While the strictest social distancing rules are starting to be eased, the economic impacts of COVID-19 will be felt for years to come. The Bank of England has warned the economy is heading towards its sharpest recession on record, as it shrank by just over 20% in April. Around 8.9m workers – equivalent to a quarter of the UK’s workforce – are now covered by the furlough scheme. A further 2.6m people have claimed support from a similar scheme for the self-employed. As the government’s economic support begins to be withdrawn, a fresh wave of redundancies is expected. Many consumers will soon need more help than ever before to cover their monthly bills.
Regulators have been quick to offer support in these circumstances. Ofcom has agreed new measures with the broadband companies to support vulnerable consumers through COVID-19. These measures include broadband providers committing to working with customers who find it difficult to pay their bill to ensure they are treated fairly. Providers have also committed to removing data limits on fixed broadband services. In addition, telecom companies will also offer new phone packages to help vulnerable people stay connected.
This week, Ofgem has also submitted proposals which would make its existing COVID-19 support package a permanent requirement for energy suppliers. Their proposals are designed to reduce the number of prepayment customers temporarily going without energy. They would also require suppliers to offer more support to any customer who is struggling to pay their energy bills. While many suppliers already offered some support to vulnerable customers before the lockdown, the new rules will be consistent across the sector.
These new support programmes build upon the wider reforms which regulators have already introduced to protect consumers. Last September, Ofcom brought in measures to help broadband customers pay fair prices. This included guaranteeing an existing customer receives the same offer as a new customer when they take out a new contract. The rules also ensure broadband companies offer more help to vulnerable customers. Ofcom is also considering introducing a new tariff specifically for low-income households to ensure they have access to the internet.
In the energy sector, Ofgem has brought in new rules to protect vulnerable consumers. These include its default tariff price cap and its prepayment meter cap which were introduced in January 2019. The price caps are designed to protect the 15m consumers who are on standard variable tariffs or prepayment meters. Ofgem also introduced a new automatic compensation scheme for energy customers if they experience delays or mistakes when switching supplier. This should mean consumers feel more confident to switch.
All these new rules will certainly help people. The support packages have been a welcome development given the clear problems in both sectors. But too many people are still paying far more than they need to for their essential bills. At a time when any extra money could make a real difference, energy customers stuck on default tariffs or out-of-contract broadband customers could still save hundreds of pounds by switching tariffs or suppliers. The market must also go further to deliver solutions that engage these consumers to seek out better deals.
The actions taken by Ofgem and Ofcom clearly acknowledge pricing problems in both markets that prey on disengaged consumers. While they differ in their approaches to addressing the underlying issue, the changes are very welcome. At Youtility, we believe further innovation from the market is vital to engaging these consumers, and that the issue is of increasing importance given the ongoing and upcoming economic uncertainty.
The lockdown has accelerated the digitalisation of the economy and emerging technology such as Open Banking is beginning to develop promising solutions for consumers. This has created new opportunities to transform the energy and broadband markets to ensure all consumers pay a fair price for their monthly bills.
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