Budget: Saving Gateway scheme is scrapped
- 22 June 2010
- From the section Business
A flagship savings plan proposed by Labour has been scrapped by the new coalition government.
The Saving Gateway, planned to start in July, was aimed at encouraging the poorest to save.
The previous chancellor had pledged to add 50 pence to every £1 saved in the programme, which was designed for up to eight million people on benefits and tax credits.
But in his Budget speech, George Osborne said it was "not affordable".
A single line in the chancellor's Budget speech sealed the fate of the Saving Gateway.
"We have decided that we simply cannot afford to extend the Saving Gateway," he said.
The scheme was first proposed by the Labour government in 2001 as an incentive for those on lower incomes to save, and calls for its introduction grew after the collapse of the Farepak Christmas savings scheme.
After a series of pilot projects, a date was finally set for its introduction in 2010. Under the now-cancelled plans, the government would have added a maximum of £300 after the account-holder had been saving for two years - but only in months when no withdrawal was made.
"The Saving Gateway would have been a great opportunity for the government to support our post offices and remove a barrier for people on low incomes getting on the savings ladder," said Mike O'Connor, chief executive of watchdog Consumer Focus.
"This will be a disappointment for many potential savers and makes it even more important that the government reforms financial services so that they better serve people who earn the least."
Mr Osborne's Budget did make changes for savers - with the threshold for tax-free savings likely to be increased.
This is because the amount allowed to be saved tax-free in an Individual Savings Account (Isa) will increase in line with inflation each year.
More than 20 million people are estimated to have an Isa.