes to improve financial literacy and money management skills. ICT marks another obvious industry that has developed and supported community involvement programmes in recent years to provide the skills necessary for excluded people to take advantage of new technologies. One such example is Microsoft UK’sAnytime, Anywhere Learning scheme, which provides teachers and students with one-to-one access to their own laptop computers, thereby helping to improve IT literacy and enhance young people’s job prospects.
Less commercial perhaps, but equally important from an inclusion perspective, is the work companies are doing to develop products and services for people with disabilities. Again, technology companies are leading the way in this respect. Vodafone, for example, recently set up a specific team to create products that have a ‘social benefit’, such as mobile phones for the hearing- and visually-impaired. Mm02, meanwhile, is experimenting with mobile phone technology that can help people with asthma to monitor their breathing.
Conclusion
It could well be argued that free market capitalism has proved the most successful system of bringing more goods to more people at lower and lower cost. Cars, fridges, telephones, the preserve of a rich elite only fifty years ago, have been transformed by the power of competitive market forces into widely available products. The market will inevitably lead to failures in product and service access in areas where little or no commercial incentive exists. It is then for the government to provide such incentives (or to regulate where no incentives are practicable) for private sector providers. The government’s mantra of ‘equal access for all’, however, does present CSR practitioners with an opening to highlight the needs of excluded individuals. Getting product and service developers to listen will probably continue to be an uphill battle. Yet in their existing partnerships with public and voluntary groups, CSR professionals have an obvious starting point for the necessary internal discussions about equal access.
FACTFILE: DEFINITIONS
Excluded consumers:
People who – for example, due to low-income, basic skills difficulties, or one of the wide range of disabilities – are not able to get full access to goods and services that are defined as necessary for meeting basic physical and social needs.
Essential goods and services:
The United Nations classifies as essential those goods and services necessary to maintain a minimum acceptable way of life, including a nutritious diet, social participation and engagement on equitable terms, sanitation, healthcare, education, adequate housing and a healthy environment.
Universal access:
Availability and continuous accessibility and affordability of goods and services at a specified minimum quality for all consumers.
Source: National Consumer Council report, ‘Paying more, getting less’, 2004
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