Darling's Pre-Budget Report offers gateway to savings for low earners

25 November 2008 / by Rachael Stiles
Alistair Darling said that the Government wants to "encourage those with modest incomes to put money aside" and proposed a number of incentives in his pre-Budget Report yesterday in order to make saving more attractive.

The Chancellor's proposed scheme, The Saving Gateway, will mean that from 2010 the Government will add money to every pound that people save, with eight million low-income savers receiving an additional 50p for every pound saved.

The money will be paid as 'bonus' after a two year period in the special savings accounts, up to a maximum of £25 a month, boosting savings of £600 up to £900.

The Saving Gateway will be means-tested and widely available at a number of banks, building societies, credit unions, and the Post Office, the Chancellor confirmed, which, he hopes, will mean people save more.

However, he also announced that the amount savers are allowed to invest in tax-free Individual Savings Accounts (ISAs) will remain frozen for the next tax year at £7,200, and the amount that can be invested in cash will remain at £3,600.

Families with children will benefit from the plans; it was previously announced that they will see an increase of £50 in the Child Tax Credit from next April and will see an additional £25 increase in 2010, but the Chancellor now intends to bring in both of these increases next year, which could mean £2,235 more for modest income families.

As was already known, Child Benefit payments will increase from £18.80 to £20 a week, almost double what it was a decade ago, but Mr Darling has brought this forward to January instead of April.

Mr Darling also announced plans to improve the take-up of tax credits and benefits by working with local authorities, which, he said, "have a key role as well in working with families to tackle disadvantage and extend opportunities for children." The Child Poverty Bill will introduce legislation which includes the "historic commitment to eradicate child poverty by 2020."

"Putting into law the commitment to eradicate child poverty is excellent, but so is putting it into practice." said Kate Green, chief executive of Child Poverty Action Group. "The promise is achievable, yet today's report was a missed opportunity and significant new investment in next year's Budget is essential."

While some children's charities and organisations think that the measures do not go far enough, child savings provider The Children's Mutual has welcomed the Chancellor's plans to bring £11.5million of support to improve children's knowledge of finance in the classroom using the model of the Child Trust Fund.

David White, chief executive of The Children's Mutual, said: "The The Children's Mutual is a fantastic catalyst to restart the savings culture in the UK and in the current climate this has never been more important. By saving for children from birth, families can help youngsters to understand the importance of having an asset when they reach adulthood."

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