Comment: Counting the cost

Just last month, the Office for Budget Responsibility announced that living standards in the UK are set to fall by 2.2 per cent in 2022-23. It’s the largest fall on record, and not expected to recover until 2024-25.

As the war continues in Ukraine and the world wrangles with the impact of the Covid-19 pandemic, uncertainty and big bills loom large for governments across the world. 

Financially, that same uncertainty and spectre of debt is hitting those at the bottom end of the ladder the hardest. This is worsened by the premium people pay for being poor, with higher costs for basics on a pay-as-you-go basis.

Much of the discussion around the financial crisis for households has centred on the cost of energy, food, or clothes, each one rising like a tide. And the thing about tides is that they don’t care about people, they just move in relation to gravity, the moon, and the sun. We have no power to control them.

If I was to run with that analogy, then credit reference agencies – made up of three main forces – play a similar part in people’s lives. Omnipresent but practically inaccessible and unbreakable, they make their presence known on our everyday lives, sometimes with disastrous consequences. Unless you’re extremely well off. 

In writing this column, I want to admit I’m not a financial expert but it’s clear that we’re paying far more than we ever have for the essentials and it’s going to have an immeasurable impact on households across the country, especially on society’s poorest. 

Your credit rating is judged by reputation. A reputation built on your employment, your income, your housing situation, the stability and length of any bank accounts and your credit history. That seems to be commonly held wisdom. It all sounds so simple. 

Yet at the same time there are countless websites and experts all professing to showcase how to improve your credit rating. Each has their own method and boast about the results they can yield. However, just by the very existence of these experts we’re able to understand just how complex, obscure, and inaccessible these credit ratings really are.

I want to be clear here. I’m not talking about people taking credit to go on holidays, buy fast cars or flashy gadgets - although you’re well within your rights to do so. 

The main concern for me is that much of the world runs on credit and if you can’t access it, you pay a premium.

Want a bank account with benefits and lower overdraft fees? Credit check. Want to rent a flat? Credit check. Want access to better tariffs for your electricity and gas? Credit check.

It’s possible to exist in a world without credit, but you better be prepared to pay a price. If you don’t access credit for your phone contract, expect a higher pay-as-you-go rate. The same can be said for deposits to letting agents and pay-as-you-go energy.

The cost difference can be stark. If you were to travel from Glasgow to Edinburgh for work five days a week, (something that many employees face as their employers recall them to their offices) you would pay £140 a week or £7,176 a year. If you were to buy a season pass guaranteeing travel 365 days a year, you’d pay £4,432. This is an option many take, using loans to help meet the up-front cost. If you can’t access a loan, expect a difference of almost three thousand pounds. A difference that increases to over £5,000 if you were to go for a like-for-like comparison.

Of course, if you’re lucky enough your employer might offer a season pass loan, which is to be paid back from your wage monthly and doesn’t require a credit check. An arrangement that might work until you want to move job. Then it’s time to pay up.

It’s clear we don’t exist in a pro-work economy – we strive in an anti-work economy. As levers are shifted about by faceless corporations we too can be pulled into the rising tide of poverty and find our own stability thrown overboard. 

It happened to me. I was working in a well-paid job and after a series of life events that meant a few missed payments on minor bills I watched my credit score drop and until relatively recently I was paying that premium. 

Governments and politicians who oppose them must move to make the credit market more transparent. It’s unfair that your credit can be impacted by moving house or missing just one payment on a gym membership. It’s an affront to common decency that these same credit agencies are now offering subscriptions to services that could “boost your credit rating”, whatever that means. 

I’m sure that those more well-versed in economic matters will read my column and offer many arguments. Whether it’s the risk factor or the impact on the economy if everyone was able to afford a basic living standard, there will be arguments made.

However, I find no greater argument than the fact that the poorest among us should not pay a premium just to eat, be housed and keep themselves warm – all because some algorithm said as much, and we did nothing about it.