The UK government confirmed that people on benefits who regularly save money will be offered cash incentives of up to £1,200 over four years.
Prime Minister David Cameron said that the scheme, known as “Help to Save”, would “improve the life changes of the poorest in our society” by motivating them to save.
Claimants will receive a 50% boost on savings set aside after two years, up to a maximum of £600. They will then be eligible for £300 a year over the next two years. This means that those who set aside £50 a month could receive a top-up of up to £1,200 over four years.
The scheme is set to cost approximately around £70m over the first two years.
The BBC’s political correspondent, Chris Mason, said that if the average person on benefits can save £10 a month, they would get a bonus of £120 after two years.
However, the Labour party said the scheme was “like stealing someone’s car and offering them a lift to the bus stop”, adding that cuts to benefits would mean “families are going to struggle to have enough money to make it to the end of the week, let alone save for the future”.
Owen Smith, the shadow work and pensions secretary, said that the plans were “almost identical” to the ‘Saving Gateway’ which Labour devised when it was last in power.
The government estimates that 3.5 million people would be eligible for a Help to Save account.
The government also announced that from October 2016 the national minimum wage would increase.
Skills Minister Nick Boles said the scheme, along with a higher national minimum wage, would help low-income families.
Mr Boles told the BBC’s World At One: “This is a more generous incentive scheme than the old Saving Gateway that the last Labour government had.”
Budget cuts planned
Chancellor George Osborne warned the UK must “act now rather than pay later” ahead of this week’s Budget, with further spending cuts planned.
He said the cuts would be “equivalent to 50p in every £100” of public spending by 2020, which was “not a huge amount in the scheme of things”.
