Consideration of Bill, as amended in the Public Bill Committee
Saving Gateway accounts
With this it will be convenient to discuss the following:
Amendment 12, page 1, line 19, at end insert—
‘(4) If a person was eligible to receive a notice of entitlement by virtue of section 3(1) but had ceased to be eligible before the notice of eligibility was issued, then the person is still entitled to receive that notice.’.
Amendment 3, page 2, line 16, clause 3, after ‘(2)’, insert
‘or the person is aged between 18 and 65 and has an annual income of less than that prescribed by regulations;’.
Amendment 4, page 2, line 35, clause 3, leave out ‘subsection’ and insert ‘subsections (1) and’.
Amendment 13, in page 3, line 3, clause 3, at end insert—
‘(8) The Treasury will each year lay before Parliament a report which sets out the number of people who—
(a) are eligible to hold a Savings Gateway account by being entitled to each of the benefits and tax credits listed in subsection (2) above;
(b) are aged between 18 and 65 years old and earn less than any amount prescribed under regulations made under subsection (4) above; and
(c) have opened a Savings Gateway account in that year.’.
This group of amendments focuses on eligibility, a topic that we discussed at some length during what were relatively short Committee proceedings. Today provides an opportunity to retrace two issues covered in this group of amendments. First is the issue that we debated on the first day of the Committee proceedings about what happens to those who move on and off benefits during the time it takes to send out notices of eligibility. The second issue relates to the fact that the Bill is designed to encourage people on low incomes to save, and the Government use benefit entitlements as their proxy for that group. We need to understand the difference between the number of people who are entitled to receive benefits that effectively passport people on to the savings gateway account and the number of people in the low-income group. I set out two different approaches in amendments 3, 4 and 13 to address that issue.
I shall deal first with amendments 11 and 12. As I said in my opening remarks, they arise from a debate that we had in Committee. The Bill sets out the requirement for someone to be issued with a notice of eligibility on the relevant date, and we debated in Committee at some length what happens when someone becomes eligible for jobseeker’s allowance at the start of a period just after the last batch of notices have been sent out, then ceases to be eligible for that allowance before the next batch are sent out. Given that the notice of eligibility drives the ability to open a gateway savings account, we identified in Committee the risk that people who have moved on and off benefit between those two dates of issue may well, although eligible to open a savings gateway account in principle, miss out on that opportunity because they did not qualify on the date that the notice was sent out. That is why amendment 12, in particular, focuses on that matter. It would insert a new subsection (4) into clause 1.
That matter was left hanging in Committee. The Economic Secretary assured us that
“we do not want to stop people who fit our normal criteria receiving support under the Bill”.––[Official Report, Saving Gateway Accounts Public Bill Committee, 3 February 2009; c. 47.]
I have tabled amendment 12 to take that matter a little further today. Since I tabled it, and perhaps even triggered by that, the Minister has kindly written to the Chairmen of the Public Bill Committee and circulated the letter to other Committee members, stating that people who ceased to be eligible by the date on which the notice of eligibility was sent out would still receive that notice. We are grateful for that clarification, but it would be helpful for that to be on the record in the House rather than in a letter. I am sure that he will want to make that clear.
Amendments 3 and 4 are the first way in which we wish to ensure that people who would be eligible for the saving gateway by virtue of being on low income are picked up by the system. As I said, the Government have used eligibility for certain benefits as the criteria for eligibility for the gateway. That means that only people in receipt of those benefits can take part and qualify for a saving gateway account. There may be people on low incomes who do not qualify for benefits and who will miss out as a consequence.
In Committee, the hon. Member for South Thanet (Dr. Ladyman) tabled amendments intended to increase the number of benefits that would enable eligibility. My amendment takes a different direction. It would set out in the Bill the fact that the group that we are targeting are people on low income. It is worth remembering that some categories of people on low income are ineligible to receive some of the qualifying benefits. For example, somebody who is unmarried, childless and under the age of 25 does not qualify for tax credits. A person on low income below that age would not have a route to access saving gateway accounts, and the same applies to a married couple under that age. In considering how to implement the idea of providing an incentive for those on low income to save, I wonder whether the Government have considered the number of people who fall outside the specified categories and who, despite being on low incomes, will not be eligible because they cannot claim a benefit.
I appreciate that there is a cost attached to my suggestion, because the method that the Government have adopted builds on data that the Government hold either at Her Majesty’s Revenue and Customs or the Department for Work and Pensions, and it is relatively easy to use the existing databases to send out a notice of eligibility. It would be much harder for the Government to capture people on low incomes who do not qualify for benefits, and it would require a new apparatus of means-testing and forms to be completed when making a claim. The Government might argue that the cost of that additional apparatus is disproportionate to the benefit that it would confer on a new group of recipients, in addition to the costs that would arise through more people saving and qualifying for matching contributions.
The amendment is probing rather than one to be pressed to a vote, but it is also meant to be almost a reserve power that the Government could deploy if they believed that the proportion of people who are brought within the scope of the saving gateway through qualifying for the benefits in clause 3 is too small compared with the total population of people on low incomes whom they feel should benefit. A Government could deploy that power in future.
Part of the challenge is that we do not know what the gap is. We do not know how many people should be eligible on the basis of low income and how many are eligible through passporting benefits. Amendment 13 tries to establish the populations as well as identifying the take-up of the savings gateway account in a particular year. It is important to ascertain the effectiveness of the scheme’s take-up rate. Perhaps the Economic Secretary will be so taken with the logic of amendment 13 that he would like it to be in the Bill.
Amendment 13 is insightful, but proposed new subsection (8)(b) refers to those aged between 18 and 65. In a week when a 13-year-old has fathered a child, will my hon. Friend encourage the Economic Secretary to consider whether people would be eligible at 16 or even younger? I do not suggest 13 as an appropriate age, but 16 might be.
My hon. Friend makes an important point, and I wish I had consulted him before tabling the amendments—perhaps I could have benefited from his wisdom in setting a more flexible starting date for the benefits. I am not sure how 13-year-old fathers fit into the benefits system and whether, as a consequence of claiming tax credit, they would be eligible for a notice to be issued to them under the Bill. However, my hon. Friend makes an important point about understanding who will be excluded from the measure through the Government’s criteria. It is important to tease that out from the Economic Secretary today. I do not believe that we addressed it specifically in Committee. Given the aim of the measure, which is to encourage people on low incomes to save, it is important to understand how many people who are on low income but not eligible for benefits will be excluded from participating in the saving gateway account.
The five amendments are straightforward. Two of them give the Economic Secretary the opportunity to put on record the assurances that he gave the Committee in writing. The other three try to probe how many people will be excluded from participating in the Bill, despite being on low income, because of the route that the Government have chosen of using qualification for existing benefits to establish their entitlement to the saving gateway account.
The Committee stage was consensual, but that does not mean that the Bill could not be improved a little, certainly by one addition. My hon. Friend the Economic Secretary will recollect that I tabled an amendment in Committee to include recipients of carer’s allowance among those who were eligible for saving gateway accounts. The Liberal Democrats tabled a similar amendment. I have not tabled such an amendment on Report, and Mr. Speaker would rule me out of order if I sought to debate the merits of including carers in the scheme.
I believe that the amendments that the hon. Member for Fareham (Mr. Hoban) has tabled, however, would bring some carers within the ambit of the Bill and make them eligible for the saving gateway account. Amendment 13, which calls on the Government to publish an annual report of account recipients or those who are eligible for the accounts, would allow us to calculate how many carers had been excluded from such accounts, even though we would rather want such people to get the accounts.
I am using that proposal as an excuse to give my hon. Friend the Economic Secretary the opportunity to tell us, hopefully, that the Government intend to table an amendment at some point in the Bill’s passage, presumably in the other place, to include recipients of carer’s allowance. I understand that he might wish to limit the provision to carer’s allowance recipients of working age because, after all, saving gateway accounts are aimed at people on low incomes who are of working age. I would be happy to accept that, but I would be most grateful if he confirmed whether he intends to table such an amendment.
Having said that, I apologise to colleagues in all parties and to the Economic Secretary; a group of girl guides from my constituency wants to see me at 1 o’clock and I know that hon. Members will not want me to disappoint them. If I do not hear my hon. Friend’s response, I assure him that I will read it assiduously afterwards, and I will be back as soon as I have spoken to my constituents and presented them with the awards that they have come here to receive.
I hope that my hon. Friend can comment on the important issue of carers’ eligibility to take up the wonderful opportunity that the Government are giving those on low incomes.
Without the distraction of girl guides, I can give my full attention to the important considerations before us. I have some sympathy with the comments of the hon. Member for South Thanet (Dr. Ladyman) about carers and I am interested in the Economy Secretary’s view, because carers seem to be a group that could be included, and many people who fall into that category but not into others that would make them eligible, would appreciate such a gesture. If the Economic Secretary could outline the cost implications of extending the scope of the Bill in the way that the hon. Member for South Thanet suggests, that would be interesting for everybody who has followed the Bill’s passage.
The points about eligibility, which amendments 11 and 12 cover, have already been made, and I have nothing to add to the comments of the hon. Member for Fareham (Mr. Hoban), who tabled all the amendments in the group.
I have some sympathy with amendments 3 and 4. I assume that the motivation is to try, when possible, to avoid introducing legislation that creates poverty traps, which lead to what some people call a benefit culture, whereby those who are able just to provide for themselves but are on low incomes are eligible for far fewer benefits or means of support from the state than those who do not make that effort. The former come to regard themselves, with some justification, as being penalised for just about managing to provide for themselves, while others, whom they perceive as striving less hard to be self-reliant, qualify for a greater range of benefits than them. If that is the motivation, I have some sympathy with it, because it is a justifiable grievance. However, there are some concerns, and it would be interesting to know the Economic Secretary’s estimate of the number of additional people who would be covered if the amendment were accepted. Would it be a small top-up or are we considering having many tens or even hundreds of thousands of extra people? Obviously, that would have considerable cost implications.
The hon. Member for Fareham cited the example of someone under 25 without children not qualifying for the tax credits. However, I am struggling slightly to think of large numbers of people whose incomes mean that they would be caught by the amendments but are not eligible for benefits. If people can give further examples, that would be interesting.
I suppose that, as a spokesperson for an Opposition party, I should support amendment 13, because Opposition parties are always in favour of the Government being compelled to make more reports to Parliament. Were I pushed to take a view, I suppose I would say that the amendment was a good idea, but I would not be surprised if the Economic Secretary perceived it as a bit onerous. When we pass legislation, we tend to forget about it and move on, but it would be useful and interesting to know how successful the legislation has been and how many people have been enticed by the scheme, so I hope that the Economic Secretary will engage constructively with amendment 13.
A number of hon. Members have pointed out that there was a high degree of consensus on the Bill in Committee. One area where there was perhaps less consensus, and where there is still lingering disappointment, is the extent of continuing parliamentary involvement in and scrutiny of the Bill. I suspect that that sense is likely to arise again today over the third group of amendments, given that we spent considerable time in Committee considering whether much of the delegated legislation should be subject to affirmative or negative resolutions. The essence of that debate also applies today; indeed, it is what lies behind amendment 13, which I am happy to support.
We on the Conservative Benches recognise that the Government want the Bill to have in-built flexibilities, but it is crucial that Parliament should know whether the Bill is a success. Amendment 13 goes to the heart of that. It is right for Parliament to know whether the Bill is working. There is a need for a proper debate. There has been much discussion about eligibility, including on Second Reading and in Committee, and even already this afternoon. There was also quite a lot of discussion about the appropriate financial limit and, I recall, some probing questions from my hon. Friend the Member for Broxbourne (Mr. Walker) in the witness sessions of the Public Bill Committee. I would ask that amendment 13 be supported, because it would introduce a welcome element of report-back on a central part of the success criteria of the Bill.
Let me begin by adding my condolences to those expressed by other right hon. and hon. Members to David Cameron and his wife on their tragic loss.
The amendments in this group cover three areas, relating to eligibility and the notices of eligibility. Amendments 11 and 12, which the hon. Member for Fareham (Mr. Hoban) covered, deal with the circumstances in which a person has ceased to be an eligible person but has not been issued with a notice of eligibility, and they seek to ensure that such a person will be sent a notice. We discussed that matter in Committee, as the hon. Gentleman mentioned, and I have since written to explain and clarify the position. The purpose of clause 1(3)(b) is to allow the commissioners for Her Majesty’s Revenue and Customs to issue a notice of eligibility to a person who is not an eligible person on that date, but who was eligible for the scheme at an earlier date as determined by them. We have now got to the bottom of the matter. People will be sent a notice of eligibility automatically. Therefore, amendments 11 and 12 are not needed, because the issue is already covered in the Bill.
Amendments 3 and 4 relate to eligibility for the scheme. As hon. Members will know, the saving gateway is targeted at people of working age on lower incomes. The hon. Gentleman’s amendments seek to ensure that people in that group who are not entitled to one of the qualifying benefits and tax credits listed in the Bill would still be eligible for a saving gateway account. We have carefully considered the best way of determining eligibility for the saving gateway, including whether it should be based on a means test or on passporting from benefits and tax credits. Again, we rehearsed some of those arguments in Committee.
We believe that passporting is the most simple and effective method available for determining saving gateway eligibility. In particular, passporting will mean that people will not be required to fill out a form or complete a means test to prove that they are eligible for the saving gateway. Instead, they can automatically be sent a notice of eligibility. We also believe that the majority of our target group—working-age people on lower incomes—will be eligible for the saving gateway through the system of passporting set out in the Bill. We expect about 8 million people to be eligible.
A number of hon. Members asked about the specific numbers who might be included if amendments 3 and 4 were accepted. The best figures that we have available are based on taking those on low income to be individuals with incomes of up to £11,000 and couples with incomes of up to £16,000, which is approximately in line with the highest incomes of those claiming one of the qualifying benefits and tax credits. Using that as our yardstick, we estimate that around 4.5 million people of working age on lower incomes will currently not be eligible for the saving gateway through passporting.
However, more than half that number—2.7 million—are eligible for one of the qualifying benefits and tax credits; they just have not claimed them. An important issue of take-up is involved. We are actually talking about 1.8 million people who would not be eligible for those credits who, if they could claim them, could open a saving gateway account. However, this is of course a particular point in time. Many of those of working age who are on a lower income but are not eligible for one of the qualifying benefits and tax credits are likely to become eligible for a saving gateway at some point in their lives. That is an important point.
The amendments would introduce a means test alongside passporting. We have carefully considered that option, too. I accept that it would give some additional people a way of accessing the saving gateway, but it would also introduce extra complexity and costs, and we do not believe that they would be proportionate. First, there would be extra costs for HMRC, estimated at about £2.5 million a year and reducing to about £1 million a year in a steady state. Secondly, there would also be an increased compliance risk in operating a means test, as individuals would be allowed to open a saving gateway account without having previously been through Department for Work and Pensions and HMRC checks to establish their eligibility for other benefits or tax credits. Inevitably, some accounts would be opened but would subsequently have to be closed, in cases where people who would not otherwise have been eligible had mis-stated their income. That would be burdensome for providers of saving gateway accounts.
Thirdly, having two methods of determining eligibility for the saving gateway could be confusing and would certainly add complexity to the system. Some people who are eligible through passporting may think that a means test was required and be put off applying, for example. There are therefore several downsides to introducing a means test alongside passporting. It is also important to remember that although some working-age people on lower incomes may not be eligible for those qualifying benefits or tax credits at a particular point in time, people’s circumstances change. For many people, therefore, it will not be a case of missing out on eligibility; rather, it might be one of having to wait until they qualify. Also, people will be able to have only one saving gateway account in their lifetimes in any case.
Members of the Public Bill Committee will remember that the experts who gave evidence were positive about the eligibility criteria and the approach that the Government have adopted. Citizens Advice, for example, compared the system of passporting with the alternative, which Teresa Perchard said was
“an expensive system of targeting, recruitment and application,”
“load costs on to the accounts and will also be a barrier to take-up.”
She also said:
“If the intention is to attract people to save for the first time in their lives, or in their family’s history, the Government have come up with an approach that gets the balance right.”––[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 7, Q15.]
I appreciate the point that the hon. Member for Fareham has made. Indeed, I have a lot of sympathy with what he has said, because we want people on low incomes to get the savings habit. However, there are a number of practical downsides to introducing a means test alongside the approach of simple passporting, which is why we have taken the decisions that we have.
The last point that was raised on eligibility related to whether people would be eligible at the age of 16 or even earlier. I want to make it clear that, in using a passporting system, we will be depending on the eligibility criteria for the underlying benefits. Some of those will have an age limit of 16; others might have other age limits. However, we are not doing anything in this legislation to change the age limits.
Finally, I will deal with amendment 13. I agree with the hon. Member for Fareham that the saving gateway should be carefully evaluated and monitored. However, I do not agree that it would be appropriate to set out in the Bill an information requirement of the type that he suggests. Similar legislation, such as that relating to individual savings accounts, contains no such reporting requirement. However, as hon. Members may be aware, HMRC publishes details annually on individual savings accounts subscriptions and valuations, as well as a more detailed distributional analysis of the scheme. A similar approach might well be appropriate for the saving gateway; that will need to be considered in due course. However, we do not believe that it is appropriate to set down in the Bill an inflexible commitment to publish certain data.
As for the data that the amendment would require, I recognise that they might allow some basic calculations to be made about the take-up of the accounts or the coverage of the scheme. At best, however, they could give only a partial evaluation of the scheme’s success, against measures such as the take-up of accounts. As hon. Members will appreciate, our objectives for the scheme are far broader than could be encompassed by the metrics that the hon. Gentleman proposes. We could not assess the success of the scheme purely against those factors, because a broader range of factors than those detailed in his amendment will need to be considered. I therefore hope that he will not press it to a vote. I assure him and the House that we want to ensure that information will be made available and that the saving gateway scheme will be properly monitored and evaluated.
My hon. Friend the Member for South Thanet (Dr. Ladyman) asked about the carer’s allowance. I was going to address that matter on Third Reading, but I am happy to confirm that I am certainly minded to table an amendment for consideration in the other place that would ensure that people of working age in receipt of carer’s allowance should be able to qualify for opening a saving gateway account. It is my understanding that the cost involved would be about £5 million in 2012-13, and a few million in subsequent years, but based on our discussions in Committee and on further reflections and discussions with other groups, I believe that extending the qualifying benefit in that way would be a good thing to do. I hope to be able to table that amendment at a subsequent stage.
I am grateful to my hon. Friend for those comments, and I am glad that I was able to get back into the Chamber in time to hear them. When Ministers show themselves to be open minded and genuinely reasonable, we ought to put on record how grateful we are to them. I should therefore like to record my thanks to my hon. Friend, and I am sure the thanks of all those carers who will get a positive benefit from the opportunity of having a saving gateway account, assuming that the Lords and then this House agree to his amendment. I thank him very much.
I welcome my hon. Friend’s comments. It is right that the Government should always be open to listening to arguments, and when we find good, persuasive arguments, we ought to respond to them. That is what I have tried to do here.
I have listened to the arguments on amendments 11 and 12, which I think are unnecessary, and I hope that the hon. Member for Fareham accepts that. On his amendments 3 and 4, I have a lot of sympathy with wanting to extend the target group, but I do not want to introduce a means test alongside a simple passporting system. We have a good basis for proceeding as we are at the moment. There is a strong case for encouraging greater take-up of qualifying benefits, and that has been an objective of the Government. We will need to continue to persuade people who are entitled to claim benefits actually to do so, and then to go on to open a saving gateway account.
I appreciate the probing way in which the hon. Gentleman spoke to amendment 13. It is right that we should monitor and evaluate the saving gateway account. It is also right that we should provide sufficient information to people. We will do that, but I do not think that doing so in the way that he has specified needs to be put in the Bill. That is not the normal way in which we do things. I therefore hope that he will not press his amendments to a vote.
I thank the Minister for the way in which he responded to the amendments, and for his suggestion that an amendment will be tabled in the other place to include those in receipt of carer’s allowance, which demonstrates the Government’s ability to listen to proposals made in Committee.
I am pleased that the girl guides of South Thanet did not detain the hon. Member for South Thanet (Dr. Ladyman) for much longer; otherwise he might have missed hearing about that concession. I am sure that a girl guides badge is winging its way to the hon. Gentleman for being punctual and timely in his appearances, both in and outside the Chamber.
I am pleased that the Minister put it on record that clause 1(3)(b) covers the circumstances that we debated in Committee. It was not clear what circumstances the subsection applied to, so it is useful that he made it clear that it applies to a situation in which people cease to be eligible for qualifying benefits between the times at which the notices are sent out.
On amendments 3 and 4, the Minister helpfully set out the scale of the challenge that we face. He said that 8 million people will be eligible by virtue of qualifying for the benefits in question, but that there were 4.3 million people with incomes of less than £11,000 for a single person or £16,000 for a couple—
I will come back to the Minister’s 4.5 million, because his maths did not quite add up. I had a figure of 4.5 million as well, but he then said that 1.8 million people would not be eligible and that 2.7 million were not taking the benefits up. There are 12.5 million people who would qualify for the saving gateway account on the basis of their income or their eligibility for benefits, and half of them are effectively excluded because they do not take up their benefits. There are 4.3 million on low income who might qualify if a means-tested scheme were introduced, and 8 million are eligible by virtue of claiming the qualifying benefits. So there is a large number of people on a low income to whom the scheme will not be relevant at the moment.
The hon. Member for Taunton (Mr. Browne) mentioned the tension between those who are on benefits and those who are not. This topic crops up in our surgeries and our correspondence. People ask, “Why are they entitled to that when they are on benefit?” and “Why aren’t I entitled to it?” We need to consider the equity involved, and to get the balance right.
I just want to be clear about the numbers of people involved. Our estimate is that 8 million people will qualify for a saving gateway account. We estimate that about 4.5 million working-age people on lower incomes will not qualify through passporting, 2.7 million of whom would qualify if they decided to take up the qualifying benefits. My suggestion is that if they are not at the moment taking up qualifying benefits to which they are entitled, they might not want to fill in a means test. That leaves out 1.8 million people, who represent a real issue. We would like to provide assistance to them, just as we would like the 2.7 million people to get the benefits to which they are entitled and to consider opening a saving gateway account. I hope that this intervention has provided some information so that we are all talking about the same numbers.
Indeed, I was coming on to the issue of the 2.7 million people who are eligible to claim those benefits but do not take them up. It is important to take that into account as we look to any extension of the scheme. As the hon. Member for Taunton (Mr. Browne) said, there is a tension resulting from differences in perceived levels of entitlement. However, if 2.7 million people are eligible to take up these benefits but do not do so, I share the Minister’s view that they are unlikely to go for a different form of means-testing to open a saving gateway account. Our debate on numbers has been helpful, because it has shown the scale of the problem. The additional costs that would be incurred by having to set up a means-testing scheme lead one to question whether there is sufficient merit behind the argument to extend the scheme to people on low incomes who are not currently in receipt of benefits.
I also accept the point about the flow of people through the system. We touched on that issue occasionally in Committee, and it certainly applies here. The Public Bill Committee debated the issue of people coming on and off jobseeker’s allowance and we discussed a contribution-based benefit for those on low incomes. People will qualify for these benefits at different points in time, raising the question of the best time to capture them. Until people receive benefit, however, they will not be eligible for a saving gateway account.
The Bill is a partial solution to encouraging people on low incomes to save. It is probably the most cost-effective solution, but it is not necessarily the ultimate answer, as more work needs to be done to encourage people on low incomes to save, particularly those who are not eligible for this scheme. Perhaps the Financial Inclusion Taskforce could work on how to target that group.
Amendment 13 was intended to probe different means of identifying whether the scheme targets all those on low incomes. As the scheme is evaluated, I hope that the mismatch between eligibility through the passporting route and the proportion of the population on low incomes who are eligible will be a central feature because it will enable us to determine whether the scheme needs to be refined, not just in respect of the additional benefits but in relation to whether other ways can be found to roll out the saving gateway account to meet the needs of those who do not currently qualify for it.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move amendment 5, in page 3, line 33, at end insert—
‘(1A) Conditions imposed under subsection (1)(a) shall have regard to
(a) location of the provider’s premises;
(b) the provider’s commitment to financial education; and
(c) the provider’s willingness to expand access to broader financial services.’.
This second group of amendments deals with two particular points. Let me deal with amendment 5 first. The seven lines of clause 5 are designed to deal with the fact that account providers need to be approved. Subsection (1) refers to the conditions that might be imposed on “an approved account provider”, but there is no further description in the Bill—much of it gives enabling powers—or the explanatory notes of the conditions that a provider might be required to fulfil.
We had some debate in Committee about the type of providers that we should encourage—or discourage—to take part. I am not going any further down that road, although the hon. Member for South Thanet (Dr. Ladyman) might want to enter the debate on this group to make those points again. It is important, however, that published guidelines are available to provide some clarity to providers about the conditions and their application. Pilots have already taken place, so it might be possible to draw out three conditions, which the Government might like to reflect on for approving providers.
One point that came out of the evaluation was the importance of the branch network. The take-up of saving gateway accounts in the pilot increased in relation to the closeness of people to a branch of HBOS—the organisation involved in the pilot. If we are to encourage take-up, we need to think about an account provider’s branch network. So far, the only group that has expressed a clear intention to participate is the Post Office, which has a strong, if diminishing, branch network. It would fit the bill as a good provider. Access should be easy; people should be able to take their certificate somewhere close to where they live. The more barriers we put in the way of access to the provider, the harder it will be to get a decent take-up of the saving gateway account.
My hon. Friend makes an interesting point. Apparently, these banks are managed on an arm’s length basis, but it appears from press comments about the assets insurance scheme that strings are being attached to the receipt of such support. The Minister might like to think about my hon. Friend’s suggestion and attach a further string. Participation in a saving gateway account scheme might be a reasonable concession in return for the receipt of protection of apparently £500 billion—indeed, it would be a small price for banks to pay. The Minister might like to discuss with his colleagues in the Treasury and the Department for Business, Enterprise and Regulatory Reform whether this is a feasible concession for the banks to make and whether the Government will press for it. One would like to think that, as part of their broader responsibility, financial services organisations would take very seriously a commitment to broaden access to financial services products and view it as a way of fulfilling that obligation. Paragraph (c) of my amendment stipulates as one of the conditions for approval
“the provider’s willingness to expand access to broader financial services”.
It is an elastic and loose term, but I hope that when the banks and other financial institutions are thinking about whether they want to be a provider, they will bear it mind as part of their obligations.
I am grateful to the hon. Gentleman. His answer to my question might mean that I will not need to make a further contribution to the debate on this group of amendments. One possible effect of the hon. Gentleman’s amendment is that it might be used to exclude small friendly savings providers, such as credit unions, as they do not have the wider access to other banking services that the amendment seems to require. It might also prevent the Government from targeting these accounts through Post Office Counters—something that might help to keep some of the post offices in all our constituencies open. I hope that that is not the intention, but will the hon. Gentleman confirm that it is simply a probing amendment and that he does not intend to limit these accounts to the big banks? If that is his intention, I will certainly want to vote against it.
We want there to be as many providers as possible. We want the widest possible geographical network. I do not want the amendment to be used to restrict provision to a single provider, such as the Post Office, or to exclude such bodies as credit unions, because this is part of the market that they exist to serve. If, for instance, a bank or building society decided to offer saving gateway accounts in only half its branches, I am not sure that either the hon. Gentleman or I would find that particularly acceptable. The condition can be used in different ways to maximise the inclusiveness of the product.
I am not sure I agree. The amendment refers to conditions, and to the need to have regard to the location of the provider’s premises. It does not say that we can only allow big financial services companies with loads of branches to participate. It poses the question “Will all branches in a network participate, or only some branches?” Its purpose is to probe some of the conditions that might apply when potential providers are encouraged to come forward.
But the wording of paragraph (c) would empower the Government to limit provision to organisations that are willing to provide access to a wider range of financial services. Organisations such as credit unions that could not provide that wider access would be covered by that paragraph, with the result that the Government or a future regulator might prevent them from providing saving gateway accounts.
In the course of discussion about financial inclusion, it has frequently been observed that some institutions are not very keen on encouraging access to financial services products. We want such institutions to commit themselves to widening the range of services available to people who are at present financially excluded. We do not want them to cherry-pick saving gateway accounts and not offer other products to those people. I do not intend to press the amendment to a vote, but it will depend on how the Government choose to use their powers to determine access to financial services products. I want institutions that participate to be committed to financial inclusion. I do not want them to view the saving gateway account as a product in isolation in which they are currently interested, while not being particularly interested in broadening financial inclusion.
Credit unions, as organisations, are committed to financial inclusion. That is the essence of their activities, as is clear from the extension of their offer of savings accounts to include current accounts and their offer of loans consisting of relatively small amounts. Part of their mission is financial inclusion, and I certainly do not believe that paragraph (c) seeks to exclude them. What they may not be able to offer is access. We need to ensure that providers operate in as many locations as possible, are keen to support financial inclusion, and are committed to financial education. One of the issues that emerged from both the public evidence session and the evaluation of the pilot schemes was the need to offer financial education along with saving gateway accounts. The hon. Member for South Thanet will recall, as I do, discussion of whether the accounts should be interest-bearing. Teresa Perchard of Citizens Advice pointed out that if they were not, it should be explained to people what they should expect at the end of the two-year period when their account rolled into a current or basic savings account.
Many factors will help to make the product successful. Three of them—the provision of easy access to account providers’ premises, commitment on the part of providers to educating people in order to improve financial awareness, and a commitment to financial inclusion—could prove particularly powerful in that regard. We should ensure that those who are considering putting themselves forward as providers share the commitment to tackling financial exclusion. That is part of what the Bill is about, and it is no good having providers who are not interested in it. I hope that the hon. Gentleman is now reassured about the purpose of this probing amendment.
The amendment refers to
“location of the provider’s premises”.
Given that more providers are using the internet, has my hon. Friend ruled out web-based providers? Does he believe that providers need a physical location? Having met a good many homeless people, I know that there is a high level of internet penetration. The internet provides a secure way for those without a stable location to manage their finances. Before meeting those homeless people, I had been under the impression that the web base was more for those with a little more money.
That is an interesting question, and not one that we explored in Committee. Perhaps if my hon. Friend had listened a little more carefully in Committee, he would have raised the point then.
The system that we are discussing is based on a notice of eligibility. I had always assumed that a piece of paper would be posted to people, who would then present it to an account provider over a counter. However, like my hon. Friend, I have been contacted by a number of people who are homeless but have internet access. They might indeed prefer to manage their money in that way.
I do not know whether the Minister has had any discussions with potential account providers about how they might supply a web-based service. A point that emerged both from our debates in Committee and from the evidence sessions was that the greater the burden of cost imposed on potential providers, the fewer of them there would be. That is, to an extent, relevant to amendment 6. If we require providers to offer a web-based service, that may involve an additional cost making participation less attractive to them.
We must get the balance right. We want to encourage a wider range of providers because we want eligible people to have physical access to saving gateway accounts, perhaps not on every street corner but within a reasonable distance of where they live. That will mean ensuring that the cost to providers is appropriate, and it is possible that a requirement to provide a web-based service might deter them from participating because of the extra cost. Perhaps the Minister will be able to tell us whether any providers are interested in supplying such a service, which, of course, might pose challenges in the context of financial and digital exclusion.
Let me now turn to amendment 6, which proposes the deletion of clause 11(2)(e). Again, it touches on the costs issue. Regulations made under the Bill will set out how information will be filed by account providers. I am wary that we might create too much prescription on providers and therefore force up costs, and I wonder how permissive or relaxed the regulations will be in respect of the type of information providers will be required to produce for Her Majesty’s Revenue and Customs.
Amendment 5 is intended to probe the issue of the guidance that will be offered to providers and what conditions might be attached to them. We are keen for providers to offer commitments on access and on financial inclusion and education. I hope the Minister will recognise that our intention here is to encourage the success of the scheme—rather than to restrict the range of providers, as the hon. Member for South Thanet seemed to think, or hope.
Let me begin by saying that, despite the discussions we have had in Committee and today, I agree with the hon. Gentleman: I want the accounts to be provided through as wide a range of organisations as possible. I was saddened by the attitude of those representatives of the banking industry at the evidence sessions who seemed to say, “We may not be interested in providing these accounts, because there may not be enough profit in it for us.” The purpose of these accounts is to help people who would not otherwise have got the saving habit to acquire it. In any other sphere of activity in the markets of this country, that would be welcomed as increasing the customer base, yet bank representatives were sitting there saying, “We’re not sure we’re interested in expanding our customer base.” Given the money we have given to the banks recently, and the debt most of us think they owe to our society at the moment, I would have thought that they would have been falling over themselves to say, “We want to help.”
I would not, perhaps, put it that strongly, but, absolutely, that is broadly what I am saying. One of the reasons for our current problems is that we have lost the saving habit. The Prime Minister has made that point in recent weeks when he has spoken about people saving prior to taking out a mortgage and about whether or not it is a good thing that people have 100 per cent.—or 100 per cent. plus—mortgages, so never developing any saving habit or any notion of thrift prior to taking on the obligations of a mortgage. My understanding from contributions from Members in all parts of the House is that what we want the saving gateway accounts to encourage those people who would otherwise not have developed a saving habit to see the merit of doing so. Given our society’s current problems as a result of the banks’ activities, I would have thought that it would be absolutely on point for them to say, “Okay, we now accept that we need to do more to help people get that saving habit. We accept it is our job to get people to think about thrift. It is now our job to make people think they can’t always come to the bank and get 100 per cent. or 120 per cent. mortgages, and that they will actually have to put a bit of their hard-earned cash aside each week and save up for some things prior to borrowing the balance of the money.” When we were taking evidence, the banks should have come to us and said, “We don’t see that there are huge amounts of profit in this, but we do see that it is absolutely our duty to provide these accounts. It is absolutely our duty to be providing financial education and training and support to people who need it, and it is absolutely our job, whether or not these things make money for us, to provide them and to do so willingly and to provide a good service.”
To that extent, I agree entirely with the hon. Member for Fareham (Mr. Hoban), but I do not want credit unions and the Post Office to be excluded from providing such accounts. I do not think that is the intention of the hon. Gentleman’s amendments—indeed, he has made it clear that they are probing amendments—but the Post Office and credit unions can play a role. Credit unions tend to be small and to provide a good, almost pastoral, service to some of their customers. They are in a position to say to people, “Let’s sit down and talk about your budget. Let’s talk about where you’ve got some extra money, and about the benefits of saving.” The saving gateway account represents a big opportunity for credit unions and the Post Office, and I do not want anything to be done that would exclude them. I am happy to note that the hon. Gentleman has confirmed that that is not the intention of his amendments, and I think we have all-party support for how we want the accounts to operate.
I do not understand why the hon. Gentleman should propose in his amendment 6 to “leave out paragraph (e)”—I assume, again, that it is a probing amendment. I would have thought that making an option for electronic filing was a way of reducing costs for those who provide these accounts. If the effect of the amendment would be to prevent the Government from allowing people to file their returns electronically, we might be inadvertently increasing costs. I suspect that is not the hon. Gentleman’s intention, and I agree with him that our objective must be to keep the administrative costs as low as possible so that there is a plurality of providers, who are willing to provide the broad range of services that we want those who take out a saving gateway account to have.
I must say that I do not see the point of amendment 5, unless its purpose is to make it clear that we want competent, reputable financial institutions to provide those accounts. I am sure that we all agree that that is desirable, especially given that significant sums of public money will be involved. I share the view of both previous speakers—I think there is general consensus on this point—that we wish to see the broadest possible number of providers, and I would very much like credit unions to be among them as they offer a different type of service, and one that some of the potential customers may feel particularly comfortable with. I would therefore regret it if the amendment were to restrict the scope for, or inclination of, credit unions to provide the service, as the hon. Member for South Thanet (Dr. Ladyman) feared.
Although the hon. Gentleman has said that he wants to see a wide range of providers, I hope that by expressing our enthusiasm for credit unions we do not sound unenthusiastic about banks providing the service, because I think the one great advantage of banks doing so is that that feeds into the mainstream banking and saving system people who otherwise might not participate at all in normal banking arrangements. That lack of experience acts as a barrier to participation in financial services among wider society. There are some people in my constituency and elsewhere on very low incomes who do not have a bank account or have one but use it in a very limited fashion. Those of us, like everybody participating in this debate, who get used to a monthly salary being paid direct into our bank account should occasionally step back and reflect on how little in cash terms we actually see of the money we have been paid. Most of the money flows in and out of the banking system, and quite a small proportion is withdrawn in cash.
People who are generally better off or in longer term employment get used to how banking systems work and become confident with them. Some people who have less money or who have not been introduced to formal banking by becoming a customer at a younger age may have less confidence in the system. I do not mean confidence in the banking system as a whole, because we all have less confidence in that than we did a year ago: I mean confidence in the experience of being a depositor in a bank or having a savings account. That would be a longer lasting virtue of the Bill, because we are seeking to inculcate the savings habit in the people who take up the service. If they do not maintain that habit beyond the two years in which the Government will provide substantial financial inducements to do so, the Bill will not have succeeded to the extent that we all wish. To that extent, I hope that banks are to the fore, for altruistic reasons and because I share the view of the hon. Member for South Thanet that it will be in their commercial interests to try to widen their customer base.
Who knows whether somebody who opens a savings gateway account may end up being a prosperous customer? After all, that is the basis on which the banks push offers at students. It is not because students have very much money to deposit in the bank. Rather, the banks hope that the students will become good customers in the future. It may be that some of the people who choose to take up this option become more lucrative customers, and even those who do not become so wealthy could still be good customers in other ways, even if the total amount that they deposit with the bank is less. I hope that banks will participate. We want as wide a range of providers as possible and I hope that all those providers will be reputable. In so much as this amendment was designed to probe all those issues and stimulate a useful debate, I hope that the Minister feels that it has done so.
We are approaching a new age of financial responsibility as a result of the current downturn in the financial markets, and we will see a separation of banking services. Investment banks will become separate from retail banks, which will, in their purest form, have to get used to much smaller profit margins. So the traditional reasons for not entering the markets that are the subject of the Bill will eventually disappear.
All banks publish voluminous annual reports, and at the back they include corporate social responsibility statements. There is no better way for the banks to demonstrate their corporate social responsibility than by seizing this initiative and driving it through their branch network. At the moment, banks are rightly held in very low esteem by the vast majority of people and banks need to make some headway in the community. Traditionally, banks have ignored low income groups in favour of chasing those people whom they deem to be more profitable—those who can take out significant mortgages or rack up large credit card debts.
I do not want to see any financial sector excluded from delivering these accounts. I sincerely hope that the Post Office is involved in their delivery, because for many people the post office is their local shop and at the centre of their community. I also hope that credit unions play their part in delivering these accounts, but the credit union sector is still small—although it is growing—and many communities will not have a local credit union over the next decade or so. So banks will have an important role to play in delivering these accounts.
I am sure that when the whiz kids in the banks sit down and look at the accounts they will conclude that they will not make a lot of money out of them. Indeed, banks might make a small loss in delivering the accounts. However, that should not deter them. We have heard many declarations of contrition for the banks’ failures in the past year and the failures that undoubtedly lie ahead, but if they are to restore confidence, the provision of these accounts would be a good place to start. I hope that banks will seize the opportunity to volunteer to be at the forefront of this initiative, instead of being dragged to do so.
These amendments cover two distinct areas, but they have in common that they both relate to the requirements to be placed on account providers. I wish to stress that the Government want to maximise customer choice and access, and we are keen to secure as broad a range of appropriately qualified authorised account providers as possible. That includes the Post Office, credit unions, banks and building societies.
The Bill Committee heard from representatives from a variety of potential providers, and the message was that while their members support the objectives of the saving gateway, they want to consider carefully any costs associated with the provision of saving gateway accounts before committing to offer them. It is similarly important to remember that most of the requirements that we impose will apply equally to all approved providers, from the large high-street bank to the smallest mutual society. We must therefore ensure that the requirements that we impose on saving gateway account providers are appropriate and proportionate, as they will affect the number of providers that opt to offer the accounts.
I immediately took a more charitable interpretation of amendment 5 than did my hon. Friend the Member for South Thanet (Dr. Ladyman). I thought that the hon. Member for Fareham (Mr. Hoban) was trying to be helpful and to probe our intentions. As drafted, the Bill already provides the coverage for conditions and requirements to be imposed on account providers in the areas mentioned in amendment 5. I agree with all the opinions that have been expressed about the importance of appropriate access to account providers, to financial services and to financial education. However, there is nothing in those points that makes them particular to people who decide to open a saving gateway account. As hon. Members will be aware, the Government support a wide range of measures and initiatives to improve financial capability and widen access to financial services. That covers some of the points made in the amendment.
As hon. Members will see from the draft regulations, we have restricted the conditions that we propose to impose on providers to those that ensure that they have the appropriate regulatory permission and can offer and operate accounts as set down in the Bill and regulations. That strikes the right balance. It is important to guarantee the saver regulatory protection and consistency of account features, while ensuring that the conditions on providers are not excessively burdensome.
An important point was made about local branch access. We want easy access for people to open accounts. The draft regulations provide that account holders must be able to make account deposits in several ways, including in cash. That is likely to mean that providers must offer a counter service, or similar. However, nothing would prevent the offering of saving gateway accounts that could be opened electronically. We have had discussions with potential account providers who want to deliver the saving gateway accounts in several different ways. We believe that providers should be required to accept cash deposits, which might make things difficult for a web-based provider. However, it may be possible for a provider to have a web-only account for some customers, if those customers prefer that.
Let me turn to amendment 6. I should explain to hon. Members that we consider the requirement that an account provider’s returns and declarations should be submitted electronically to be a reasonable and proportionate requirement on providers. It is not only consistent with broader developments in Government practice, but central in many cases to the smooth operation of the scheme and the prompt payment of match amounts earned by savers.
We set out in the consultation document that we published at the Budget 2008 that we intended to make online filing of returns the only means of sending returns to HMRC. We asked in that consultation document whether that would cause any problems for any particular groups of providers. The response to the suggestion of mandatory online filing was very positive—most providers recognise the benefits of that. Indeed, those benefits are considerable both to providers and to HMRC. Online filing is quicker than submitting and processing papers returns, more cost-effective and more accurate, as well as being more environmentally friendly than a paper-based system. The hon. Member for Fareham did not make a great deal of that amendment, so I do not need to explain in much further detail why we think that there is not a problem in the industry with electronic filing. The consultation confirmed that.
I think that I have addressed amendments 5 and 6. I recognise that they are probing amendments and I hope that the comments that I have made were helpful.
It has been useful to debate the nature of the providers and the terms and conditions that we would expect as well as the things that we would expect providers to do. I want to press forward on the issue of cash, because Mark Lyonette of the Association of British Credit Unions Ltd mentioned the cost of processing cash payments, which was potentially significant for credit unions.
Although I recognise the importance of having facilities available for people to pay cash, when it comes to reducing the cost to the providers of providing the accounts, the deductions that can be made electronically through direct debits, standing orders and pay packets clearly reduce the cost of collection to providers and are a further way of encouraging a larger number of people to participate. Having said that, I know that the Portsmouth Savers credit union not only operates a counter facility through its branch but works through PayPoint, too, spreading the network of payment points widely through the catchment area that it supports. Clearly, there are ways in which credit unions can expand their accessibility in a way that is not available to some other institutions.
That is an interesting suggestion. One issue that credit unions face is the availability of access points and how to provide different methods of access. I am not sure that my caseworker would welcome responding to constituents’ correspondence as well as acting as a bank cashier, but that is a matter that I will explore with her. Accessibility is important, as the pilots demonstrated. Part of the rationale for tabling amendment 5 was to tease out some of those important issues that will underpin the success of the savings gateway account.
On amendment 6, the Minister confirmed that there is widespread support for the use of electronic filing by account providers. He said that most respondents welcomed mandatory electronic filing, and I would assume that the sort of systems that bodies such as credit unions are putting in place would be capable of making electronic filings of their returns and if they are, that is welcome. My amendment was a plea for a degree of discretion where systems are not up to electronic filing and where the cost of updating systems might be a barrier to credit unions and other institutions that are prepared to offer saving gateway accounts. Based on the debate, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move amendment 2, in page 4, line 19, at end insert—
‘(6) After the first exercise of the powers in subsection (5), the Treasury will be required to consult interested parties on any changes to those regulations and lay a copy of the report on this consultation before Parliament before any further regulations are made.’.
With this it will be convenient to discuss the following: Amendment 9, in clause 27, page 13, line 4, after ‘(4)’, insert ‘, 4’.
Amendment 10, in clause 27, page 13, line 4, after ‘(4)’, insert ‘, 6’.
Amendment 7, in page 13, line 7, leave out ‘The first’.
Amendment 8, in page 13, line 10, leave out subsection (6).
This group of amendments tries to address one of the issues that the hon. Member for Taunton (Mr. Browne) mentioned on Second Reading, which is the fact that the Bill is an enabling Bill and contains a large number of regulation-making powers. I think that he said that there were 29, and virtually every clause contains at least one regulation-making power. The Government have already published some draft regulations, and the amendments try selectively to enhance the parliamentary scrutiny of the regulations. I accept that there are circumstances in which the negative resolution is the appropriate route, when matters are relatively uncontentious, but I have suggested a number of areas where I felt that the affirmative procedure might be more appropriate given the implications for the taxpayer of changes to some of the criteria in the Bill.
First, let me deal with amendment 2. Clause 6 is about eligibility and it talks about people being able to open a saving gateway account having received the notice of eligibility. When we discussed the clause in Committee, there was some discussion of the regulations under subsection (5), which are very permissive and enable people to have more than one saving gateway account at any one time or more than one over their lifetime. They also restrict the number of saving gateway accounts that someone might have. We know that the intention of the Minister and the Government is that people should have only one saving gateway account and that was the consensus that was underlined in Committee and in the evidence-taking sessions that we had before the Committee scrutinised the Bill line by line. Sharon Collard and Brian Pomeroy, among others, made it clear that if people have not got into the savings culture through one account, it is unlikely that being offered further opportunities will enable them to develop the habit of saving.
Amendment 2 proposes that once the Government have made their first regulation to limit accounts to one per person, there should be a proper consultation if they seek to make any subsequent changes. The consultation should consider whether there should be more accounts and a copy of it should be laid before the House before any further regulations are made, to ensure that the House is aware of the outcome of the consultation before it is made.
Amendments 7 and 8 refer back to clause 14, which gives the Government the power to make regulations for the treatment of the accounts in the context of income tax and capital gains tax. Again, the Government’s intention is that the accounts should be free from income tax and capital gains tax. However, the Bill states that although the first regulations made under the clause will be subject to the affirmative resolution procedure, any subsequent changes will be made under the negative resolution procedure. Given that subsequent changes could make accounts subject to income tax or CGT, it is appropriate to build in a safeguard requiring proper parliamentary scrutiny, so that any subsequent orders would be made by the affirmative rather than the negative process.
Amendments 9 and 10 deal with other parts of the Bill that allow changes to be made by the negative procedure. Clause 4 is important, as it determines the maturity period that applies to saving gateway accounts and the maximum amount that can be paid into an account. The draft regulations published by the Government set the maturity period at two years and the maximum monthly payment at £25. Any amendment to those terms would be made by the negative procedure, but lengthening the maturity period could lead to increased costs to the Exchequer as people build up higher balances that would be subject to the 50p in the pound matching process.
Similarly, increasing the monthly payment from £25 to, say, £30 or £40 would also lead to increased costs to the Exchequer. We believe that both processes should be subject to the affirmative rather than the negative procedure. That is a reasonable extension of the affirmative procedure, and it would provide some safeguard for taxpayers.
Amendment 10 makes a similar point in connection with clause 6. In amendment 2, we ask that a report be laid before Parliament when the Government propose a change to the number of accounts that can be held. In amendment 10, we argue that any subsequent use of the power after the first use should be subject to the affirmative rather than the negative procedure because, again, the cost to the Exchequer will be greater if the rules are modified to allow people to hold more accounts.
As the hon. Member for Fareham (Mr. Hoban) rightly said, on Second Reading I spoke about what I consider to be the Bill’s excessive flexibility. I said that the Government would be able, through regulations and without sufficient reference to Parliament, to change quite fundamentally how the Bill works in practice, and I maintain that that is still the case.
I can understand that all Governments like to have some flexibility. Legislation probably benefits from a degree of flexibility, especially if there are financial considerations that mean that the Government may need to manoeuvre to some extent to respond to events. However, we are sent here to represent our constituents and to make sure that Bills are scrutinised properly, and there are a very large number of moving parts in this Bill. The word “mockery” is too strong, but it undermines the scrutiny process if Bills brought before us for our approval have so much scope for interpretation by Ministers at a later date.
I continue to hold that view about this Bill. I regard it as broadly benign, but a wider principle is at stake. However, I shall not detain the House unnecessarily, as I agree with all the accurate and wise comments made by the hon. Member for Fareham. Rather than making them all again, I shall confine myself to saying that I hope that the Minister will respond accordingly.
I hope that I can convince the House that the Government’s approach to what is put on the face of the Bill and what is contained in secondary legislation—as well as to what is subject to the affirmative and negative procedures—is fair, reasonable, proportionate and appropriate.
This group of amendments covers two points. Amendments 7 to 10 ask whether the exercise of some of the regulation-making powers should be subject to the affirmative rather than the negative procedure, whereas amendment 2 would introduce a requirement for the Government to consult interested parties and report to Parliament before using one specific power in the Bill.
I shall begin by responding to the hon. Member for Fareham (Mr. Hoban)—and, by default, I suppose, to the hon. Member for Taunton (Mr. Browne)—on amendments 7 to 10. As I have said a number of times, we believe that the current use of delegated powers is appropriate. The important features of the savings gateway, including the list of qualifying benefits and credits and the method of calculating maturity payments, are all set out on the face of the Bill. However, many of the details of the operation of the saving gateway are relatively technical and our view is that they are best tackled through secondary legislation, because that provides the flexibility that will allow the scheme to be amended in the future to ensure that it continues to meet its objectives.
We know that those objectives have the broad support of the House, and we want them to be amendable without the need for further primary legislation because we also know that that can suffer from the pressure of parliamentary time. We think that we have struck the appropriate balance, and I shall explain our approach to the House.
The first use of all but one of the delegated powers in the Bill will be subject to the affirmative procedure. We think that that is the right thing to do to allow appropriate parliamentary scrutiny of the details of the scheme that is being introduced. However, subsequent use of most of the powers in the Bill will be subject to the negative procedure, as that will provide the necessary flexibility to make minor or technical changes to the scheme.
Of course, we can debate which changes are minor or technical: hon. Members might have different views, and it is right that the Government be probed about such matters. However, I want to explain that there are four exceptions, under which each use of the regulations will be subject to the affirmative procedure. They include all three delegated powers relating to eligibility, which is clearly a central feature of the savings gateway. It is therefore right that any changes should be subject to full parliamentary scrutiny.
The same is true of the match rate—the amount of maturity payment earned for each pound saved. The power to set that amount in regulations under clause 8(1) is therefore the fourth delegated power that will be subject to the affirmative procedure on each use. All the key parts of the savings gateway architecture are therefore either on the face of the Bill or subject to the affirmative resolution procedure. Moreover, all changes to eligibility and the match rate will be subject to the affirmative procedure.
Yes, indeed I can. Moving from a match rate of, say, 50 per cent. to 100 per cent. would be a major decision, with serious cost implications. We think that our figure for the amount that can be paid in monthly is appropriate, and we anticipate that future adjustments will be needed only to keep pace with inflation, or something similar. We are therefore talking about two different matters: we think that a change in the match rate would be a fundamental redesign of the scheme, whereas updating for inflation would not be. As a result, it is more appropriate that such updating should be covered by the negative procedure.
But the Bill gives the Minister the power to double the monthly contribution by means of the negative procedure. We do not know how much people will save, but that could have the same financial impact as doubling the match rate and leaving unchanged the amount that can be saved.
That is true; that is how the legislation is worded. If a future Government decided to double the match rate without consultation and without agreement, I am sure that people would pray against the regulations. Our clear policy intention is to update the monthly deposit limit, but we do not at the moment foresee making a fundamental change, such as a change to the match rate. That should be debated, and be subject to the affirmative procedure.
For the life of me, I have never understood why the Opposition always make that point. If the Government cannot afford something, they will not lay the regulations before the House, and if the Opposition do not like a measure, they can pray against it; it will then be debated in the same way as regulations introduced under the affirmative procedure. Will my hon. Friend confirm that Cabinet Office guidelines require a public consultation before regulations are laid before the House? That means that interested parties would have their say even before the regulations were laid before the House.
My hon. Friend makes a very good point. It is perfectly possible for people to pray against regulations introduced under the negative procedure; indeed, that happens quite frequently. I am simply making the point that a change to the match rate would be a fundamental change to the design of the scheme. As to updating the monthly deposit limit in the light of changes to inflation, inflation is low now, and under this Government, it will continue to be low and sustainable, but we need the ability to update that. A minor, technical amendment that updates the scheme in the light of inflation is more appropriately handled through the negative procedure. The hon. Member for Fareham and I will have to differ on the issue, but I hope that on reflection, he will not see it as a major issue that he wants to press to a Division.
The hon. Gentleman also raised the issue of tax relief. I understand his concern about the possibility of a future Government taking away the tax-relieved status of the saving gateway using the negative procedure. We have been very clear that the saving gateway will be free of income tax and capital gains tax, as is provided for in the draft regulations. I am happy to confirm that we have no intention of reversing our position. Of course, if a future Government were to choose to do so, it would be open to Members to pray against the relevant regulations, but it is not sensible to require all regulations relating to tax relief for the saving gateway to be subject to the affirmative procedure. Some of the regulations may be simple, technical provisions to reflect changes in the tax system more widely. We need to differentiate the policy intention from any fundamental change in policy; that is why the legislation is framed as it is.
The hon. Gentleman mentioned the length of the saving gateway account maturity period. I can see where he is coming from. He is saying that if we increase that length and increase the monthly limits by the negative procedure, it could have as significant a cost impact as a change to the match rate. We agree, but the policy intention is to keep the match rate as it is. On the length, the intention is to evaluate the scheme properly once it has run for a period. If it is right to make changes in future, we will want to do so. Allowing the flexibility to make changes of that kind, so that we can ensure that the scheme continues to meet its objectives, is sensible contingency planning on the part of any Government. It is right that the measures should be subject to the negative procedure.
That brings me to amendment 2, which relates to the number of saving gateway accounts that a person can have in their lifetime. As I said on Second Reading and in Committee, our intention is that people should be able to have only one saving gateway account in their lifetime. That is reflected in the draft regulations. The saving gateway aims to kick-start the saving habit, as we know. It is therefore right that it should be a one-off account. Brian Pomeroy, the chair of the Financial Inclusion Taskforce, said during the Committee’s evidence sessions:
“it is right that they get only one shot, because the basis of the scheme is that it should be a kick-start.”––[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 18, Q38.]
I think that the hon. Member for Fareham agrees with us on that point. However, we believe that it is right, and sensible contingency planning, to maintain some flexibility on the issue and to give this and future Governments the freedom to allow people more than one account per lifetime, if that is thought reasonable at a later date.
Amendment 2 would restrict that flexibility by requiring the Government to consult interested parties and to lay a report of that consultation before Parliament. That would be an unusual requirement for legislation to impose, and it is not necessary. If we wanted to consider a change to the number of accounts that a person could hold in their lifetime, I am sure that we would want to consult on the idea. As my hon. Friend the Member for South Thanet (Dr. Ladyman) says, under the normal procedure and the guidelines followed in such cases, we would consult. We would want to make sure that any change was effectively targeted, which would mean consulting and talking to various bodies. We have shown in recent years that we are keen to take the views of interested parties into account, when it comes to the design of the saving gateway. Indeed, it has been pointed out that we have hardly rushed into introducing saving gateway accounts. There has been extensive consultation and dialogue, and we are continuing to discuss with various providers how the accounts will be implemented, as the House will be aware.
I do not believe that the Government’s flexibility should be restricted in the way proposed in amendment 2. Nor do I think that the changes proposed in amendments 7 to 10 strike the right balance when it comes to what should be covered by the affirmative procedure, and what by the negative procedure, so I hope that the hon. Member for Fareham will seek leave to withdraw his amendment.
The hon. Member for South Thanet (Dr. Ladyman) asked why Opposition Members argue for the affirmative procedure; it is because we want increased parliamentary scrutiny. We know that it is more convenient for the Government to get their business through with as little grit in the process as possible. That is why Governments tend to prefer the negative procedure.
Given the ministerial experience of the hon. Member for South Thanet, I suspect that he knows exactly why Governments prefer the negative procedure. Of course, we will treasure his remarks, just in case roles are reversed in the next couple of years and he then argues in favour of applying the affirmative procedure.
Well, I do not think that the two are in any way correlated. There is a debate to be had about what the level of parliamentary scrutiny should be. The Minister’s explanation of why he rejects the amendments indicates that there is a fine line to be drawn, because there are areas where technical changes could be subject to the negative procedure. Part of the issue is that there are some instances where the Government could make a minor, technical change, such as a change to some detail in the tax treatment of saving gateway accounts, or a fundamental change.
What we lack in the Bill and in the procedure of the House is a way of distinguishing between a significant change and a technical change. As the Minister said, there could be a change to the monthly contribution limit just to index-link it. We would all agree that that would be a relatively minor change, which could go through on the negative procedure. However, the Government could make a significant change to double or halve the monthly contribution, which would be far from a technical change. It would be a substantive change, and the Opposition would have to go through the negative procedure by praying against the regulation.
The Minister commented that he viewed my amendments more charitably than did the hon. Member for South Thanet. Perhaps I view the powers that the Government have under the Bill less charitably than I should; perhaps I see the opportunity to make significant changes and emphasise that opportunity rather than the possibility of making minor technical changes. On balance, I would prefer more parliamentary scrutiny with the capacity to make a significant change that could have an impact on the account, and I would prefer to err on the side of caution, rather than make it easier for Governments to get business through. However, I appreciate the points that the Minister made, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Transfer of funds on account ceasing to be Saving Gateway account
I beg to move amendment 1, in page 7, line 9 , at end insert—
‘(1A) Subject to subsection (1B), funds in the account will be transferred into an account which pays interest at a rate which is equal to or greater than the rate paid on funds held in an Individual Savings Account as set out in the Finance Act 1998 (c. 36) operated by the Savings Gateway Account provider in question.
(1B) Where an account provider does not operate an Individual Savings Account, the amounts will be transferred into an account that it provides which—
(a) has no penalty for the withdrawal of funds without notice; and
(b) offers a rate equal to or higher than the highest interest rate offered on other accounts operated by the provider.’.
The final amendment covers an important point that we discussed in Committee. Clause 16 deals with the transfer of funds when an account ceases to be a saving gateway account. It is a significant element of the Bill because it creates a clear expectation of what should happen when an account comes to an end, and should be seen in the context of ensuring that people are given as much incentive as possible to continue the savings habit which they will hopefully have developed over the two-year period.
In the pilot programme, the default option was a savings account with a very low interest rate. That is a better option than defaulting into a current account, not only in terms of the interest that someone might earn, but because a savings account might discourage them from withdrawing the money, whereas if it is lumped together with their existing current account balance, there might be a greater incentive to spend it.
The amendment seeks to reflect some of the concerns expressed about the default option. The intention behind the Bill is to ensure that when the account comes to the end of its two-year period, there is a roll-over into an individual savings account. I sought in Committee to make that mandatory. A number of objections were raised, which I try to reflect in the amendment.
In the evidence-taking session there was some debate about whether an ISA was the appropriate default option. Teresa Perchard from “Which?” expressed a preference for a plain vanilla savings account because of some of the complexities attached to ISAs. Matthew Wakefield from the Institute for Fiscal Studies was more open to the idea that the account should default into an ISA. One of the other arguments made in the evidence session—by Adrian Coles of the Building Societies Association, I think—was that some providers might wish to default a customer into an account with a much higher rate of interest than an ISA. That would be a positive move, but in most cases the ISA rate is higher than the rates generally offered on instant access savings accounts.
Others made the point that some potential account providers did not offer an ISA. One can imagine a credit union, for example, not offering an ISA, and I would not want credit unions to be excluded from the provisions of the Bill, so my alternative suggestion is that where a provider does not operate an ISA, the amount should be transferred into an account where there is no penalty for instant withdrawal without notice, and which offers a rate equal to or higher than the best rate offered on another savings account.
If somebody is rolled into an account that offers the best possible rate for that saver, it is meant to be an attractive option and to ensure that rather than the money being lost to a current account at the end of the two-year period, it rolls into a savings account and that we get the best possible deal for the saver by mandating that it should be an ISA or, where that is not offered, an account with a rate equivalent to the best rate that the provider offers.
What happens when the account matures is, as Alan Cook from the Post Office said, a critical issue. It will help to influence the way in which people manage their money in the future. The more we can do to ensure that the default option is an account such as an ISA which offers a good rate of return and a sense that the money is set aside, the more likely it is that we will encourage people to continue to save in the future.
I agree with the hon. Member for Fareham (Mr. Hoban) to this extent: all the accounts must have a default option. People should be told what that is when they go into an account. They should be told that at the end of the two-year period, they will have choices. It should be made explicit that there is not one option, but a range of choices that they can make. They should be told that if they do not exercise that option, the provider has a default option, which should be explained.
I agree with the hon. Gentleman that there are many people for whom the best default option will be an ISA, from which they will get the best rate of return. Equally, many of the people at whom the scheme is aimed will not be payers of income tax. We won today a kind concession from the Minister that carers, for example, will be entitled to saving gateway accounts. Those people may envisage a very long period of being a carer; if so, they will therefore not be income tax payers in the near future. For them, a different type of account may be preferable to an ISA. For example, a national savings and investments account, where payments are made without income tax being removed from the account, might be the best and most convenient option for them.
I hope that people will decide for themselves when they go into saving gateway accounts whether they are likely to benefit from an account that defaults to an ISA or an account that defaults in some other direction. It is even possible, as we discussed in Committee, that the Post Office will act in partnership with other organisations to provide saving gateway accounts. The Post Office might be able to offer a plurality of choices into national savings and investments accounts or into ISAs as a result of such partnerships.
To the extent that the hon. Gentleman intends to ensure clarity about offering choices at the end of the saving gateway accounts, and to the extent that there will have to be a default option, I agree with him. Where we part company is on his belief that for everybody an ISA will be the best option. For many of the people on very low incomes whom we are discussing, that will not be the case. I want to see a range of providers who cater for that market, as well as for those people who would benefit from an ISA.
There are three broad areas of consideration in respect of this issue, and we touched on them during our early deliberations; I think that we broadly agree on all three. The first is that people who take out the accounts should be able to access their money in full whenever they wish to. We agree on that, but the principle is important. Although we do not want them to access the money as that would rather undermine the purpose of the scheme, many of them would be unlikely to participate in it unless they felt able to access their money if they chose. We have to be extremely cautious about sending out the message that barriers—even if only procedural, rather than absolute—are being put in their way.
The second point is that the accounts should resemble a normal savings account as much as possible. In Committee, we discussed whether the accounts should attract any interest, as well as statements and all the features with which people with normal bank savings accounts will be familiar. If we wish people to take up the savings habit and the transition into conventional savings accounts once the two-year period has elapsed, we should want the characteristics of the gateway account to represent a normal account; that is desirable in so far as it can be achieved.
The third area relates to the purpose of the entire Bill. Even if the people who take up the option of having one of the accounts decide on occasions to use the money that they have saved on short-term expenditure, the scheme will still succeed if it makes them more likely to be longer-term savers. For me, that is the purpose of the legislation. A significant group of people in society—perhaps, 10, 15 or 20 per cent. of people—have an insufficient stake in their country and society as a whole; I am thinking of their participation in the democratic process and civic society, but the issue is most keenly felt in their lack of stake in the financial future of the country. Even quite modest savings will give such people a feeling that they have something to gain—and even something to lose—according to the fortunes of the country in which they live. It is important that those people do not feel isolated from the mainstream. Any amendments or progress that we can make that encourage people to regard the account as the start of a longer-term trend for their finances, and inclines them to save beyond the two-year period, is to be welcomed—with the caveat that they should not be compelled.
I am sympathetic to the motivation behind amendment 1, but I fear that it is too inflexible. The motivation is good, because it accords with the principles that I have sought to outline. Perhaps, however, there is a means of reaching that point that is superior to going down this rather narrow path. If the Minister knows of such means, I would welcome it. However, I urge him to take seriously the inspiration behind amendment 1, because that will govern whether the legislation is deemed a success in five or 10 years’ time.
The debate about amendment 1 has been helpful because it gets to the heart of what the Bill is about. The ultimate success of the Bill would be achieved if people changed their behaviour and were encouraged to save, so it would be unfortunate if we left the post-savings gateway account period in any degree of uncertainty. That would affect two of the Bill’s long-term-success criteria, outlined in Committee by my hon. Friend the Member for Fareham (Mr. Hoban). One was about persistency—about whether the Bill will make the culture change happen. The second was about the increase in net wealth that ought to come with it. Brian Pomeroy added the criterion of wider entry into financial inclusion.
One of the most telling remarks in the evidence sittings came from Teresa Perchard of Citizens Advice, who talked about how we all feel an inertia about banking—even those of us who are experienced at banking. She said:
“Everybody hates their bank but will not shift accounts.”––[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 16, Q33.]
That inbuilt inertia is also a good reason for the sentiment behind the Bill and for making the post-account period clearer in relation to what we expect to happen as a result of it.
I sympathise with the sentiment behind the amendment. We all want to ensure that savers benefit from good returns on their savings when funds are transferred out of saving gateway accounts that have matured; we disagree on whether that should be mandated. In many ways, the amendment is a good example of the considerations that the Government need to take into account when designing policy. The hon. Member for Fareham (Mr. Hoban) will no doubt be familiar with the work of Thaler and Sunstein, whose book “Nudge” discusses the setting of sensible default options. I am particularly interested in the application of behavioural economics to policy making. I recommend the works of Daniel Karmann, as much as I would that of Thaler and Sunstein.
We can have a legitimate debate about how we address the issues. We are all clear on the policy objective, which is to kick-start a savings habit. We want to make sure that the saving continues in the longer term, when the account matures. We want to see saving gateway accounts transferring on maturity to an appropriate account, through which the individual continues to save. The issue is whether we should mandate a default roll-over account into which funds should be transferred when the account holder does not give any instructions about what should happen to their account balance at maturity, or whether there should be more choice and no mandatory requirement. As part of that, we considered carefully whether default roll-over accounts should be ISAs, for example. We have decided against that for a number of reasons, some of which I explained in Committee.
However, I point out again that we have said that we will permit transfers from matured saving gateway accounts into ISAs to be treated as previous-year subscriptions. That is an important point—in other words, those accounts will not count towards the annual ISA subscription limit. That means that savers can continue to save tax free and gain the benefits of ISAs. As the House will be aware, about one in three people in the country—more than 18 million UK adults—already have an ISA account.
The amendment would take a prescriptive route in trying to achieve the outcome by mandating a default account; we have decided to take a permissive approach because we think that account holders may want some flexibility. As my hon. Friend the Member for South Thanet (Dr. Ladyman) rightly said, account holders may well find themselves in different financial circumstances and have different requirements, so it would not be right to mandate one particular type of account.
Providers may also wish to have some flexibility to ensure that the account into which accounts roll over will be appropriate for their customers. As soon as conditions are laid down for what these accounts will look like, that flexibility would be constricted or eroded. The amendment’s prescriptive approach would also mean additional costs and complexity. It would require the account into which saving gateway funds are transferred to pay interest at a rate at least as good as that of an ISA offered by the provider in question, or as good as any account offered by a provider that does not offer ISAs. I applaud the hon. Member for Fareham for the ingenuity with which he phrased his amendment following the discussions that we had in Committee. However, it does not mention for how long this requirement would need to be met beyond the point of transfer. This would need to be monitored and policed to ensure that it was effective, and that process would add costs and complexity for providers and for Government in administering the scheme. The hon. Gentleman mentioned Alan Cook, the managing director of the Post Office, who said:
“If there is over-prescription, you will introduce extra costs. We do business in different ways with our customers, and we should allow the organisations to play to their strengths.”––[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 28, Q52.]
We need to take that into account.
I have every sympathy with the hon. Gentleman’s intentions. We want to see good rates of return offered to savers, and I am aware of the need to consider the setting of sensible defaults because there may well be inertia and people will not be making active decisions. Nevertheless, I still think that the balance of the argument lies with not being prescriptive, and I want to give two reasons for that. First, under the banking code and the requirement to treat customers fairly, banks or others that offer saving gateway accounts that are being rolled over should be offering interest-bearing accounts that are appropriate to the interests and needs of their customers. Our expectation is that at the end of the two-year period, funds will be transferred into the most appropriate account that the provider offers. Of course, we will want to monitor that very closely.
Secondly, as I stressed in Committee, we want competition and a marketplace. We want saving gateway customers to have good deals that are offered by saving gateway providers. Part of that package should involve setting and offering a good default option for when accounts roll over at the end of the two-year period. The more providers there are, the greater the range of options that are available, and the more competition that there is for savings when saving gateway accounts mature, the better that will be for the customer. We want individual savers to be able to choose what happens when their account reaches maturity. If they do not believe that the default option that is being offered to them by their provider is right for them, they have the right to move their saving gateway account, on maturity, to an account that is more appropriate. Obviously the advice and support that account holders receive as their account nears maturity is critical, and we want to continue to work on that with providers and intermediaries.
The balance of argument that has influenced our policy design has been to say that the obligation to treat customers fairly, the competition and marketplace that we think will be there, and the need to give consumers choice rather than have it constrained for them outweigh a requirement to set a mandatory default option. We will of course want to monitor the situation closely. Everyone would be concerned if it became common practice that people offering saving gateway accounts were then encouraging people, on maturity, to roll over into accounts that provided no or very low levels of interest, or certainly levels that were not competitive.
For the reasons I have set out, we do not believe the prescriptive approach that the amendment proposes is the right basis on which to proceed. I hope that I have explained my reasons for the Government’s decision.
We have chewed this over in Committee and again today. My concern is to ensure that the default option is a good one for saving gateway account holders. Where there is inertia, as there will be for many people, who will not necessarily make the rational choice that we might want them to make, we want them to default into an account that pays them a good rate of interest. I was keen to move down a more prescriptive route to ensure that there is a good deal for those who effectively make no choice when the account matures. We have to be careful about assuming that people always act in a rational fashion, because that is not always the case. I am an accountant by background, and I am not sure that my financial decisions are always rational. People will not always do a whole of market review to see what the options are and decide that National Savings and Investments is the right approach for them.
I am keen to ensure that the default option is a good choice and that people will not do themselves any harm by defaulting into something that offers a rate that is not comparable to an ISA. Even people who are not paying tax are probably better off in an ISA than in a normal savings account. My approach is to say that we should encourage them to take up a good option that should not cause them too much harm. That would not preclude them from exercising choice, in the same way that in personal accounts there is an auto-enrolment process whereby once someone is enrolled they can decide to opt out. The default option is meant to be a positive one on which they can make a choice. This is the same approach. I would not say that someone has to be in an ISA for two years, 18 months, six months or even a week, but once they have gone into it they can then choose, if they wish, where the best home for their savings is.
There would be another benefit from having a vehicle like an ISA as the default option. This goes back to some of the work that Thaler and Sunstein and others have done on behavioural economics; it is about the concept of mental accounting. If someone has some money locked away or put in a separate account, they have to make a conscious decision to access that money. Sometimes people on low incomes adopt a “jam jar”, mental accounting approach to saving. That is why Farepak was attractive. It may not necessarily have been something that most people would accept as a reasonable way of saving for Christmas, but it worked because it was a form of mental accounting in that the money was locked away until it was needed. That is one of the attractions behind defaulting into an ISA. It would be a powerful way of getting people to think about setting their money aside, and it is an account that would do people the least harm to default into, compared with a savings account paying 0.1 per cent. interest, as in many cases at the moment. It would represent a good deal for people who have a saving gateway account that has reached the end of its life.
I do not think that the Minister and I have a huge disagreement; it is a matter of how this is put into practice. He clearly signalled to account providers the sort of options that should be offered to people when their account matures. I hope that the Government will think not only of the choices that they offer to people in the financial education that they put alongside that, but how they ensure that for people who do not make a conscious choice the option that the account rolls into will represent a good deal for savers rather than a less satisfactory deal. That is the driver behind the amendment. We are not far away from the outcome that we want, but there is perhaps a difference of approach in how to get there. However, I am assured that providers will take from this debate the message that there is a commitment on both sides of the House to ensure that people have choice when their account matures, but that where choice is not exercised the default option is a good one. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move, That the Bill be now read the Third time.
We had an interesting debate on Report, and I am grateful to all the hon. Members who took part in it, and to the Members of all parties who contributed in Committee. I am grateful for the constructive approach that all sides took in the Committee sittings, and for their approach to the Bill in general. We had some very useful debates and we have made some progress in understanding the Bill. I would also like to thank those witnesses who took the time to give evidence to the Committee.
As hon. Members will know, the Bill will create a national saving gateway scheme from next year. The scheme has two objectives: first, to kick-start the saving habit among working-age people on lower incomes, and, secondly, to promote financial inclusion. Those objectives have been widely welcomed in this House and beyond. The pilots that were run over recent years showed that the saving gateway can achieve these objectives. Sharon Collard, who helped to evaluate the first pilot, told the Committee in our evidence sessions that
“the aim of the saving gateway is to kick-start a savings habit...There is evidence that that can happen.”
We designed the scheme carefully, learning the lessons from the pilots, and during the debate we touched on many major aspects of how the scheme can work. We have, rightly, paid close attention to eligibility, which we discussed again today. I agreed in Committee to continue to consider the case for the carer’s allowance to be a qualifying benefit. As I said then, carers will be eligible for the saving gateway through the qualifying benefits that are already set out in the Bill, but as I said on Report, the Government are minded to table amendments in the other place to ensure that recipients of carer’s allowance who are of working age are entitled to participate in saving gateway accounts.
We looked at the match rate on Report, and at the Government’s proposed contribution of 50p for each pound saved in the scheme, and I believe that all parties, and the witnesses in Committee, agreed that that is the right level at which to set the rate. We covered various aspects of the scheme’s design, such as the monthly deposit limit, the length of accounts and what should happen to the accounts when they mature.
There has also been debate about delegated powers, and the procedure to be followed for their exercise. As I said in response to the amendments of the hon. Member for Fareham (Mr. Hoban), we believe that we have struck the appropriate balance, but we will continue to consider the issue in the light of any forthcoming report from the Delegated Powers and Regulatory Reform Committee in the other place.
These have been useful debates, and we were pleased to have the opportunity to put the Government’s thinking to the test and to put these issues on the public record, as well as to debate them with Members on all sides of this House. I believe that this is an important Bill. The fact that there is such a broad political consensus should not detract from the fact that we are taking steps to establish a national savings gateway scheme for the first time, which will give around 8 million people a strong incentive to save. By giving them a chance to save up to £600, and earn up to £300 from the Government, but also by helping to build a lifetime savings habit and by bringing people into the financial mainstream, the Bill can make a real difference to people’s lives and I commend it to the House.
As the Economic Secretary said, there is broad support for the Bill. He also mentioned on Report how long it had taken to get the Bill on to the statute book. The idea behind it was first mooted in Labour’s 2001 general election manifesto, and it will come into force after the next general election—I do not know whether that is the longest time it has taken a pledge to move from manifesto to enactment, but 10 years is a long time for people to wait.
I should always expect a Liberal Democrat MP to make a reference, wherever possible, in any debate, to proportional representation, but that may take longer to introduce. I suspect that, from the outset, the Bill was far more likely to come into force than his demand for a referendum.
Some might argue that the Bill is a distraction from the economic and financial crisis that the country is facing, but we also need to bear in mind that one in three households in this country have no savings and no cushion against being laid off, or are facing wage cuts or an end to overtime. This Bill serves a valuable purpose in encouraging people, particularly those on low incomes, to save. People on higher incomes have an opportunity to smooth out fluctuations in income and expenses to which those on low incomes do not have access. If the Bill is successful in encouraging people to save, it will enable them to create a modest buffer against variations in income, such as the unexpected expense of being laid-off for a short period. It will give people a degree of financial security that they have not had hitherto.
The Bill is a means to an end. It is designed to develop a savings culture in this country and there is a relatively generous match of 50p in the pound to encourage that culture to develop. A clear belief was expressed in the evidence that we heard that the two-year duration and the match level would be sufficient to start to encourage the development of that savings culture.
I do not believe that the account in itself is enough. Alongside it, we need an emphasis on financial education and other ways of tackling financial exclusion. We need to help people to understand why it is important to save, and although the lessons people learn from the financial crisis will act as a spur to save at the moment, a longer-term change in culture is needed.
We need to ensure that there is an evaluation of the effectiveness of the scheme. We need to demonstrate that it works. There is a significant cost to the taxpayer—it will cost £340 million in the first three years of its operation, falling to £60 million thereafter—so we need to demonstrate that taxpayers’ money is being spent well and wisely, that the Bill has led to people saving money and to an increase in net wealth.
There are some rough edges to the Bill. We talked on Report about the mismatch between the groups of people we want to help and the way in which the Government will deliver the Bill by tackling the issue of benefit entitlement. We understand the practical and pragmatic approach that the Government have adopted in trying to achieve the Bill’s goals, but we should not forget that there will be people on low income who are not eligible for the account, and we need to find ways of encouraging them to save. More work needs to be done on that.
The Bill is a welcome measure that will help to tackle the lack of savings among a small group of people—although it must be said that 8 million people are eligible. The problems families are facing today give a clear sign that we need to do far more work to encourage people to save to provide a cushion for short-term fluctuations to their income, and to enable them to take responsibilities for their families’ futures in the long term. The Bill is a start, but far more work needs to be done to achieve the goal of increasing savings in this country.
This has been an enjoyable Bill to be involved with, and I am grateful to Members of all parties for that. The debate has been good-humoured and largely consensual, and we have done some good work. At worst, the Bill will put about £250 million into the pockets of people on low incomes that they would not have otherwise had. At best, it will encourage some of those on low incomes to get into the savings habit to make their lives a bit more comfortable in the future. I do not believe that any Government other than a Labour Government would ever have contemplated introducing such a Bill. It might have taken slightly longer to get here than we envisaged, given that we first put it in the 2001 manifesto, but the fact that it has reached this stage is most welcome.
Not only have we had an enjoyable time bringing the Bill to this point, we have even won an important and welcome concession from the Government on ensuring that carers of working age will be included in the ambit of the Bill, as the result of an amendment that my hon. Friend the Economic Secretary has said he will introduce in the Lords. It is not often that Members win a concession from the Government, and I am sure that the Whips will be keen to point out that it was won through argument and persuasion, without the need for blood to be spilled on the floor of the Lobby. I am grateful to my hon. Friend for the open way in which he listened to arguments and accepted them, and for saying that he will act to address the matter.
The one thing that we need to think a little more about is the fact that we are all being a little bit po-faced about the objectives of the Bill. The whole purpose of it is to get people into the savings habit, but we seem to be assuming that that will be a positive thing only if they carry on saving everything and keep all their money in the bank. I believe that if we manage to encourage people on low incomes to do some saving, one of the best ways to encourage them to keep saving in future will be if they spend some of the money that they gain on something fun. I would not want us to create an environment in which people think that they have to put every penny of the benefit that they gain from a saving gateway account into another savings account immediately and lock it away there for their retirement. I hope that some of my constituents use it to buy themselves a new pair of fancy shoes or a weekend break with the family. As long as they get the savings habit and carry on saving, the Bill will have been well worth while. I congratulate my hon. Friend the Economic Secretary on his work in bringing it this far.
This stage of the legislative process is a little bit like an Oscars ceremony, as we run through all the people who are worthy of appreciation and thanks. I should like to thank the witnesses who appeared before us in the Public Bill Committee a few months ago, the civil servants for the assistance that they have given and the hon. Member for Fareham (Mr. Hoban) for his thorough and intelligent scrutiny of the Government. I thank the Economic Secretary for the considered way in which he has taken on board all the representations that have been made to him.
The hon. Member for South Thanet (Dr. Ladyman) is right to draw our attention to the way in which the Minister has found himself persuaded—I shall not call it a concession—by arguments that carers should be brought within the scope of the Bill. That is an important change, which will be appreciated by many people who feel somewhat neglected in other regards or feel that their burdens are not sufficiently appreciated by society as a whole. They will have looked upon our deliberations, and when they come to feel the full consequence of them they will appreciate what has been done.
There are two important features of the Bill, which have been the reasons why it has commanded support from all parties. First, it will provide a buffer for people who otherwise run their finances down, often because they have very little money, to a point where they have no security if there is some external shock for which they have not budgeted. That can make people’s lives difficult. As we have said before, if the washing machine breaks down or some feature of their life is suddenly changed without their being able to anticipate it, those people have no scope to address that difficulty. If the Bill helps in that regard, it is very much worth while.
The bigger objective is to give people who currently have the smallest stake in society a bigger stake, and particularly a financial one. The amounts of money saved do not have to be particularly large, but the people who are enticed to save money because of the Bill will feel that they are participating in a wider collective endeavour and that the actions that are taken in their community, whether by Government or other organisations, have some bearing on their lives. They will then feel that they have a stake in the process, which is hugely important. As I said on Second Reading, it is the equivalent of the share-owning democracy being extended to people in the bottom 10 to 20 per cent. of society. That will bring widespread social benefits if the Bill works out as successfully as we all hope.
Of course, we will see whether we have got some of the details right once the Bill takes effect, such as whether the 50p rate is correct, too high or too low and what people do after the two-year period has elapsed. However good the pilots were, we will never really know that until the scheme is properly up and running. I very much hope that it will succeed, and I have enjoyed participating and wish the Bill well.
The Bill is a small step towards ensuring that this country rediscovers the savings culture. Our long-term prosperity will be built not on spend now, worry about it tomorrow but on savings and investment for the future. This is a small but important step.
We must drive discipline through the income scale. The Bill is about low earners, but the savings culture is relevant to everyone, wherever on the scale they appear, because they all have costly needs and demands. When people lose their job, it does not matter whether they are earning £10,000 or £100,000, they find themselves in difficulties. We must ensure that in future, people put some money aside for a rainy day.
We must remember that although the current financial crisis was not caused by people on low incomes, they are too often paying the price. Credit is drying up at their end of the scale as well, and they are struggling even more to gain affordable credit. As a result, they are being forced deeper into the arms of loan sharks charging exorbitant rates. We talk about putting things on the never-never, but as we know, as soon as someone misses a payment to loan sharks, they are on the doorstep making their life extremely difficult and miserable.
I need to be able to sell the Bill in Broxbourne, because it will be relevant to many of my constituents. I hope that the Minister and his civil servants will put together a pack of information leaflets, brochures and so on so that I can play my part in selling it to my constituents and getting the citizens advice bureau involved. I want to play an active part in giving it the push that it deserves.
I congratulate the Minister on all his work on the Bill. I hope that when he gets back to his office this afternoon the phone will be ringing off the hook, with all the chastened chief executives of major clearing banks calling him up and demanding the chance to deliver this initiative as soon as it comes into being next year. It has been a great pleasure to serve on the Public Bill Committee and to participate in the Bill’s various parliamentary stages. I wish it the best of luck.
The Bill is a mouse of a measure to handle an elephant of a problem. The Liberal Democrats say that this is the Oscars ceremony, but can anyone believe that the Bill deserves an Oscar when it is well below the standard of an amateur production, albeit by a group of professionals who should know better? Indeed, Ministers’ audacity in not realising how feeble the Bill is in relation to the savings problem that they confront takes one’s breath away.
We meet against the background of a huge economic crisis, in which savers are being wiped out daily. If they have risky assets, they are falling in value catastrophically. If their money is on deposit in the banks, the interest rate is now tiny. In the stages of the Bill in which I participated, one of my biggest disappointments was the unwillingness or inability of the Economic Secretary and the Government to tell us anything about how the money would be invested and what sort of return it might earn, yet they have had a decade to prepare the measure. They tell us that they have consulted the savings industry, which will help effect the Bill, but there the Economic Secretary sits, thinking of something else, because he knows that he will get his Bill and he has not a clue about what sort of offer or deal will be available when it is enacted and translated into action on the ground.
It is a disgrace that so many people in this country are so poor that they have no savings. It is a disgrace that a savings culture for such people has not been more actively promoted to give them a buffer and more options and choices in life. It is a common aim of all the parties represented in the House to do something about it. However, do the Government genuinely believe that such a measure will work if interest rates for savers are 0.5 per cent. or 1 per cent.? Do they believe that it will work if all they do is borrow more and more, thus conveying the message that the way to get ahead and have a decent job is to borrow and borrow, not save and be prudent?
The Government are by far the most imprudent with whom the country has ever been cursed. They add trillions to the public debt—[Interruption.] They think that that is funny, but they have the audacity to say to the very poor that they must never borrow, but save, and that the Government will give them a tiny increment from the money that they will borrow on behalf of us all. They cannot even tell the prospective savers what sort of an interest rate they might get on their money.
It is typical of a Government who have lost the plot, who are wrecking the economy and driving us deeper and deeper into gross national debt that they introduce a pathetic, limp, delayed and inadequate Bill and feel proud of themselves.
Question put and agreed to.
Bill accordingly read the Third time and passed.