The press release issued by HM Treasury on 12 March 2001.

Help with debt and easier access to mortgages for the financially excluded will be available from 1 April under measures to boost credit unions, Economic Secretary Melanie Johnson announced today.

Savers, including young people, will also benefit from steps towards deregulation of credit unions. These include :

• increasing the savings limits for young people to £5000 – the fixed limit for adults.
• enabling all credit unions to offer secured loans for seven years and unsecured loans for three years, helping members with debt problems.
• enabling credit unions meeting stricter regulatory requirements to offer secured loans for 12 years and unsecured loans for five years, helping members seeking longer loans, eg for house purchase.

More flexible loan periods permit credit unions to offer easier repayment arrangements to their members. This should assist some of the larger credit unions to offer more substantial loans and increase their capacity to offer mortgages.

Welcoming implementation of the proposals on 1 April, Miss Johnson said :

“This is good news for everyone, but particularly the financially excluded, for whom credit unions offer alternative access to financial services. These measures mark an important step towards improving the service which credit unions are able to offer savers and borrowers.

Enabling them to save more will encourage young people to join credit unions and get used to planning and managing their finances sooner. Greater loan flexibility will make it easier for credit unions to help members overcome personal debt problems and to compete for mortgage business.

Credit unions are an effective way of widening access to affordable credit and savings opportunities to those who cannot or do not want to deal with mainstream financial services providers. The movement is growing and there are now around 700 credit unions in Britain with assets of over £200 million.

We wish to see the movement grow and to realise its potential. But individual credit unions must be effectively managed and offer appropriate safeguards to make them attractive to those looking for better ways to manage their money and financial affairs.

The measures which will come into force next month will ease the regulatory burden and help the credit union movement to grow further and faster and attract more members.”

The press release issued by HM Treasury on 15 March 2001.

Trustees of occupational pension schemes will benefit from the removal of a barrier to investment in venture capital later this year, Economic Secretary Melanie Johnson announced today.

The measure implements one of Paul Myners’ recommendations, as part of his review of institutional investment in the UK, to reform the law on investment in limited partnerships whose purpose is to undertake investments in private equity.

Miss Johnson said :

“This is a change which will be welcomed by the occupational pensions industry. It is a significant and useful measure that will make it easier for pension funds to consider investment in private equity.

It is fully in line with the Government objective of encouraging greater investment in private equity as part of the drive to increasing UK productivity.”

The change will be implemented at the same time as other key provisions of the Financial Services and Markets Act 2000 (FSMA).

Miss Johnson also announced today that the target date for the commencement of these provisions, known as N2, will be no later than the end of November 2001. The actual date will be confirmed as soon as it is possible to do so.

The press release issued by HM Treasury on 22 March 2001.

The radio spectrum is a key resource for many new and developing high-tech industries. The management and development of the spectrum will play an important role in creating a knowledge driven economy.

The Chancellor announced in Budget 2001 that Professor Martin Cave, Vice Principal at Brunel University, will lead the independent review of spectrum management.

The review will publish an issues paper in May 2001, setting out initial areas of interest.

Professor Cave said:

“The radio spectrum is a key resource for many new and developing high-tech industries that are important to the future growth and productivity of the UK. Ensuring spectrum is managed in the best interests of the economy will mean we fully benefit from these new technologies. Consultation by the review will be wide and extensive, and involve many interested parties in industry, academia and government.”

The review will ensure that the spectrum management framework is at the forefront of change. It will advise on the principles that should govern spectrum management and what more needs to be done to ensure that all users, including non-commercial users, are focussed on using their spectrum as efficiently as possible. The review will consider the use of spectrum management tools such as spectrum valuation, trading and pricing.

The review will report to the Chancellor and the Secretary of State for Trade and Industry by the end of the year. It will address issues early where its advice will be relevant to the institutional framework for spectrum management proposed in the Communications White Paper.

The press release issued by HM Treasury on 28 March 2001.

A new Framework to improve the quality of performance information in the public sector was launched today. This will help to provide the good quality information essential for the public, Parliament and other bodies scrutinising public services and seeking continuing improvement in their delivery.

‘Choosing the Right FABRIC:  a Framework for Performance Information’, sets out principles for good performance information agreed between the Treasury, Cabinet Office, National Audit Office, Audit Commission and Office for National Statistics. All five bodies were represented at the launch of this significant collaborative initiative.

Welcoming the new Framework, Chief Secretary Andrew Smith said:

“To ensure that programmes are working as effectively as possible – and to identify opportunities for further improvement – we need high quality, reliable information about how public sector bodies perform.

The new Framework for Performance Information sets out agreed principles that will make it easier to set clear, transparent targets for their organisations to deliver public service improvements that we all want to see.”

Cabinet Office Minister Ian McCartney said:

“This Government has launched the biggest investment programme in public services in modern times.

But resource must be matched with reform and a responsibility to use those resources effectively and listen to what customers want.  The initiative launched today will help us do just that.”

Sir John Bourn, Comptroller and Auditor General said:

“Good performance information is a crucial component of better management and improved accountability to Parliament and the public.  The Framework for Performance Information provides a set of criteria for the coherent development of better performance information across government, and hence better public services.”

Andrew Foster, Controller of the Audit Commission said:

“Performance measurement is a vital tool in helping to improve public services and the Audit Commission is very pleased to be bringing its experience in this area to the table.

“It ensures that poor performance is challenged and best practice shared. But it also ensures that the providers of public services are accountable by making information available to the public in an accessible and meaningful way.”

Len Cook, National Statistician said:

“For the public to have confidence in government statements about its objectives and targets, trusted information is critical. I have been pleased to play a role in this Framework, which recognises the importance of high quality National Statistics.

My job, under this Framework, is to help meet the objective Sir Winston Churchill set when he established the Central Statistical Agency in 1941 – that arguments should be about what should be done, not about what are the right figures.”

Also launched today is the Government Strategy for Performance Information. This was developed in response to the Performance and Innovation Unit’s ‘Wiring It Up’ report on the management of cross-cutting issues. The Strategy outlines a number of initiatives, including both existing and new work, such as the Framework, that are helping the public sector to improve the way it produces and uses performance information.

The press release issued by HM Treasury on 3 April 2001.

Andrew Smith, Chief Secretary to the Treasury, today announced that the drive for better value for money in government procurement has produced its latest ‘quick win’, in the area of hotel accommodation and conferencing, with the Office of Government Commerce (OGC) delivering £18million savings to the taxpayer over three years.

The OGC initiative under which the Department of Social Security (DSS) took the lead on behalf of Government in the tendering exercise and award of contract to Expotel, provides a single contract to Government at competitive rates to drive down the cost of hotel rooms and external conferences, minimising paper based transaction charges and eliminating government re-tendering costs.

Speaking in London at Public Sector Expo, OGC’s ‘One Year On’ conference, Andrew Smith said: “This latest quick win initiative for hotel accommodation and conferencing is another example of how the OGC is working with departments to make a real difference in the way Government does business.  The £18 million savings demonstrate what can be achieved by optimising the purchasing power of government.

There are clear benefits for Government in entering strategic partnerships with major private sector providers of government services and products.

This is excellent news for the taxpayer because for every pound saved in procurement an extra pound can be spent on front line public services.”

Peter Gershon, Chief Executive of the OGC said:

“One year on, OGC’s pursuit of value for money improvements and our strategic approach to the purchase of key procurement commodities and services is making a real difference to the way the Government and its departments are able to develop their commercial activities.

This innovative DSS led contract is available to the whole of the public sector and is further proof that the OGC is making a real difference both in disseminating best practice and in delivering value for money improvements.”

The main features of the contract with Expotel include:

• A Guaranteed Average Room Rate, dependent upon subsistence rates, which equates to a saving of approx £5.50 per night to the DSS;
• A booking agent rebate of 63 per cent equivalent to approx £3.50 per room;
• A £30 process cost reduction through on-line booking;
• £30,000 savings for each department from unnecessary re-tendering.

The potential annual spend in hotel accommodation and conferencing costs across central civil government averages around £60m each year and the contract provides scope delivering further savings on conference facilities.  The newly negotiated DSS contract with Expotel gives a high priority to reducing transaction costs in the booking service by establishing an on-line booking facility in the drive to meet Government’s commitment to do business on line.

Currently Departments operate individually negotiated contracts for hotel accommodation.  By using the Expotel contract, negotiated by DSS, the need for Departments to incur further tendering costs is negated.

The contract with Expotel will run for three years and there is the scope for the contract to be extended for a further two years if there is clear evidence that further savings can be achieved.

The agreement is another in a series of initiatives arranged by the OGC following up its ‘quick wins’ on the Vodafone and Watermark contracts, the introduction of the Gateway Review process and introduction of best practice procurement guidance.

The press release issued by HM Treasury on 5 April 2001.

Chancellor launches campaign to encourage others to apply

New leaflets produced for every MP to distribute to local schools

Chancellor Gordon Brown is launching a campaign to encourage families who have yet to claim the Children’s Tax Credit to apply for the Government’s family tax cut, which comes into effect tomorrow (Friday) with the beginning of the new tax year.

Around 4 million families on PAYE are estimated to be eligible. The latest figures show that 3.4 million forms have already been returned, but the Government is launching a campaign – supported by voluntary organisations – to encourage the remainder to complete their application forms.

As part of the new campaign, the Chancellor has:

Written to all 659 MPs and provided copies of a Government leaflet (attached) which he is urging them to distribute to local schools and via community organisations encouraging parents to apply

Made sure publicity material about the Children’s Tax Credit will be available in hospitals via the ?Bounty Packs? provided to new mothers, and through information distributed to GPs

Ensured the Government’s special hotline – 0845 300 1036 – will be opened specially from 7.00 am until midnight this Friday. The hotline will also be available during the weekend and all of next week.

Mr Brown said:

“Our Family Tax Cut is introduced tomorrow. 3.4 million families have already returned their forms. That’s a major success, but there are others who could still benefit.

It means a tax cut of up to £10-a-week for 5 million families and it means that around 9 out of 10 taxpaying households with children now qualify for a tax cut.

4 million out of the 5 million who get the Children’s Tax Credit will receive the maximum amount of £520 a year on top of their Child Benefit. But all 5 million will receive additional money.

Main earners with income of £41,000 a year or less will benefit from the new Family Tax Cut. For a family on £30,000 a year, the Children’s Tax Credit is the equivalent of over 2 pence off the basic rate of tax.

For a family on average earnings of £25,000, it’s the equivalent of over 2½p. And for a family on £15,000, it’s equivalent to 6p off the basic rate.

As a result of our personal tax and benefit reforms, by October families with children will be on average £1,000 a year better off. Our Children’s Tax Credit is a key part of a better system of financial support for families.

£15.50 a week – £800 a year – for the first child in every family.

between £15.50 and £25.50 a week – up to £1,320 pounds a year – for 5 million families receiving the new Children’s Tax Credit.

over £50.00 a week – £2,600 a year – for the poorest families.

People who applied by the end of February should get the Children’s Tax Credit in their April pay packet.

But I want all eligible families to claim it and to receive it. That’s why I am launching today’s campaign and asking every Member of Parliament from every political party to publicise the Children’s Tax Credit in the communities they represent. We have made new publicity material available to MPs and I am urging them to distribute it via schools and community organisations in the areas they represent.

Between 1979 and 1997, total child support for a family on average earnings with two children actually fell by 6 per cent as the previous government froze Child Benefit. At the same time the direct tax burden on a family with two children on average earnings rose from 19 per cent to 21 per cent.

The result was that by 1996, families with children were 30 per cent worse off than families without children. For a family on average earnings, the direct tax burden will fall next year to its lowest level since 1972.

Child Benefit for the first child was only £11.05 a week when we came to power and had been frozen in successive years. As a result of all our changes, Child Benefit will in April be £15.50 a week – a 40 per cent cash rise and a 25 per cent real terms rise.

Our new system acknowledges the costs of bringing up children and the tax and benefit system reflects those costs better. Every family with children should have more support. Family prosperity will be improved and child poverty reduced.”

Mary MacLeod, Chief Executive of the National Family and Parenting Institute, said the Children’s Tax Credit would benefit families:

“Financial support is vital for families with growing children if society is to thrive. Parents can face real hardships in trying to provide for their children, especially in the early years, and this recognition of their special needs is very welcome.”

Mary Marsh, Director of the NSPCC, said:

“This is an important step to recognising the financial needs of families with children. It will help all working parents get the income necessary to ensure the health and wellbeing of their children.”

The press release issued by HM Treasury on 9 April 2001.

A £300m boost to tackle the evil of drugs in Britain and to mobilise communities against drugs was announced today by Chancellor Gordon Brown, Home Secretary Jack Straw and Cabinet Office Minister Ian McCartney.

Backed by Manchester United manager Sir Alex Ferguson, the Communities Against Drugs package will target resources at those areas that need it most, reducing crime, creating safer neighbourhoods and giving young people a positive alternative to drug misuse.

Building on the 10-year anti-drugs strategy, the cross-Government initiative includes:

• £220m over three years for police and local communities in England and Wales to disrupt local drug markets and drug-related crime;
• £15m over three years to help Drug Action Teams work effectively in their local communities;
• £5m over two years to increase the involvement of sports stars as role models and develop Positive Futures, a scheme to steer young people away from drug misuse through sport;
• £50m to accelerate the drug testing programme within the criminal justice scheme; and

A new web-based Communities Against Drugs toolkit at and information from a confidential drugs hotline on 0800 776600.

Chancellor Gordon Brown said:

“Today’s initiative starts from the only place where the fight against drugs can be won, in our communities.

It is a fight that cannot be won by Government alone, by legislation alone or even by cash alone – to win the fight against drugs we must dig deeper into the very core of our communities, giving power to community organisations and drawing strength from each other as we organise against the dealer and the pusher.

And when hardly a family is unaffected by the evil of drugs, it is time to build on the best in our communities to drive out the worst in our communities.”

The £220m will be spent on a new campaign to reduce drug-related crime. Funding will be directed through the 376 Crime and Disorder Reduction Partnerships and used to deliver community-backed strategies including:

• High visibility policing of drug hotspots;
• Increase in neighbourhood wardens;
• Support to parents and residents groups;
• Improved security including CCTV and street lighting; and
• Extra truancy sweeps.

The money will be directed across the country with particular emphasis on the worst affected communities.

Home Secretary Jack Straw said:

“Drug-related crime blights our communities. It destroys families and young lives and fuels a wide range of criminal activity, including burglary and robbery.

I want this money to make sure that police and local communities have the tools and resources they need to take control of their neighbourhoods and drive out the drug dealers.”

Sir Alex Ferguson, Andy Cole, Trevor Brooking, Tanni Grey-Thompson, Martin Offiah, Bobby Goulding and other sporting heroes joined the Chancellor and Ian McCartney later in the day at the Salford Reds Rugby League ground to meet young people choosing sport over drugs.

Welcoming the additional money, Sir Alex Ferguson said:

“Young people are our future and should be offered every opportunity to aim high and reach their goals.   I know from experience that nurturing talent from an early age and investing time in individuals can pay dividends for everyone.

That is why I am giving my full support to Communities Against Drugs and to Positive Futures in particular. Drugs ruin the potential of too many of our children and sport provides a valuable alternative to the dangerous diversion they can create.”

Ian McCartney, Cabinet Office Minister, said:

“We won’t tolerate the menace of drugs in our communities – it causes misery and costs lives. We have made good progress in breaking the link between drug and crime and are on track to deliver our targets.

This new money will enable agencies to step up their fight against drugs and the crime it breeds. It will get drug dealers off our kids? backs and into prison and help safeguard our communities.”

Lord Norman Warner, Chairman of the Youth Justice Board said,

“We welcome this boost of funds to our partnership with Sport England and the UK Anti-Drug’s Unit.  Positive Futures is encouraging alternatives to anti-social lifestyles for youngsters who are at risk of offending as well as drug misuse”.

The press release issued by HM Treasury on 10 April 2001.

Speaking in London today at the launch of the new End Child Poverty Coalition, Chancellor Gordon Brown said:

“As a result of measures introduced during this Parliament we have taken more than one million children out of poverty.

The next step is to take the second million out of poverty. And this will be a commitment of the next Parliament as we meet our goal of reducing child poverty by half in 10 years and abolishing it in a generation.

But we know child poverty cannot be abolished by Government alone, but by working with parents, voluntary, charitable and community organisations. That is why the new £450 million Children’s Fund is so vital to the task of tackling child poverty and social exclusion, with practical day-to-day support for parents, children and young people, and support of local projects run by local organisations.

I hope this coalition will become a new, powerful force  – an alliance of community and voluntary organisations, faith groups, parents – all those who share the ambition, of ending child poverty in our country and ensuring every child has the best start in life.”

The press release issued by HM Treasury on 11 April 2001.

Following a Whitehall-wide competition, Nicholas Macpherson will be promoted to Managing Director of the Treasury’s Public Services Directorate from 23 April.

In addition, following John Gieve’s move to Permanent Secretary at the Home Office, Jon Cunliffe will be promoted to Managing Director of the Treasury’s Financial Regulation and Industry Directorate from the same date.

NOTES FOR EDITORS

Nicholas Macpherson, aged 41, joined the Treasury in 1985 after working as an economist at the CBI and Peat Marwick. He has held various posts, working on social security, tax policy, public expenditure control and economic and monetary union.  In the mid-1990s, he was Principal Private Secretary to Kenneth Clarke and Gordon Brown.  He subsequently worked on the Taylor review of the tax and benefit system, and over the last three years has been the director of welfare reform, leading Treasury work on tax and benefit reform, child poverty and employment issues.  He chaired the review of welfare to work spending in the 2000 spending review.

The Public Services Directorate’s main objective is to improve the quality and cost effectiveness of public services.

Jon Cunliffe, aged 47, has spent the last three years leading  Treasury work on the international financial system, its institutions (IMF, World Bank etc), the G7 summit and non-EU economies.  Previous jobs in the Treasury have included leading the Treasury’s work on operational independence of the Bank of England and on European Monetary Union, management of the Government’s debt and foreign currency reserves, UK Alternate Director at the European Bank for Reconstruction and Development and Public Sector Pay.  Jon joined the civil service in 1980.  He spent the early part of his career in the Departments of Environment and Transport, where he served as Private Secretary to three Secretaries of State for Transport.

The Financial Regulation and Industry Directorate’s main objectives are:

• Increasing the productivity of the economy and expanding economic and employment opportunities for all, through productive investment, competition, innovation, enterprise, better regulation and increased employability; and

• Securing an efficient market in financial services and banking with fair and effective supervision.

The press release issued by HM Treasury on 26 April 2001.

A consultation on two new saving and asset proposals – the Saving Gateway and the Child Trust Fund – to tackle child poverty, break the cycle of disadvantage and open savings and wealth ownership to all was launched by the Government today.

Speaking at a press conference in Downing Street, the Prime Minister, Chancellor Gordon Brown, Education Secretary David Blunkett and Social Security Secretary Alistair Darling set out Government proposals to give all children a running start in life and help lower-income earners plan for their future and retirement.

Saving and Assets for All sets out plans for:

• The Saving Gateway, which will provide lower-income earners incentives to save by offering to match savings with additional contributions paid by the Government.
• The Child Trust Fund, which will provide a cash lump sum to all children at birth, to be kept in special accounts until they reach adulthood, thus offering access to the opportunities that asset-ownership brings. The scheme will also offer parents, relatives and children themselves the opportunity to make additional contributions to the Child Trust Fund.

Prime Minister Tony Blair said:

“We are committed to extending opportunity to all. All our children – especially the most disadvantaged – should have the chance of a proper start in life. Getting people into the savings habit, and making sure children have a real financial springboard, is a vital part of that. Piece by piece, we are dismantling the barriers – no matter what they are – which hold people back.”

Chancellor Gordon Brown said:

“Our aim is the abolition of child poverty in a generation – and to open saving and wealth ownership to all. And to do that, we plan not only to improve the weekly incomes on which a child is reared but to make it possible for them to own and value wealth when they reach adulthood.

“This Government has already done much to extend the benefits of long-term saving through the introduction of schemes such as Individual Savings Accounts, Stakeholder Pensions, our all employee share ownership scheme and the new Pensioner Credit. The new Saving Gateway will mean lower income families not simply having interest payments tax free – the Government will match the savings people make. And the new Child Trust Fund will make it possible for children to own and value wealth when they reach adulthood.”

Education Secretary David Blunkett said:

“The new Child Trust Fund and the Savings Gateway will provide a vital first step on the road to self-reliance – taking people out of the dependency culture and giving them a real stake in society. Assets for all will be the fourth pillar of the welfare state.

“Young people will start out in life with financial backing behind them – helping to ensure disadvantage is not passed down from one generation to the next. It’s about the state helping you to help yourself – a something for something approach so that people can take greater responsibility for their own future.”

Social Security Secretary Alistair Darling said:

“We are determined to build a new savings culture in this country. Saving gives people independence as well as providing security in difficult times and comfort in old age.

“We want every child in Britain to have the confidence and security that savings can bring.”

Mr Darling said that the Government’s introduction of Stakeholder Pensions had extended choices to millions of people and cut the cost of pension saving across the board.

“Whereas the charges on some personal pensions could rise as high as 30 per cent with Stakeholders the management charges are capped at 1 per cent a year.

“This Government is determined to reward everyone who saves – not just a few at the top. For the first time ever the tax and benefit system will reward and encourage saving for everyone. Today’s proposals are another step in making opportunity for everyone a reality.”

Notes to Editors

1. The proposals in the consultation document are the result of work following on from the Treasury’s report Helping People to Save, published with the Pre-Budget Report in November 2000. More details are contained in the attached factsheet.

2. Copies of the consultation document can be obtained from the Treasury Press Office or by clicking on the link below.

Savings and assets for all

The Government recognises the importance of savings in providing people with:

• security if things go wrong;
• comfort in old age and retirement; and
• independence throughout their lives

The Government has already achieved a great deal in encouraging more people to save through the introduction of Individual Saving Accounts. ISAs have succeeded in extending the benefits of saving, both in terms of the amount of money being saved, and the number of new savers from lower down the income scale. Stakeholder pensions will extend the generous tax reliefs available to contributors to private pensions to those on low or irregular incomes, who, because of high charges, were disincentivised from saving in private pensions before.

The Government recognises that more needs to be done to extend the benefits of saving to lower-income earners. 46 per cent of those on household incomes of less than £200 and 43 per cent of those on less than £300 have no financial savings at all (excluding housing and pensions, but including current accounts). The Government also recognises that the tax reliefs offered by existing schemes, such as ISAs and stakeholder pensions, may not succeed on their own in encouraging those on lower incomes to save for themselves.

Therefore, the Government is announcing consultation on a new type of saving scheme for those on low incomes. This scheme is designed to act as a kick-start to bring these people into the habit of saving. The Saving Gateway account, which will be available only to those on lower incomes, will offer to match every pound saved in the account with a direct contribution from the Government. The Saving Gateway will run for a fixed period of time, after which savers will have the opportunity to transfer their saved assets into an existing vehicle – such as an ISA or a stakeholder pension or the Child Trust Fund (see below). The Saving Gateway proposal will also provide the financial education, information and advice needed to help people make the right financial choices for themselves.

The Saving Gateway will therefore act as a catalyst towards starting those on lower incomes on the road to greater financial independence, by giving them the financial assets and information necessary to take advantage of existing measures such as ISAs and stakeholder pensions.

As well as wanting to encourage the process of saving, the Government also believes it needs to provide more people with the immediate benefits of owning financial assets from an early age. There is compelling evidence to suggest that people with access to financial assets at the start of their working lives will enjoy significantly improved life-chances over those without such access. The Government therefore wants more people to be able to have the running start that owning financial assets brings.

Therefore, the Government is announcing consultation on a Child Trust Fund which will provide every new baby with an endowment to be saved for their future. The Child Trust Fund will be universally available, with higher levels of endowment to the children of lower-income parents, to ensure that the most help goes to those likely to need the greatest levels of assistance. The Child Trust Fund will run until children reach a certain age – perhaps eighteen or twenty-one – at which point they will gain access to their funds.

The Child Trust Fund will also allow parents, relatives, friends or the child in whose name the account is held, to make additional contributions in order to maximise the value of the assets they will have access to when they reach adulthood. Therefore, in addition to improving the asset-holding of future generations, the Child Trust Fund will be focus of the Government’s attempts to encourage these future generations to begin saving for their own futures from an early age. As such, the Child Trust Fund is a complementary policy both to the Saving Gateway and to existing measures such as ISAs and stakeholder pensions, in addition to addressing the problems of asset-poverty that many of today’s children will face in adulthood.

The consultation document asks for views on a wide range of practical issues, including:

• The best way of defining eligibility for the Saving Gateway and for the higher rates of endowment under the Child Trust Fund.
• The maturation span for each type of account.
• The questions of whether savers will have access to contributions made to each type of account, and whether there will be any restrictions placed on use of assets on maturation.
• The tax treatment of contributions into each type of account.
• Exact levels of endowment in the Child Trust Fund, and limits on additional contributions made into the fund.
• Exact levels of matching contributions in the Saving Gateway, and limits on contributions eligible for matching.
• The best way to integrate financial education, information and advice into delivery of both schemes.
• The role of private-sector financial services providers in delivering these schemes.
• Investment strategies for funds held in each type of account

Illustrative Examples of Saving Gateway and Child Trust Fund

The following examples show how the Saving Gateway and Child Trust Funds might work to deliver an asset base to all children, with additional incentives to save for families on lower incomes. The assumptions and figures used in these examples are for illustration purposes only, and do not represent the Government’s thinking on how final Saving Gateway or Child Trust Fund schemes would operate. Examples given below assume a 2.5% real rate of return on funds held in Saving Gateway and a real rate of 5% in Child Trust Fund accounts.

The Saving Gateway

The following illustrative assumptions for the Saving Gateway are used in calculating the example:

• that the Saving Gateway scheme is open to families or individuals earning at or below a set threshold for eligibility;
• that the Saving Gateway scheme lasts three years from the time that an individual opens it; and

• that the Government matches every pound put into the account, on a 1:1 basis, up to a monthly maximum of £50, the equivalent of an annual maximum of £600.

Example 1: Anne, who earns less than the threshold for eligibility, opens a Saving Gateway account and saves £25 a month for the full three years of the scheme. When the account matures, the value of Anne’s Saving Gateway will be £1,870 in real terms, adjusting for future inflation. This total will be comprised of:

• £900 of Anne’s own regular contributions;
• £900 of matching funds contributed by the Government; and
• £70 interest (which, for the purposes of this illustration, has been calculated on a monthly basis).

Child Trust Fund

The following illustrative assumptions for the Child Trust Fund are used in calculating the examples below:

• that for parents below a threshold income level, the Child Trust Fund pays an endowment of £800 for each child;
• that the endowment will be staggered over time, with £500 paid at birth, and further tranches of £100 paid at ages five, eleven and sixteen;
• that for all other parents, the Child Trust Fund pays a total endowment of £400, similarly staggered into an initial payment of £250 at birth, followed by three payments of £50 at ages five, eleven and sixteen.

Example 2: Daphne and Eric have an income below the threshold. When their baby, Jane, was born, the Government paid £500 into a Child Trust Fund for Jane. Janes grandparents also make regular monthly contributions of £5 a month into her Child Trust Fund. By the time she reaches the age of eighteen, Jane will have received further payments of £100 from the Government on each of her fifth, eleventh and sixteenth birthdays. When her Child Trust Fund matures, Jane will have access to assets worth £3,376 in real terms, comprised of:

• a £800 endowment from the Government;
• £1,080 of regular contributions from her grandparents; and

£1,496 of interest, calculated monthly.

Example 3: In Example 3 above, when Jane is born, Daphne decides to start saving in a Saving Gateway. Like Anne from example 1, Daphne saves £25 a month, and receives matching support from the Government. At the end of the three-year lifetime of her Saving Gateway account, Daphne has accumulated £1,870 (including matching payments and interest). Daphne decides to put £1,000 of this amount immediately into her daughter Jane’s Child Trust Fund. She invests the remainder in a mini cash ISA. When Jane’s Child Trust Fund matures, it will have a total value of £5,455 in real terms, comprised of:

• a £800 endowment from the Government;
• £1,080 of regular contributions from her grandparents;
• a £1,000 lump-sum contribution from Daphne’s Saving Gateway; and
• £2,575 of interest, calculated monthly.

Example 4: Bill and Claire – who have an income above the threshold level – give birth to their first child, John, and receive an initial endowment of £250 into John’s Child Trust Fund. Bill and Claire make regularly monthly contributions of £10 a month into John’s fund, until he is eighteen. John also receives additional payments of £50 from the government on his fifth, eleventh and sixteenth birthdays. When John turns eighteen, the value of his Child Trust Fund will be £4,288 in real terms, made up of:

• a £400 endowment from the Government
• £2,160 of regular contributions from his parents
• £1,728 of interest, calculated monthly.