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”
Anon E Mouse
Jacquie Martin – “aggravate, intimidate and insult” – typical smearing lies from the left – never debate the comments just stick to a dogmatic tribal position and insult anyone who doesn’t agree with your incorrect flawed opinion.
The subject of the articles is what I have the problems with – positions adopted on this blog show a complete loss of understanding as to why Labour lost the last election and many are simply not credible.
I never claimed I was clever but I am honest.
we know you voted Labour last time Jacquie Martin and you do know what a Champagne Socialist is. Stop pretending to be something you’re not – the Labour Party has quite enough pseudo “working class” members already…
A Carer
@ Anon E Mouse “aggravate, intimidate and insult” who are you quoting? Certainly not Jacquie Martin in this discussion. It is clear to me you are describing yourself. Exactly which comments have you debated in the original article?
I can’t claim to be working class as I had to give up my working class job to care for my infirm mother (saving the Government approx £460.00 per week on care home costs). Yes I am one of the people this money was aimed at. Not sure I could have taken advantage of it on my Carers allowance of £53.90 per week. No, I am now simply “lower class” although it was my tax pounds (when I was working) that helped finance the FIVE HUNDRED BILLION POUNDS squandered on the banks who have since failed to lend it to businesses to help reflate the economy. I had been hoping to get a part time job to supplement my allowance once the banks started lending my tax pounds to businesses and jobs began to be created. Unfortunately the banks decided to carry on down the casino on the stock markets simultaneously risking and squandering my tax pounds.
Now, if you want to see “common sense” coming from the Government lets see it reclaiming that portion of the FIVE HUNDRED BILLION POUNDS lent to the banks 2 years ago that the banks have failed to lend to UK based businesses. THEN you will see the deficit almost disappear overnight and the Government can stop mamby pambying around trying to save a measly billion here and a couple of million there!