Credit Action disappointed with axing of Saving Gateway scheme

Amongst the headline cuts in welfare and increased taxes announced in Tuesday’s emergency Budget, the government’s decision to abandon the proposed Saving Gateway scheme received little attention.

However, Credit Action are disappointed to hear that the scheme has been cancelled, owing to the fact that it is becoming increasingly important for households to have money saved up in case of unexpected redundancy or falls in income. The Saving Gateway would have been instrumental in kick starting a savings habit amongst beneficiaries, many of whom will suffer directly as a result of the measures announced in the Budget.

The proposed Saving Gateway scheme was a generous government sponsored initiative targeted towards low and middle income earners, including those receiving working tax credits, income support, jobseeker's allowance, incapacity benefit, and other allowances.

Individuals who qualified would have been able to save up to £25 per month for two years, and the government reward (of 50p on top of every £1) would have been transferred after the two year period.

The loss of such an initiative could not come at a worse time as unemployment remains high and many low income households struggle to weather the impacts of the recession on a daily basis. On top of this, the Chancellor’s “tough but fair” Budget will leave many struggling to keep their heads above water.

The Institute for Fiscal Studies, an independent think tank, has argued that the proposed cuts in housing benefit and in disability living allowance, and the increase in VAT, are much more likely to affect the most vulnerable sectors of society*. Indeed, the institute’s director Robert Chote pointed out that the cuts to public services, which don’t appear in most assessments of the “fairness” of the Budget, “are likely to hit poorer households significantly harder than richer households”.

This issue has also been highlighted by the Young Foundation, who in a recent report suggested that over the last year, the recession has raised unemployment and put downward pressure on incomes, leaving the poorest worse off. In addition, the Young Foundation contend that the full effect of the recession and the proposed public spending cuts will not be clear for many years**.

Thus, it is lamentable that the Saving Gateway scheme has been axed at a time when many low income households are struggling with mounting debts and financial uncertainty. Such schemes do not just help promote a savings habit, which is vital for mitigating unexpected life events, but can also contribute to increased financial capability and sound money management. These are the skills that we will all need, at an individual and governmental level, to survive the next few years of low economic growth.

*http://www.ifs.org.uk/projects/330

**http://www.youngfoundation.org/

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