Sandra Gruescu mourns the death of the Saving Gateway and would like to see the Child Benefit means-tested
The biggest surprise of the Emergency Budget for me was the announcement that the Saving Gateway, a scheme designed to help people on low income to kick-start a saving habit, is being scrapped. This is highly unfortunate. A report
evaluating its effectiveness stated that the scheme ‘was highly popular with research participants, many of whom reported a number of positive outcomes and benefits from taking part. Significant proportions saved for the first time and continue to save even after the scheme ended (61 per cent continue to be regular savers, and 60 per cent agree they save more regularly as a result of taking part in the scheme). The majority agreed that they had learned specifically about how interest rates and banks operate and agreed that their knowledge of financial products had increased as a result of the scheme. Attesting to the popularity of the pilot, 98% would open another Saving Gateway account if offered and 99% would recommend it to a friend.'
The Saving Gateway scheme generated both new savers as well as new savings. As did the Child Trust Fund
. However, both schemes are scrapped, leaving savers in limbo. I really don't know why anybody would save these days, with interest rates being so low. But – given the huge savings and asset crisis we have in the UK – scrapping those two schemes against the background of low interest rates and little trust in banks can only be called a move in the wrong direction.
George Osbourne has also announced that all benefits and tax credits (except pensions and pension credits) will move in line with the CPI rather than the RPI. The Consumer Prices Index (CPI) and the Retail Prices Index (RPI), published each month by the UK Office for National Statistics, are the main measures used in the UK to record changes in the level of the prices most people pay for goods and services. CPI and RPI tend to have different values because there are slight differences in what goods and services they cover, and how they are calculated. For example, the CPI excludes certain housing costs, such as mortgage interest payments and council tax. The new policy means that in the future benefits and tax credits are more likely to rise more slowly as the CPI is more often below the RPI, rather than not. Currently, the CPI stands at 3.4% and the RPI at 5.1%. Every person on benefits will be affected by this.
The good news is that the Child Element in the Child Tax Credit will increase by £150 above inflation from April next year. This will help the poorest families. However, although this is an anti-poverty measure in the short run, this will not create any new assets as was the intention with the Savings Gateway and the Child Trust Fund. At the same time, the Child Benefit is frozen for three years. This policy is totally out of place with the announcement that all benefits are moving in line with the CPI - so why is the Child Benefit an exception? I guess because they had no time to figure out how to means test it – the only sensible solution regarding the Child Benefit payments. Freezing the Child Benefit means less money in real terms for the poorer families and still a hand out for the better off who hardly notice those payments in their bank accounts.