Regulators told to do more to protect the vulnerable

Eleven per cent of consumers are seeking support in at least three of four regulated sectors

Regulators in the water, energy, telecommunications and financial services sectors are not doing enough to help vulnerable customers, the National Audit Office (NAO) has said.

In a new report, Vulnerable customers in regulated industries, the NAO summarises the challenges associated with an increasing volume of vulnerable customers in the UK.

According to its research, 11 per cent of consumers are now seeking support to pay their bills in at least three of the four regulated industries examined. Overall, around 8m UK consumers are considered to be overindebted and 32 per cent of consumers do not have sufficient savings to deal with an unexpected bill of £300 or more. This rose to 50 per cent for the unemployed and those receiving benefits or living in social housing. 

Among its key findings, the NAO also noted that around 1.6 million UK energy customers currently self-disconnect their prepayment meters in order to avoid running up large energy bills.

Commenting on the new report’s findings Amyas Morse, head of NAO, warned that a “significant number of vulnerable consumers are particularly susceptible to bad outcomes or experiences from regulated services such as energy, water, communications and financial services”.

These “bad outcomes” can include “disproportionately high bills, lack of access or choice, and debt”.

Morse acknowledged that regulators across sectors have come some way in improving their understanding of vulnerability, and the way it can intersect across their industries. However, he added that regulators, and government, “need to work closer together to clarify their respective responsibilities if overall support for vulnerable consumers is to be value for money.”

In summary, the NAO concluded that regulators need greater clarity from government with regards to their roles and responsibilities. 

Greater clarity would reduce the scope for conflicts between regulators’ duties to protect vulnerable consumers and “other measures designed to benefit consumers in general”.

“For example,” said the report, “Ofgem and other public bodies have not intervened directly to reduce large price differences between energy tariffs, as doing so could adversely affect competition. However, many vulnerable groups are substantially less able or likely to benefit from switching to cheaper deals.”

The NAO also stated that regulatory intervention on the behalf of vulnerable customers can be “insufficient” and that “None of the regulators has yet translated its high-level aims on vulnerability into detailed objectives”.

Responding to the report findings an Ofgem spokesperson said that it si the regulator’s “priority” to protect consumers at the same time as delivering “a smarter, fairer and more competitive market”.

They added: “Consumers in vulnerable situations are at the heart of our regulatory framework. On Saturday, in line with CMA’s findings ,we are introducing a price cap for households on pre-payment meters, who are least able to access the best deals and are among the most vulnerable, which could see those using a typical amount of energy saving around £80 a year.”

A spokesperson from water regulator Ofwat said that it welcomed the NAO’s insights as an “opportunity for regulated sectors and Government to further reflect on how best to address the needs of customers in circumstances that make them vulnerable”.

The NAO describes vulnerable customers as those who “because of their circumstances, are particularly susceptible to harm or disadvantage. This is especially the case where someone’s financial position means that they struggle to pay for essential services.”

The NAO warned that the number of customers considered vulnerable may be high, and that it could increase in the future, in part due to an aging population in which cases of dementia are projected to rise from 0.9 million to 2 million by 2050.