A new fund worth up to £20m has been launched to invest in ventures which can disrupt the energy, finance and insurance markets and provide alternative services to millions of people on low incomes hit by the poverty premium.
Fourteen million people live in poverty in the UK, more than one in five of the population. But people already struggling face a poverty premium – having to pay more for essential goods and services, such as their energy bills, for credit or their food.
On average, these extra costs add up to £490 a year and can total up to £1,190 for some households.
Now, the Fair By Design Fund aims to eliminate the poverty premium within 10 years. Backed by the Joseph Rowntree Foundation, Big Society Capital, Nominet Trust, Ascension Ventures, and Finance Birmingham, the Fair By Design Fund will invest in companies from Seed through to Series A and beyond.
Progress has already been made. At an event to launch the fund on Wednesday 8 November, the partnership will unveil five start-ups from an accelerator programme, run by Wayra UK, which will all benefit from funding and mentoring while they develop innovative solutions to the premium:
The fund has £9m to deploy and is seeking to increase this to £20m over the next 12 months.
It will invest in solutions to four key areas of the premium:
Campbell Robb, chief executive of the independent Joseph Rowntree Foundation, said: “Households in poverty are four times more likely to be behind with at least one household bill and are more exposed to the rising cost of living.
“The poverty premium is costly and unjust penalty for living on a low income. It’s a sign of market failure, which we need to end urgently. Investors, businesses and social enterprise have a huge part to play in solving poverty in the UK. It’s time to make life affordable for everyone.”
Cliff Prior, chief executive of Big Society Capital, said: “It’s simply wrong that people on low incomes pay more for basic goods and services. It shouldn’t cost more to pay your bills as you go, it shouldn’t cost more to heat your home. But it does for so many people.
“We know that there are many social businesses which are looking to find solutions to some of the UK’s toughest challenges, and this Fund can help them make a real difference to the lives of people living on low incomes and their families. Together, we can eliminate the poverty premium and help millions of people.”
Vicki Hearn, Director of Nominet Trust, which today announced £1m investment in the Fair By Design Fund over three years, commented: “Nominet Trust is committed to transforming lives with tech and we know that by working with other mission-led partners to leverage skills, insight and capital we all have a greater chance of achieving social impact.
“Our investment in the Fair By Design Fund will challenge us all to think differently about the relationship between tech and society, encouraging the growth of innovative, disruptive digital solutions to the unjust consequences of living on a low income.”
Tina Hallett, Government and Public Services leader at PwC, commented:”PwC has been working for over three years now with business, Whitehall and the third sector to encourage new ways to tackle the Poverty Premium and we have found a genuine desire from these organisations to do the right thing. But translating this into tangible measures has been more difficult.
“The work of the start-ups supported by Fair By Design Fund presents a ground-breaking opportunity to lead us all in thinking differently about how we solve this problem. No one organisation can do this alone. We all need to work together to build on their contribution - and make a material difference.”
Gary Stewart, Director of Wayra UK and Telefónica Open FutureUK, which manages the acceleration programme in Oldham, said: “It’s no longer good enough to expect government or charities to solve all of our problems. The UK’s future will depend on finding partnerships like this one that empower start-ups to do good, while doing well.”
Jean de Fougerolles, chief executive of Ascension Ventures, said: “The Fair By Design Fund gives Ascension Ventures a tool to combine financial and social return for our partners and to play our part in eradicating the Poverty Premium.
“It should not cost more to buy everyday products and services just because you have a low-income. The team at Ascension is passionate about helping to eradicate the Poverty Premium, by investing in businesses that will disrupt unfair markets.”
Angela Clements, Founder, Fair for You, a not-for-profit online lending company based in Birmingham, that provides affordable finance to those who need it the most, said: “Fair for You provides small loans to facilitate the purchase of essential household items, and in our first 22 months we have already loaned £4m which at an average of £300 each time, means that thousands of families have been able to avoid the poverty premium attached to fridges, cookers, cots, bunk beds.
“Independent research from Centre for Responsible Credit has estimated an average saving of around £500 per item. Essentially, it also found that over a third of customers believed their children’s health and wellbeing had improved directly as a result of taking finance from Fair for You instead of their previous high cost credit provider.”
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