£10bn - cost of Brown's savings scheme

THE bill for Gordon Brown's flagship 'matched savings' scheme could hit nearly £10 billion over five years, Financial Mail has learned. Research commissioned and published by the Treasury suggests a quarter of the population of working age - 9.5 million people - could qualify for the Saving Gateway accounts, in which the Government matches every £1 saved up to a £1,000 limit over five years.

Should everyone take up the 'free money' offer, the cost would run at £1.9 billion a year, or £9.5 billion over the life of the account.

The escalation in the possible cost of the scheme is likely to prompt criticism at a time when public finances are tight. Already, £150,000 has been saved in 1,478 accounts set up under five pilot schemes, which started in August 2002 and finished in July 2003, and Brown plans to spend £15 million next year on a larger trial before launching the scheme nationwide.

No official price has been put on the Saving Gateway, which is a key part of Brown's agenda to 'promote financial inclusion'. The special accounts will be open only to people on low incomes.

Until now, it has been assumed that between five and six million people would be eligible, but researchers at Bristol University, working for the Treasury, have calculated that 9.5 million people could qualify.

The university's personal finance research centre said that while the Treasury had yet to draw up eligibility criteria for Gateway accounts, 'as many as one person in four of working age met the likely definition'.

Earlier this month, Brown said: 'Matching can provide an important new dimension to Government support for saving.'

The pilot schemes ran in Bethnal Green, east London; Cambridge; Hull; Gorton, Manchester; and Cumbria.

The Treasury said: 'The £1.9 billion annual figure is based on four assumptions: that a national rollout will take place, that all eligible customers will take up the opportunity, that the limit will be £1,000 and that the ratio will be pound for pound. None of these details has yet been agreed.'