ISAs: Plans to allow savings that help society too

5th July 2011

The idea is contained in a report written by Graham Allen, Labour MP for Nottingham North called "Early Intervention: Smart Investment, Massive Savings". The idea has been endorsed by David Cameron.

Under the plans, savers could be offered a £200 boost to their Isa limit if they agree to invest their money in schemes to help the poor. These could include helping teenage mothers, young criminals and children from workless families improve their lives.

Allen says: "We need to change the culture of Whitehall firefighting with billions of pounds of public money and shift to a culture of early intervention."

The report also suggests financial incentives to firms which succeed in steering children away from a life of crime and alcohol abuse.

There will be a system of payment by results for private firms which prevent children taking the wrong path. The scheme will save the UK money by, hopefully, reducing the cost of benefit claims and dealing with crime.

The figures certainly suggest that early intervention is worthwhile.

People with untreated behavioural problems as children cost the taxpayer an average £70,000 each by the time they are 28 – 10 times the cost of children  without problems.

Placing a child in a secure children's home costs an average of £220,000 while a stay in a young offender's institution costs the state about £59,000 a year.

The fund aims to raise £200million from private investors, charities and the state. Wealthy investors will also be able to invest in ‘early intervention bonds'.

Cameron will endorse the report today, saying it makes "the economic, fiscal and moral case for switching public spending with dealing with the causes of  social failure towards investing in programmes that prevent the failure in the  first place."

But the plan met with a generally negative response on internet message boards.

On This is Money, Mark from Cambridgeshire asked "What idiot thought this one up?" while Moneyspider from Medway did the maths: "An extra £200 a year. Wow! That's an extra £6 a year in interest if you can get a top paying ISA at 3%."

Hobo from Wakefield wrote: "It is bad enough that our taxes are used to fund this dross, but for what you get in interest from savings it is not worth it. Perhaps the money might be better spent on education or birth control, and if they are problem families who flout the law lock them up."

Comments on the story on The Telegraph included charter1 who suggested: "If you really want to help others and get a decent tax break we already have Gift Aid with relief at the basic and higher rate for donations to charities and Community Amateur Sports Clubs, (CASCs) – presumably many of which are designed to improve children's behaviour and emotional development."

So, what do you think: Are early intervention Isas a good idea or are the financial returns to investors not worthwhile?

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