Brown boost for less well-off

CHANCELLOR Gordon Brown is expected to announce measures in his Pre-Budget Report tomorrow on financial inclusion for the less well-off.

His savings strategy will also focus on incentives for people to build up a nest egg throughout their lives, beginning with the Child Trust Fund for babies.

Some 2m British families are believed to suffer 'financial exclusion' because they do not have access to basic banking facilities, largely because they do not fulfil the High Street operators' criteria.

Ministers want improvements to the provision of free financial advice for consumers and the Government has been running pilots of savings 'gateway' products for small amounts of cash.

Brown, the proud father of baby John, is likely to signal improvements to the Child Trust Fund. A set of further announcements on the Fund is expected in January.

Under the scheme, which starts in April, savings on behalf of babies born after September 2002 will be kick-started with £250 - £500 for poorer families - and can be topped up to £1,200 by parents, relatives and friends. The fund can be cashed once the child is 18.

But many parents - particularly in low-income families - are unaware of the initiative. Some financial institutions are giving it the cold shoulder because they claim low charges and investment levels do not make it worth their while.

The Treasury believes it has helped savers by beefing up City regulation and through improved economic stability. But Brown has been criticised for scrapping popular tax-free Personal Equity Plans, proposals to scale back tax- efficient ISAs from 2006 and for his raid on tax credits on dividends in pension funds.

New Labour's low-cost 'stakeholder products' has also received a mixed reception from the financial industry.