When I write about personal finances in Quids in! magazine, I know our target audience of low-income households feel the system is rigged against them. Change, they suspect, does nothing positive for them. We see the same pattern in our : getting the keys to a new place should be good news, but for many, that quickly gives way to the reality of an empty home they can’t afford to furnish.
Announcements by regulators sound tough but people who are struggling have ‘spidey-senses’ – the hairs on the back of their necks go up because they can feel a price rise a mile off. And they’re usually right.
Ofgem have announced they’ll be issuing fines to energy companies who don’t rectify faulty smart meters within 90 days. Customers, they recognise, are missing out on cheaper deals, time-of-use deals, and accurate billing. Automatic compensation of £40 to consumers will also apply if they miss the deadlines.
Does anyone still think companies break into a sweat at threats like this anymore? Who pays these costs?
We do.
Even if they denied it, in a world where dynamic pricing is legal, do we really think they wouldn’t find ways to invent surcharges to claw back profits some other way? (More on dynamic pricing another time.) It’s not even like we can shop around like we could before the Russian invasion of Ukraine that caused the energy market to implode and prices to soar.
Ha, ‘competition’. The argument for privatising utilities, right? So, why can’t I shop around for my water?
The recent docu-drama Dirty Business, on Channel 4, exposed what happens when companies are left to mark their own homework and set their own prices, unfettered by competition (or adequate regulation). Companies are allowed to pass on the cost of fines to customers, so they did. Even if they’re forced to clean up their mess, we will pay for it. What a time to be alive!
The programme also described the cosy relationship between the regulator, Ofwat, and the industry. Ofgem has similarly been accused of protecting the interests of energy companies, or ‘the market’, over customers. And the FCA has come under attack for the same with financial services – and I’ve been in the room when bankers have questioned out loud why they should have to serve people in hardship who make them no money. Out loud! And in front of representatives from the Alzheimers Society, Mencap, Mind and, obviously, Clean Slate Training and Employment CIC.
Yesterday morning I received an email from Meta to say that it will be introducing a new ‘tax’ on its Facebook and Instagram advertising. Set at variable rates, depending on the country we’re in, (two per cent in the UK versus five per cent in Turkey, for example), on account of the cost of regulation. I know consumers have always picked up the tab for tax, like VAT, but this isn’t for tax. Like with the water and smart meter examples, it´s for doing things right and looking after consumers. I suppose we should be thankful for the protections that regulation should bring us, (caveat: see above), but honestly, where does it stop?
It’s a legal protection racket. You want clean water? You gotta pay more. You want accurate bills? You gotta pay more. You wanna keep your money safe? You oughta pay.
The cost of living will only continue to spiral while companies with a monopoly, or acting like cartels fixing charges, are free to name their price, at no expense to their shareholders. The argument that competition tempers prices only works if petrol stations don’t match the highest local prices, knowing the drive to the next forecourt will cost more than the savings to be had. Just like pubs in cities, in southern England at least, are seeing how quickly they can make eight quid the average cost of a pint. But while there’s enough people wealthy enough not to care, there is no pressure on businesses to lower prices. Everyone else can stay at home – or have a couple down ’Spoons maybe.
Even when regulators act at such a surface level as fines for wrong-doing, we can see why people suspect it just means bigger bills down the line. Low-income consumers feel like fines do nothing positive for them because their perception is always through the lens of the cost of living. So even if smart meters start working, beaches become cleaner, and banks start offering better services to benefit claimants, people know it’s only because, one way or another, they paid for it.
PS. I had some equipment delivered by SpeedyHire yesterday. The driver rushed me along because he was on a yellow line. “The company don’t pick up the parking tickets,” he explained. “I have to pay it.” Of course, the company has no control where staff park so there’d be no disincentive if the business covered the fines. And, I guess, if they did, I’d pick up the tab for those too.