Social tariffs are lower-priced broadband or mobile packages which aim to support access to connectivity for poorer households. Despite recent cost of living pressures, take-up of social tariffs for connectivity remains low with the latest data suggesting that only around 220,000 households in the UK use such tariffs.
Ofcom, the regulator, has called on operators to raise awareness of the tariffs as one way to increase take-up.
Given the interest in social tariffs as a mechanism to improve the affordability of connectivity, there is surprisingly little information on who is eligible for them and how far income levels drive decisions about take-up. BT Group asked Frontier to help fill this evidence gap. Our full report is available here.
We used the Family Resources Survey – the official dataset used to understand household incomes in the UK – and government data on the receipt of income-related benefits to profile the eligible group. Our analysis uses eligibility for the BT social tariff, Home Essentials. This is based on receipt of Universal Credit (or the legacy benefits it replaces) for working age people, or the Guarantee element of Pension Credit for pensioners.
There are a large number of people eligible for social tariffs for connectivity: almost nine million people of working age receive Universal Credit or one of the legacy benefits. As connectivity is at the household level, and around 22% of eligible individuals live in households with other eligible people, we estimate that just under eight million households are eligible.
Our analysis of incomes for these household reveals two important nuances in the role of social tariffs.
First, a million eligible working age individuals live in low income households that cannot afford any connectivity, even if social tariff rates were reduced further. These are households where incomes are so low that they cannot afford a restricted version of the minimum income standard (MIS) which could cover the key essentials of food at home, rent, water, energy, a TV licence and household goods and services (other than connectivity). This means that more than one in ten working age individuals eligible for social tariffs may not take up the tariff because they live in households that cannot afford to pay anything for connectivity because they have no remaining income after paying for such basics as rent, water, food and energy.
Second, two million eligible working age individuals live in households with higher incomes who may not need a social tariff to afford connectivity. These are households with incomes above the full MIS, which includes the costs of a broader range of goods and services deemed necessary for an acceptable standard of living in the UK. This can happen for two reasons which point to the imperfect nature of the determining social tariff eligibility based on benefit receipt:
- Eligibility for low income benefits is assessed on the basis of the income of an individual and their partner, not the household. Some eligible people live with other people with higher incomes (for example, adult children living with their parents).
- Some benefit recipients have incomes above the minimum income standard and receive low benefit amounts but are nevertheless entitled to a social tariff (since this eligibility is based on the ‘cliff edge’ of whether you receive the benefit or not, rather than the amount of benefit received).
Between these two extremes, households face some tough choices about which items from the minimum income standard basket to purchase. They might purchase connectivity in preference to other items in the absence of a social tariff; only purchase connectivity if offered a lower social tariff; or choose not to purchase connectivity even with the social tariff option.
These findings are illustrated in the Figure below. The horizontal axis shows the difference between actual household incomes and the restricted MIS (reflecting the cost of purchasing bare essentials). A negative number indicates that the household cannot afford even the restricted MIS. The vertical axis shows the number of working age people eligible for social tariffs living in these households. Almost two-thirds of those in households with incomes below the restricted MIS face shortfalls of £30 per week or more – suggesting that income falls a long way short of being able to afford connectivity for most of these individuals.
The same issues can also be seen for pensioner households, although to different degrees. Of the 1.2 million pensioners estimated to be eligible for the social tariff:
- 6% live in households with incomes below the restricted MIS, who are unlikely to afford connectivity regardless of the level of the social tariff.
- 41% live in households with income above the standard MIS, who may not need a social tariff to afford connectivity.
In other words, compared with eligible working age individuals, eligible pensioners are a bit less likely to have very low incomes, but much more likely to have higher incomes suggesting they do not need a social tariff. This can be seen in the chart below for eligible pensioners. The yellow bars – those above the standard MIS – are a much bigger share of all eligible pensioners.
In addition, a substantial proportion of the middle band of eligible pensioners, who can afford the most basic but not all of the items in the MIS basket, have weekly surpluses not much in excess of the restricted MIS. This suggests that harder choices may be needed than for working age individuals in the corresponding group to make use of a social tariff for connectivity.
The full report presents detailed demographic profiles of each of the three household income groups shown in the figures above, highlighting some key patterns:
- Among working age individuals in households with income below the restricted MIS, almost three quarters are not working and receive all their income from government. For those in households with incomes above the standard MIS, only around a third are non-working and fully reliant on government for all their income.
- Households with income below the restricted MIS are predominantly single individuals without children, including 60% who are working age individuals living alone and 7% who are single pensioners. The low proportion of households with children in this group may reflect the fact that additional benefits are available to families with children
- Around half of households with income above the standard MIS contain eligible individuals living with other household members who are not a spouse or dependent child. The other half are single-family households. This suggests that both explanations for eligible individuals living in relatively higher income households (they are living with individuals with higher income or in families with low amounts of benefit) are important.
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