Help to Save will only harm
First, Help to Buy, now Help to Save. What will be the next headline-grabbing, vote-seeking but yet fiddling, complicated, expensive and ultimately destructive policy from the UK government? Help to Buy helped to buy votes (at taxpayers' expense) by subsidising house purchases. As UK house prices were rising fast, it was almost universally popular. Not in the Adam Smith Institute of course: we explained its damaging consequences on the blog. By adding further to the demand for housing, but doing nothing to increase supply (such as easing the UK's suffocating 1940s planning policies), the scheme simply stoked prices further.
Under Help to Save, around 3.5m people on universal credit or working tax credits who save up to £50 a month will receive a cash bonus of 50% of their savings after two years. Then they can save for another two years, with the same deal.
That amounts to a cash gift of £1200 from taxpayers. Not that many of the 3.5m will get that amount: £50 a month is a huge amount for people on benefits to save – indeed, half of UK adults have less than £500 set aside for emergencies.
Of course, if interest rates were not kept artificially low by the Bank of England (in concert with other people's central banks), saving might be more attractive. And if there were not so much onerous regulation on hiring and firing, more people on benefits would be able to get a job, and move on to a better one. Help to Save looks like a measure to plaster over the cracks opened up by earlier ones.
And think about the administrative complexity of the scheme. The UK's tax code is already nearly the world's longest, and its welfare code is pretty dense too: but here we are, adding another couple of dozen pages. Just think about the rules, and the staff, you need to create and manage even a trifling scheme like this. First, you have to identify those who qualify – and check their bona fides. Which means rules, documents and civil servants. Then you have to check what they are saving, so you need access to their account – or are you setting up a special account for them? Ditto. You need to check that the two-year and then four-year schedule has been met. Ditto. Then you need to pay over the cash, so you need to raise payments, dispatch them, make sure it is all done correctly, deal with mistakes and complaints.... Ditto.
It does not take much reflection to see that this scheme – and countless others like it – will occupy a sizeable civil-service task force, probably in several centres throughout the country, and that the cost of the scheme could well be a significant proportion of the intended benefit. Are there not cheaper and easier ways to help poorer families? Like taking them out of National Insurance entirely?