At first glance George Osborne’s Lifetime ISAs look like just another give away to the better off. At the lower end of the scale they represent a generous subsidy for those who can afford to put money aside to buy a home – savings of up to £4000 a year will be topped up by a 25% hand out from the state. For rich kids it’s a bit of free money, a tax payer funded discount for their first luxury apartment. Osborne can afford this generosity for his own class after all. Subsidies for the poorest tenants, forced to pay eye-watering rents that can only be met by housing benefits, have been slashed and slashed again over the last five years.
But there are real warning signs that this scheme is more ominous then just another tranference of public funds from the poor to the rich.
The use of personal savings accounts as a replacement for the social security system has long been an ambition of free-market extremists desperate to eradicate any form of social spending. As the Think Tank Review website reminded us last year, the Adam Smith Institute proposed Fortune Accounts way back in 1995. The suggestion was that individuals should pay into a pot of money to fund any future periods of sickness or unemployment. More recently the right-wing Policy Exhange called for the establishment of MyFund accounts in an astonishing report that did not just demand personal savings accounts to replace unemployment benefits but also suggested that the money could pay for “access to private sector employment support services”. They want us to pay for our own workfare.
There is ample evidence that government ministers are already considering some form of savings or insurance based social security system. A public sector consultant recently blogged about a meeting – sponsored by health insurers BUPA just by the way – with comedy toff Lord Fraud held at the Reform think tank. According to the report the Minister for Welfare Reform raised the question of “why do employers insure against sickness absence and why don’t individuals?” .
As Think Tank Review point out, Iain Duncan Smith has already made his feelings clear in an interview with the Daily Telegraph shortly after the last election when he said: ”We need to support the kind of products that allow people through their lives to dip in and out when they need the money for sickness or care or unemployment.”
At present this is not how George Osborne’s Lifetime ISAs will work. Initially the government top up will only be available for those putting down a deposit on a house or once someone reaches 60. If the money is withdrawn for any other reason the government subsidy will be removed and a 5% fee will be charged – to teach you a lesson.
This is likely to change however. Budget documents say that: “The government will consider whether Lifetime ISA funds plus the government bonus can be withdrawn in full for other specific life events in addition to buying a first home.”
When Universal Credit is fully introduced and all out of work benefits replaced with a single payment then any personal savings will reduce entitlement significantly. Those with assets of £16,000 or more will not receive any benefits at all whilst savings of just £6000 will mean the level of payments start to be reduced. It is unclear whether Lifetime ISAs will be included in the savings threshold, although there is little reason to believe they won’t be. This means that for many young people their Lifetime ISA will end up covering periods of sickness or unemployment, not buying them a home. Of course most better off young people – not long into their working lives and earning enough to be able to save – don’t think they will ever be long term sick or unemployed. That’s why Osborne has started with middle class kids. Ask anyone, they are the easiest to mug.
For those in precarious zero hour jobs, on temporary contracts or with wages so low that saving for anything is near impossible, then Osborne’s accounts are worthless. The problem is that the experiences of the poor don’t count. Once it becomes normal for the children of the chattering classes to have a tax payer subsidised nest egg then anyone who couldn’t afford to save will be condemned as irresponsible. They will need to be forced to save, with some form of mandatory scheme. Or they will be left to starve and it will be their own fault. This is what lies behind the Chancellor’s savings give-away. It is a first small step towards the complete eradication of the welfare state.
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