Combined with other measures in the budget which are likely to disproportionately affect the poor, the abolition of the Saving Gateway is further indication that this Budget is not as progressive as the government claims.
Our guest writer is Dalia Ben-Galim, associate director of the Institute for Public Policy Research (ippr)
It may have been overlooked by many but the 2010 Budget announced that the Saving Gateway has been deemed “unaffordable” and so will not go ahead as had been planned. The Saving Gateway was a ground-breaking scheme designed to incentivise and reward saving among low-income families by providing a “match” for each £1 saved. Rigorous pilots have shown that the Saving Gateway has been effective in increasing saving among low-income families.
Evidence from ippr’s ‘consumer spending and debt’ research explored how low income families spend, save and borrow. Most families wanted to save and many successfully saved for Christmas and birthdays. For example, a 33 year old parent with two children told us:
“I’ve not been one for saving long-term. I can save for a purpose.”
Families had often interpreted ‘saving’ as not spending and were able to juggle income and expenditure for a particular event. But most families did not manage to build up any ‘rainy day’ savings. And very few were managing to save for the medium or long term, even though many would like to do so to help their children.
A 46 year old mother of two told us:
“We have not been able to put any [money] in [to our savings]. We’re spending so much in the shops and supermarkets and on bills.”
This was was a typical response; ippr’s research concludes that the lack of precautionary saving for low-income families leaves many more of them vulnerable to income and expenditure “shocks”. A quarter of our research participants experienced a fall in household income as a result of unemployment or changed working conditions. Another 10 families (out of 58) reported “shocks” of unexpected spending due to the breakdown of a household item (e.g. fridge, boiler, washing machine).
While many were trying to save – for example, one family was saving their child benefit money, and another was saving £10 a week into a child savings account – none had long-term savings. Low-income families would benefit from increasing their savings and building an asset base.
The Saving Gateway provided a “match” for savings – rather than tax relief – which many families with no or low earnings cannot benefit from. We already spend £1.6 billion on tax relief for ISAs (and almost £22 billion in total on tax relief for savings). The Saving Gateway would have cost just £115 million and would have provided a vehicle for many low-income families to regularly save and build a savings habit.
The Coalition government says it is keen to increase household saving rates but has just taken away a key mechanism that incentivises and rewards saving among low-income households. Combined with other measures in the budget which are likely to disproportionately affect the poor, this is a further indication that this Budget is not as progressive as the government claims.
12 Responses to “Abolition of Saving Gateway will hit poorest families the hardest”
Jacquie Martin
I used to work in rights advice and dealt with money managment and debt. Families I advised would often have every last penny accounted for, and I was trying to juggle literally nothing to deal with these shock problems.
Unlike the rich, they don’t have a stash to fall back on. Similarly unlike the middle class workers, they don’t have access to affordable credit to help them through a tough time.
This government simply has no ability to engage with reality. They don’t understand how people live and all they can do is crticise, blame and penalise anyone for having the temerity to be poor.
And I see this as a problem which is going to affect many more people who might not see themselves as ‘low income’ now i.e. when jobs are lost, the tax rises kick in and the cuts bite.
Michael Green
https://www.leftfootforward.org/2010/06/abolition-of-saving-gateway-will-hit-poorest-families-the-hardest/ Another Lib-Dem sell out.
Anon E Mouse
Thank god some common sense seems to be finally coming to government – this is a breath of fresh air after the spending of our money on the last useless lot’s pet projects.
For Harriet Harmon to spend taxpayers money on her “relaxation pods” is a disgrace and personally I’d like to haul her in front of the beak, or her electors to explain herself.
(While she was there she could also explain why she approved of positive discrimination for woman and let her husband, Jack Dromey take a safe Labour seat in the West Midlands. Hypocrite.)
Add to that the stupid “Baby bond”, where we borrowed money on the international markets, paid interest on it and then gave it free to babies was financial incompetence of the highest order.
Thank god for common sense from this new government – remember when someone says some thing is free, like school dinners, it just means someone else is paying for it…
Anon E Mouse
Jacquie Martin – Are you familiar with the term “Champagne Socialist”?
You should be.
As a real member of the working class I find your comments unattractive and patronising…
Jacquie Martin
Anon
Quite frankly I find all of your comments nnattractive and patronising. You make the mistake of thinking you’re clever when in fact you are not.
Your opinion of me is of no consequence to me, as I’m sure mine is not to you.
I’m aware people like you exist on the blogosphere but I will speak my mind when I feel I have something useful to add to the debate. Your sole intention seems to aggravate, intimidate and insult. By all means have a different opinion – it adds to the debate, but like most others on this blog, I propose to ignore you in the future and stick to the subject of the articles.