The government is preparing to roll out a scheme for people on Universal Credit to “save” money. But what it does with this money is even more eye-opening than the preposterous idea of Universal Credit claimants being able to afford to save anything.
The DWP: encouraging people to save
On Wednesday 25 July, the Department for Work and Pensions (DWP) updated its Universal Credit guide for claimants. It added information about and a link to HMRC’s “Help to Save” scheme [pdf, p22]. As the government described:
Help to Save is a new government saving scheme to support working people on low incomes to build their savings.
Over 4 years, regular savers can deposit up to £50 a month and could receive up to £1,200 in tax-free bonuses.
Help to Save is not open to everyone on Universal Credit. Claimants have to be:
- Getting Working Tax Credit or Child Tax Credit payments.
- Earning at least £542.88 a month from a job.
The government started a trial of Help to Save in January, and it will be out in full from October. Essentially, the government will pay 50% interest on claimants’ savings. But the government’s own research [pdf] for Help to Save showed that most people believed they couldn’t afford to put money aside.
Losing the plot
Of people the government surveyed:
- 71% said [pdf, p37] “they cannot afford to save for retirement”.
- 57% were [pdf, p38] “not very” or “not at all” confident they were saving enough for a “rainy day”.
- Only 28% said [pdf, p39] they had never run out of money in the past 12 months.
- Just 6% said [pdf, p39] that “building up savings” was a financial priority.
What’s more, the DWP’s own research shows that Help to Save is at best pie in the sky for many.
As The Canary previously reported, a DWP-led survey of Universal Credit claimants found that only 25% said they were “keeping up with bills and credit commitments without any difficulties”. Also, 50% of claimants who had been on Universal Credit longer had to get “additional funds” to supplement their benefits.
But aside from the DWP’s own rose-tinted view that claimants can afford to save, what the government will do with claimants’ money is staggering.
One big Ponzi scheme?
Help to Save is actually operated by National Savings and Investments (NS&I) and HMRC. NS&I will run claimants’ savings accounts [pdf, p1]. It also manages Premium Bonds, Junior ISAs and other savings accounts.
But the money the public puts into NS&I doesn’t just sit there. Some of it gets used [pdf, p116] by another government department, the National Loans Fund. Examples of where the fund funnels some of this money to include [pdf, p8]:
- A £1bn loan to the International Monetary Fund (IMF).
- £380.6bn of funding for the Bank of England’s quantitative easing programme. It is a scheme where the bank essentially created more money to put into the economy.
- Lending £39.2bn to banks to then lend on to customers.
The government says [pdf, p1] Help to Save is supposed to be a “rainy day” fund for claimants. But it appears that the government is using claimants’ money to cover the cost of ‘rainy day’ funds for banks too.
Help to Save shows two things. Firstly, that the DWP has no idea what it’s like to be on a low income or benefits. For many people, there is never a ‘rainy day’ fund. Even if every month you can afford to cover the basics of life, there is always something else that needs buying or paying off.
Moreover, the government using benefit claimants’ money to fund banks is staggeringly hypocritical. The banks sponging money off the poorest in society when, due to the 2007/08 financial crisis, they helped make people so poor in the first place, is twisted beyond words. But from a government and a department that the UN found guilty of “grave” and “systematic” violations of disabled people’s human rights, Help to Save is probably the thin end of the wedge.
– Read The Canary‘s full analysis of Universal Credit.