Expand Smart Data To Help Poorer Households Cut Their Bills, Says Think Tank
The Social Market Foundation (SMF) has said government must take a more "active role" in regulating Smart Data. (Alamy)
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A leading think tank has warned that poorer households are at risk of missing out on savings on their energy bills without government action on 'smart data'.
In a report published on Wednesday, the Social Market Foundation (SMF) said that low-income consumers could benefit by up to £217 annually from smart data, but, as things stand, it risks just being a "middle-class money-saver".
Smart data is used by companies to better understand consumer behaviour, and consumers can use it to better navigate products and services.
The previous Conservative government defined it in its "Smart Data Roadmap" as the sharing of consumer data through approved third-party groups via Authorised Programming Interfaces (APIs), allowing third parties to create comprehensive understandings of consumer habits and needs.
The then business minister, Kevin Hollinrake, said it could increase GDP by nearly £28bn a year.
According to the SMF, rolled out effectively, it could help households, particularly low-income households, find better deals on bills, groceries, insurance and other essentials.
It said that low-income households are currently likely to miss out on savings and instead face what it describes as a "poverty premium", whereby they are charged more for products and services due to their perceived risk.
The think tank pointed to research showing that the average low-income household is charged a poverty premium 3.5 times a year at a cost of £217. Around 15 per cent of low-income households pay a poverty premium 7 or more times a year, the SMF said.
The SMF report set out several reasons why poorer households face being excluded from the benefits of smart data.
They include a lack of consumer awareness of how it works, as well as deliberate or inadvertent marginalisation of lower-income consumers by companies. The think tank said a lack of legal obligations from the government means that companies are able to avoid smart data schemes, to the detriment of poorer households.
The SMF has called on the government to take a "more active role" in expanding smart data schemes to include more people, like ordering all data holders, including itself, to participate. As things stand, the only active user of smart data in the UK is the Open Banking Scheme.
Other recommendations include ensuring the government always consults on the potential impacts on low-income consumers and ensuring consumers can control the use of their data, including being able to withdraw consent at any time.
Focus groups carried out by the think tank found public concern that companies will exploit their data and breach their privacy.
“Smart Data can empower consumers – but fairness won’t come about under the status quo," said Niamh O'Regan, senior research at the SMF.
“If ministers want Smart Data to be more than a middle-class money-saver, they must design it to tackle the cost of living crisis head-on. With the right safeguards and government leadership, Smart Data could put hundreds of pounds back in people’s pockets each year.”
The cost-of-living was a major focus of Chancellor Rachel Reeves' Budget last week.
The Labour government has frozen prescription fees and train fares and reduced levies on energy bills in a bid to alleviate pressures on household finances.
