It is a pleasure to start our Committee consideration of the Saving Gateway Accounts Bill. As I said at Second Reading, fundamentally, this is not a contentious Bill, but one which we must scrutinise in the customary way before we return it to the other place. I thank the Minister for writing promptly after Second Reading dealing with the points that arose during that debate. It is generally a welcome feature of his modus operandi that we receive letters in good time, but his letter in respect of the government amendments tabled last week, while dated 30 March, arrived only this morning. While I was in the Chamber, a further letter, dated yesterday, arrived. I was going to give him full marks, but I am afraid that I will have to dock a few penalty points in this regard.

Amendment 1 would, on a probing basis, delete Clause 1(2). This subsection requires saving gateway accounts to be managed by the HMRC. I have deleted this subsection in order to find out why the Government consider the HMRC is best qualified to carry out the management of the scheme. The other obvious contender is the Department for Work and Pensions, since that department manages five of the seven benefits listed in Clause 3 as creating eligibility for a saving gateway account.

I have searched the background documents for the saving gateway scheme, starting with the 2001 White Paper and ending with the 2008 summary of responses. The scheme seems to have evolved from one which was jointly in the care of the Treasury and, for no reason I can really discern, the Department for Education and Skills, as it then was, to one which is now led by the Treasury and the HMRC, without any discussion, as far as I can see, en route about the best way for the project to be led. The DWP was involved in the pilots, but it seems to have been allowed to play only a supporting role.

The HMRC is not everyone’s idea of an ideal body to lead a new project. It is the organisation which lost the data relating to around 25 million people and the report carried out by Mr Poynter was damning about the management and organisation skills within the HMRC. Subsequently, it has had to have a major change of personnel at the top. I would be surprised if anyone could claim that the internal failings which were highlighted have yet been solved. The HMRC is also the body which has introduced the disastrous tax credit system, which continues to attract criticism from Select Committees in another place, the latest being a report from the Public Accounts Committee. That report highlighted the huge problem of over and underpayments that still beset the scheme even after the extraordinary £25,000 disregard, which covers up the fact that the scheme is not fit for purpose. The report also covered income tax and was less than complimentary about the HMRC’s handling of self-assessment and PAYE returns. Other failings in the HMRC are often associated with the introduction of new IT systems, which, presumably, the saving gateway scheme will require. It is hard not to conclude that the Treasury has placed the saving gateway scheme with the HMRC simply because, in effect, it belongs to Treasury Ministers and possibly because it occupies the same building.

A much more logical case could be made for DWP based on the number of benefits and likely number of people qualifying for a saving gateway account. The main reason for saying that the DWP would be more appropriate is that the benefits system works in real time and the tax credits system is still struggling to graft a real-time focus on to a tax system that is fundamentally based on a retrospective look at fiscal years. Put simply, the DWP is used to dealing with individuals’ changing circumstances while the HMRC is not. I look forward to hearing the Government’s rationale for using the HMRC. I beg to move.

I agree with the Government—I do not support the amendment—but I want to make a couple of points. I declare an interest: I am the father of an eligible person and my wife and I are both carers, although we do not fall under the Minister’s definition. I am 100 per cent in favour of the Minister’s amendment although I am not personally covered by it.

I am content with the proposed approach to management. Amendment 40, which we will come to later, would involve looking back and seeing how things were provided and how far the system had worked to achieve its objectives. I am in favour of that amendment.

Following the principle that when you want to make a point and there are an awful lot of amendments, it is easiest to make it on Amendment 1, I want to put one point to the Minister—it is not a critical point but it is of real interest. I want the Minister to comment on the provision in the Explanatory Notes on the way in which the system will work; that is, the third example. That involves someone who saves money for, say, the first year and gets up to £300 and then he or she draws out some money; at the end of the year, there would be substantially less in the account. None the less, the payment from the taxpayer would relate to the highest figure; it would relate not to the amount of money in the account at the end but to the amount of money that was in the account before some of it was withdrawn. In a sense, I do not object to that because the arrangement is very favourable to the saver, but it involves a rather odd proposition. The reality is that many people will put money in for a short period—I know quite a lot of the type of people who are eligible here—but, unfortunately, there will be something that they really want to buy and they will withdraw some of it. When we get to the end, there will be quite a lot of people who do not have in their account the full amount that was originally put in. Even so, the taxpayer and the Treasury are to pay 50p, which is related to a much higher figure than the amount in the account at the end. I do not object to that but, if I may say so, it involves a rather curious proposition.

I invite the Minister to comment on this point, although its relevance to Amendment 1 is a little marginal. However, it is important, and I really do believe that that is what will happen under this scheme: people will put money in and, even if they draw some out, they will get benefit on a much reduced account.

I begin by saying how much I have looked forward to this Committee stage. I know from my experience of the Banking Bill with noble Lords, including in particular the noble Baroness and the noble Lord, Lord Newby, that work in Committee will almost certainly be a challenge, that there will be good scrutiny and, conceivably, improvement. I look forward to working with noble Lords to achieve that. I also welcome the noble Baroness’s statement of the Opposition’s support in principle for the Bill and this new product.

I will endeavour to do better with the speed of communication. Indeed, if it continues to fall short of the noble Baroness’s expectations, I may take it upon myself to hand-deliver the letters if they take as long as they appear to have done. I apologise for that. I have always believed that being granted the facility by Members of the House or Committee to respond to technical matters by correspondence is a privilege that colleagues should not abuse; that is to say, we should respond promptly and in detail to anything where we beg the indulgence of the House or Committee to respond in writing rather than during the debate.

I am sorry to interrupt. I do not know whether the Minister’s letters to the noble Baroness were private billets doux but, if they were slightly more generally distributed, I have not got mine yet.

Even at this very moment, a copy is winging its way towards the noble Lord, Lord Newby. I suspect that the G20 summit has rather slowed the performance of my office; I apologise for that.

Amendment 1, by removing the provision in the Bill that places the saving gateway under the management of the commissioners for Revenue and Customs, would make it more difficult for the commissioners to exercise general managerial discretion in carrying out the functions conferred upon them by the Bill. At the heart of my answer to the noble Baroness is the observation that this is not a social security benefit. The saving gateway is a savings scheme and therefore, constitutionally, properly and correctly falls under the Treasury. The HMRC administers both the individual savings accounts and child trust funds and, consequently, is best placed to administer the saving gateway, building upon its experience and established links with savings providers. The HMRC is of course working closely with DWP as it develops the scheme.

The noble Baroness, Lady Noakes, refers to performance shortcomings at the HMRC, particularly the loss of data and the administration of certain benefits. The HMRC is committed to enhanced data security programmes, and is investing over £150 million over the next three years. There are new physical and technical controls on access to and movement of bulk data, on paper and electronically, using removable data. My colleagues have, no doubt, previously expressed disappointment at the performance of the HMRC on the loss of data to which the noble Baroness refers. There is a salutary warning there on the importance of achieving confidence in the customer community by not repeating those shortcomings.

The noble Lord, Lord Williamson of Horton, raises a question that even he acknowledges is somewhat tenuous in its linkage to the amendment. However, in the spirit in which we are going to work together to achieve a good outcome here, I am more than happy to answer to the best of my ability his question on whether the match payments should be calculated on the final balance of the account. Our view is that this would unfairly penalise those who, possibly for reasons beyond their control, make a withdrawal from the saving gateway account before the end of the account’s life. That could mean that someone who has saved for 23 months and then had to withdraw the money because of an emergency at home, for example, would get no return at all on their savings if no interest were paid on the account. That would clearly be unfair. The final balance will never be higher than the highest balance, meaning that many account holders could receive a lower return on their savings.

The system that we have chosen means that people will not be penalised for making withdrawals. However, such withdrawals will nevertheless be disincentivised as savers will have to put the money they withdrew back into their account before they can earn the additional match. I remember, at Second Reading, the noble Lord, Lord Newby, used the phrase “rough justice”, or “rough and ready”, or something of that sort. The truth is that the noble Lord was correct in that respect. We have a wish to be as simple and straightforward as possible, so arguments of the sort advanced by the noble Lord, Lord Williamson, which have validity, are nevertheless subservient to the better interest of keeping this simple and straightforward. On that basis, I ask the noble Baroness if she will be kind enough to withdraw her amendment.

The Minister must remember never to ask me to be kind.

I thank the noble Lord, Lord Williamson, for his contribution, although he did not support my amendment. I certainly look forward to him supporting Amendment 40 when we get to it.

The Minister said that the reason why it was constitutionally proper for this to be in the Treasury and the HMRC is because it is not a social security benefit. I was trying to make the point that the DWP was just a better organisation and I would have hoped that the Treasury would have chosen the best organisation in Whitehall to carry out this project. The Minister referred to the investment by the HMRC and controls over data which, of course, we recognise that it would have to do in response to the data loss of 25 million people, but control over data is only one part of it. The main problem with the HMRC, which has been demonstrated in spades with the tax credit system, is that it finds it difficult to operate with the kind of immediacy in which the DWP has to operate. The very nature of handling benefits means that you have to be very alert to changing circumstances. That is fundamentally where the tax credit system has failed. The HMRC could not adapt to that as its culture is fixated on past years rather than on what is happening now.

I regret that the Minister has not given anything more than a constitutional nicety as an argument for the HMRC. If it were objectively tested by having a market test around Whitehall, it would be difficult to find the HMRC at the top of the list as being the most appropriate organisation, especially given the number of criticisms that are not simply confined to data security. There are backlogs on PAYE, self-assessment and all kinds of other things that are not conducive to being handled in real time. I shall not press this further, although I do not think that the Minister has justified the case. I predict that leaving this to the HMRC could leave the scheme struggling as its workload starts to involve large amounts of paper and processes that have to be dealt with in real time. That is on the Government’s head. I beg leave to withdraw the amendment.

I shall also speak to Amendment 5. The amendments refer to eligibility for a saving gateway account. Amendment 2 would delete Clause 1(3)(b) which states that the relevant date for a notice of eligibility can be earlier than the date that the notice is issued if the person concerned has already ceased to be eligible. If the person was eligible for, say, jobseeker’s allowance but then got a job and came off JSA without going on to any other benefit or tax credit, the HMRC could nevertheless issue a notice of eligibility allowing that person to open a saving gateway account.

In Committee in another place, the Minister said that that was indeed the Government’s intention and that even a fleeting encounter with the benefits system would create eligibility for a saving gateway account. The noble Lord, Lord Newby, spoke on Second Reading about the opportunities available to young people from wealthy backgrounds. They could register for JSA, get their saving gateway entitlement which their parents might fund and then leave JSA either because they got a job or because it really was too boring to do all those job interviews.

Stakeholder pensions were a policy failure in providing pensions for those without workplace pensions, but they became a very big hit with the middle classes, which could see the tax advantages of taking out stakeholder pension accounts for non-working spouses. It was simply an opportunity that was too good to miss; and the concern is that a saving gateway account may be too good an opportunity to miss.

Amendment 2 would not allow the HMRC to issue a notice of eligibility if the person concerned had already moved out of eligible benefit or tax credit. Amendment 5 has a similar purpose. It modifies Clause 2 so that the expiry date of a notice of eligibility must be no later than the cessation of eligibility. Even if a notice had been issued to someone who was receiving one of the benefits, it could not be used after the person came off benefits or tax credits. That would further restrict the possibility that people who are not really on benefits would qualify.

In Committee in another place, the Minister said that allowing a saving gateway account to those who no longer qualified affected only around 4 per cent of the eligible population. I suspect that that makes no allowance for the behavioural effect of encouraging people to register for a benefit only for the purpose of gaining access to the tax-free return that the saving gateway account will allow. I can see no possible reason for the saving gateway account scheme to encourage that sort of behaviour, and the scheme should not allow it to occur. The Minister may say that it is very difficult, because DWP will be transferring information to the HMRC only once or twice a month, so the system cannot cope with short-term shifts in eligibility. That has to be a weakness of either systems or processes that are being set up to cope with the new scheme or, to return to the theme of my earlier amendment, with placing responsibility with the HMRC rather than DWP, which is very used to handling short-term changes in the circumstances of individuals. I have already argued it is the more logical place for administration to be located. I beg to move.

These amendments are concerned with the relationship between a person’s eligibility and the notices of eligibility that the HMRC will issue.

Clause 1(3)(b), which Amendment 2 would remove from the Bill, is necessary to ensure that a notice of eligibility can be issued to every person who becomes eligible for a saving gateway account. It may be helpful if I explain the background to, and purpose of, this provision.

As noble Lords will be aware, Clause 1(3) defines the “relevant date”—that is the date on which a person must be entitled to a qualifying benefit or tax credit in order for their account to be a saving gateway account. In most cases, this relevant date will be the date on which the notice of eligibility is issued. However, as I will explain, it will be necessary for there to be exceptions to this rule, and Clause 1(3)(b) would allow for these exceptions.

Eligibility for the saving gateway will be passported from entitlement to certain benefits or tax credits. The HMRC systems will be updated with periodic transfers of information from DWP and the DSD in Northern Ireland. By the time that the HMRC receives these periodic transfers and issues notices of eligibility, some people whose details it has received from DWP or DSD may no longer be entitled to a qualifying benefit or tax credit. They would not therefore be an eligible person on the relevant date specified at Clause 1(3)(a). An example would be a person who has had a short period of entitlement to jobseeker’s allowance within the period between transfers of information from DWP or DSD to the HMRC.

I am sure that noble Lords will agree that it would not be right for people in these circumstances to be excluded from an opportunity to have a saving gateway account, just because their benefit status has changed by the date on which the HMRC receives information from DWP or DSD.

Clause 1(3)(b) allows the HMRC to consider that a date earlier than that on which the notice of eligibility is issued should be “the relevant date”, ensuring that every person who becomes eligible for the saving gateway can be issued with a notice of eligibility.

Amendment 5 would require the notices that the HMRC issue to eligible people to contain an expiry date not later than the date when a person ceases to be eligible under Clause 3, which will generally be when they move off the qualifying benefits or tax credits. This would obviously be rather challenging since the HMRC will not be able to anticipate any future changes in a person's circumstances. However, I appreciate that the intention behind the amendment is to ensure that notices of eligibility issued by the HMRC will not be valid once a person’s claim to the qualifying benefit or tax credit ceases.

I agree that it is important for eligibility to the saving gateway to be appropriately targeted, and we have considered this point carefully, but we have decided to take a different approach so that notices of eligibility will be valid for a set period of time, regardless of changes in people’s circumstances. Let me explain why we have taken this approach. We want people to be clear, when they receive a properly issued notice of eligibility, that they are entitled to open up an account until the point when that notice expires, provided they have the necessary connection with the United Kingdom. That makes the scheme simple for potential account holders to understand and simple for providers to operate.

As I have said, it would be impossible for the HMRC to anticipate when a person’s eligibility might cease and print that date on the notice. To operate the scheme in the way that is envisaged in this amendment would therefore require individuals to declare their benefit or tax credit entitlement to the provider at the point of account opening. That is likely to deter people from opening an account and we do not think that providers would welcome having to ask about, record and report information on benefit entitlement to the HMRC. Where the HMRC later found out that a person had wrongly reported their eligibility status, this would lead to more accounts having to be closed, which we know would be burdensome for account providers and a deterrent to their offering a saving gateway account. Allowing notices of eligibility to remain valid up to their expiry date avoids these problems. It gives providers certainty and it makes it easier for people opening accounts to know where they stand.

However, as I said earlier, we recognise the importance of properly targeting eligibility for the saving gateway and I understand the noble Baroness’s concerns in this area. We anticipate, though, that only in a minority of cases will a person move out of entitlement to the qualifying benefits and tax credits between being issued with a notice of eligibility and opening an account. We estimate that this will apply to only around 4 per cent of accounts that are opened.

As I have said, there is a balance to be struck between achieving marginally more precise targeting of the scheme on the one hand and ensuring that the scheme is simple to use and to operate on the other. We feel we have struck the right balance and that this amendment would introduce unwelcome complexity and may well inhibit take-up of the scheme by either account holders or providers. I hope that the noble Baroness will seek leave to withdraw the amendment.

Before I decide what to do with my amendment, what will be the notice period to which the Minister referred? How long will it be?

Three months.

What would Ministers do without officials? I thank the Minister for that. The issue is whether a passing acquaintance with the benefits system should be allowed to generate access to a very privileged little savings scheme. I understand the problem that is caused by the HMRC not necessarily having access to the information, and indeed I highlighted that earlier when I said that the HMRC is not good at handling things in real time; it is always behind the pace. It is the use of the HMRC that in part is causing the problem. If the Government had chosen to use DWP, they probably could have used a simpler mechanism with the arrangements set up so that a voucher is issued.

Would the noble Baroness and the noble Lord, Lord Newby, find it helpful to have a meeting with representatives from HMRC to better understand how it will address the very practical issues of implementation? They might be best handled in a meeting across a table. I would be all too pleased to facilitate and attend such a meeting.

That may well be useful, but the fact remains that HMRC is not good at doing this kind of thing, and that is what is causing the problem in the drafting. Inevitably there will be data transfer periodically rather than in real time, and that will lead to delays. That is the fundamental burden, and it would take a lot to convince me that HMRC will be efficient once it has this to deal with. Structurally, there is a problem in the scheme. The Minister says that it is not right to exclude someone because they have come out of eligibility before the notice is issued. I have no problem with that because it implies that there is no genuine entitlement in the same sense that there is an ongoing entitlement to benefits. For example, a very rich person could register, get his entitlement and move out of benefit simply to get the saving gateway account. The Minister again quoted the small number expected to be in this category, but that does not take account of behavioural changes.

The Government are creating a problem for themselves. The Minister said that having the issue dealt with by declaration was not desirable because it would mean that the person would have to declare to the provider, although the provider would not have to do anything by way of validation. But the rules already provide that the applicant for a saving gateway account should make a declaration that he is entitled to it, and I do not see how anything additional could come from that. I appreciate that the Government want to do it this way, but I do not think that offering people who have a passing acquaintance with the benefits system a three-month entitlement to open an account is the most just way of spending public money. Indeed, to me it seems to be a waste of public money.

I shall think about what the Minister has said and contemplate the possibility of a meeting with HMRC before we reach the Report stage. I beg leave to withdraw the amendment.

This amendment adds a few words to Clause 2(1). Under this subsection the commissioners must issue notices of eligibility. My amendment provides that they may either issue the notices of eligibility or cause them to be issued. In part this picks up the theme I have been developing in the previous amendments because, as I have said, it is not entirely clear why HMRC should be the lead department. Even if it is, it is not clear that it should be the sole body handling the paperwork for saving gateway accounts. The amendment would allow HMRC to arrange with another body, perhaps DWP, the issue of notices of eligibility—in the case of DWP, it would be at the point when the benefits are actually set up. It would then only be necessary for DWP to tell HMRC which notices have been issued. The amendment would also allow HMRC to subcontract the operation of saving gateway accounts to a private sector operator, if that was thought desirable.

My amendment is entirely permissive. I would argue that it is desirable because it would give flexibility in the event that the saving gateway account processes have to be changed if we find, as we have found in other areas, that HMRC does not handle these accounts well. As I have said, it is naturally a gatherer of taxes and not a payer of benefits. Tax credits have not really changed that.

If the Government’s experiment with using HMRC fails, my amendment would give the Government an easy way to rectify the scheme without needing primary legislation to change the scheme or having to do something inappropriate, as they had to do with the tax credit system, which produced a massive £25,000 income disregard simply to save the scheme. I would have thought that the Government would welcome having more flexibility built into this Bill to take account of what might go wrong and what might even be reasonably predicted to go wrong. I beg to move.

There is a mistake in the Marshalled List. The proposed amendment should read, “Page 2, line 3, after “issue” insert “or cause to be issued”.

This amendment seeks to allow one of HMRC’s duties under the Bill—that of issuing notes of eligibility to all eligible persons—to be performed by a third party on behalf of the commissioners. I am pleased to reassure the noble Baroness that such an amendment is not necessary. Existing legislation in the Commissioners for Revenue and Customs Act 2005 allows the commissioners to delegate certain functions to a third party. The Act gives powers to the commissioners, under Section 12, to make arrangements for the conduct of their proceedings; under Section 14, to delegate their functions to any other persons; and, under Section 9, to do anything, including entering into a contract, that is necessary, expedient, incidental or conducive to the exercise of their functions. This power to delegate would apply to any of the duties conferred on the commissioners by this Bill once it is passed, including the duty to issue notices of eligibility. So the flexibility which the noble Baroness seeks already exists under separate legislation. I hope that in the light of this the noble Baroness will seek leave to withdraw the amendment.

I am grateful for that explanation and I beg leave to withdraw the amendment.

Amendment 4, like the previous amendment, adds words to Clause 2(1). This would require HMRC to issue a notice of eligibility within one month of becoming eligible. A person who is entitled to open a saving gateway account should be entitled to receive that privilege at the earliest possible time. Ideally, that would be at the point that eligibility was established either to a tax credit or to a relevant benefit. My amendment would mean that the individual would have to wait no more than one month to gain access to a saving gateway account.

This amendment would link to the desirability of creating a saving habit. The Bill is aimed at those whose income qualifies them for benefits or tax credits and, therefore, is of modest levels. It is in that target group that we are seeking to create the habit of saving. Saving requires forms of weekly or monthly budgeting, so that saving is effectively put on one side. The point at which someone become entitled to a tax credit or a benefit is a natural point at which to identify the possible level of regular savings. If there is too big a gap between the start of the benefit or the tax credit and the opportunity to start saving, the income that has already been received by the individual may already be swallowed up or accounted for as part of regular expenditure. It may be more difficult to carve out saving at a later stage. That is why I believe there needs to be a positive duty on HMRC to get notices out promptly.

The Minister will probably say that my amendment goes too far, because if the reasons have nothing to do with the eligible person and HMRC fails to get notice out, there may be doubt about the validity of a notice issued late—for example, if the computer system breaks down completely and has to be rerun and the letters go out late, one would not want that to prevent someone having the saving gateway account. That is certainly not my intention, but there is a lot of scope for HMRC to get notices out very late. A glance at the recent Public Accounts Committee report on HMRC, or previous Treasury Select Committee reports, will show that HMRC often—not deliberately, but as a matter of fact—builds up backlogs in certain areas. A backlog will be harmful to the success of the saving gateway scheme. With that, I hope that the Minister can explain not only what HMRC is expected to do but what will happen if it does not. I beg to move.

I am grateful to the noble Baroness for the terms in which she has moved the amendment, as she is seeking to ensure that the scheme should be as effective and efficient as possible. The amendment is constructive.

HMRC’s saving gateway system will receive periodic updates from the DWP and from the Department for Social Development in Northern Ireland about people who are entitled to the qualifying benefits for the saving gateway. There will be a similar process to transfer information from HMRC’s tax code system. Based on that information, HMRC will issue the notices of eligibility. The amendment would ensure that that is done within one month. We expect that that would largely be the case. The exact frequency of the date of transfer from DWP systems has not yet been determined, as the IT system is still being developed, but it is very likely to be more frequent than once a month, so it should be able to effect exactly what the amendment suggests.

Once the data have been transferred from DWP to HMRC, it will of course need to be matched to the data already held on the saving gateway system to prevent duplicate notices being sent, but there should not be significant delays in the notices of eligibility being issued, because that will be an automated process. I hope that the noble Baroness and the Committee will appreciate that there may be circumstances in which it will just not be possible to issue notices of eligibility within one month of the person becoming eligible. For example, if there is a problem with someone's claim for one of the qualifying benefits, there can be a delay in the benefit being awarded, and, therefore, and inevitable delay in HMRC being advised of their eligibility. Their entitlement to the benefit will generally be backdated to the date of their claim, which will therefore be the date on which they were eligible for the saving gateway. A month may have already elapsed. In that situation, it is just impossible for HMRC to meet the requirement that it must issue notices of eligibility within one month of the person becoming eligible.

Although HMRC will certainly aim to issue notices as promptly as possible—we anticipate that we will largely be able to meet the point that the noble Baroness is driving at in her amendment of a limit of one month—it must carry out the necessary checks to confirm eligibility. It may be that for other reasons time has elapsed from the date on which the person is defined as being eligible and HMRC having the information to issue the notice.

There is not a great deal of difference between us on how we want the scheme to work, and I certainly agree with the noble Baroness that it is important to make the proposal early. We want the scheme to be as efficient as possible, but the amendment would introduce a rigidity which we could not guarantee that HMRC would be able to deliver. Therefore, I hope that she will feel able to withdraw the amendment.

I thank the Minister for that. Does the Treasury expect HMRC to be given specific targets in respect of the turnaround of saving gateway notices?

I do not have a definitive answer to that question but it seems like a constructive proposal. I am pleased to see that the noble Baroness is in favour of targets.

I am in favour of targets when they make government departments deliver things that they might not otherwise deliver. I, of course, understand the points that the noble Lord made. The whole purpose of tabling the amendment was to flush out the need to get these notices out relatively quickly in order to reinforce the beneficial effect of having a saving gateway account. I urge the noble Lord to take back to the Treasury the possibility that targets should be set in discussion between the Treasury and HMRC because if this is allowed to go the way of other HMRC matters, the Government might not achieve the result that they want. I beg leave to withdraw the amendment.

This is a probing amendment designed to flush out from the Government how they will attempt to ensure that the take-up of the saving gateway accounts is as high as possible. The amendment proposes that a further notice of eligibility should be issued if, after a set period, a person to whom one was initially sent has not opened the saving gateway account. I have tabled the amendment because I believe that simply sending a single notice of eligibility, particularly one with a set deadline comprising an eligibility period of three months, will result in a low take-up. At Second Reading I gave the example of the child trust funds where take-up is little over 50 per cent in the poorer constituencies, even though in effect the parent is sent a cheque from the Government and told to, “Put this cheque into whichever child trust fund account you wish”. In this case there is far less incentive to open an account because you have nothing in your hand of any value. You trigger a benefit only when you start putting your own money into an account. I believe that if the only communication that eligible people receive is a single, no doubt very formal, letter from HMRC, a lot of them will barely read it, far less act on it. Do the Government have any plans to do anything beyond sending out a single notification of eligibility as a matter of course?

Our earlier discussion raises a second point, particularly in respect of people who will be eligible to open a saving gateway account over a long period and who, for one reason or another, might not be in a position to do so as soon as they get a notice of eligibility. I have in mind particularly recipients of carer’s allowance, who might be in receipt of such an allowance for a number of years. When they receive their notice of eligibility, they may be facing a personal crisis within the family or a financial difficulty, which means that they cannot immediately open an account. As I understand it, three months down the line, even though they will still be eligible in theory to open an account, their notice of eligibility will have expired. Therefore, three months and one day after receiving the notice, they will not be able to open an account. Have the Government any plans to deal with this ancillary or secondary problem of people who are eligible over a long period and who may for a variety of good reasons want to open an account, but not be able to do so within the relatively short period of initially receiving a notice of eligibility? Could that period of eligibility be reopened after a set period—for example, a year—if people are still eligible to open an account? I beg to move.

I rise briefly to support the noble Lord, Lord Newby. The Government would do better to focus attention on those who are in the benefits or tax credits system in the long term and whose eligibility ought to continue over a longer period of time. Their circumstances in terms of savings may change compared with the current position, which is making sure that people who will not rely on tax credits or benefits over the long term are given the maximum opportunity to take part in the savings gateway scheme. The Government’s emphasis ought to be the other way around, focusing on long-term tax credit and benefits recipients rather than those who are in the system for only a short period.

I support this amendment simply in terms of the general purposes of this excellent Bill. We are trying to change people’s habits and deal with those who, first, do not have the habit of saving because perhaps they feel that they are not able to save, and, secondly, are ill equipped with the technicalities of financial administration in terms of managing their own affairs. There is a point in trying to be as helpful as possible to those who may not open a gateway saving account because it is not the way they have done things before. The Bill might be assisted if we took account of this proposal.

I am grateful to all noble Lords who have spoken in this short debate. The noble Lord, Lord Newby, indicated at Second Reading that he was concerned about these issues, so I am not surprised that he has raised them in Committee. Once someone’s notice has expired, they will be able to request a repeat notice if at that point they are still eligible to open a saving gateway account, and they need only phone HMRC to arrange it. We are not creating a complicated process for those who signal their intent. The new notice of eligibility would again last for three months, so that people do not have to open an account within three months of receiving the first notice; they can make their own decision about when to open the account.

The noble Lord has been a little unfair about the child trust fund. We are rather delighted that around three out of four families are opening child trust fund accounts for their children, which indicates a strong engagement with the policy. I hear what he says about child trust funds having added and different advantages over this proposal and therefore proving to be more attractive, but I noticed his criticisms and wanted to put him in the picture on the facts. Indeed, even in households with low incomes where fewer child trust fund accounts are being opened, around 65 per cent are nevertheless taking up the entitlement. I wanted to put the record straight on the issue, but I realise that the noble Lord may contend that those figures apply to a scheme with features which are even more attractive than this one, a point we all appreciate.

The question is whether the repeat notices should be sent out automatically or whether the person should have to request one. Our concern, which we expressed when this issue was considered at reasonable length in the other place, is that automatically sending notices to people could mean them receiving notices that they do not want. They could be getting them every three months, which would make the scheme an annoyance, not make it more attractive. We all know the enormous frustration everyone feels about unwanted letters inviting them to get involved in things that they have clearly made their decisions about.

I understand the point about that automatic repeat notices might help to encourage take-up, as the noble Lord said clearly at Second Reading, but as my noble friend Lord Myners said in his letter, we are thinking carefully about how to raise awareness of the saving gateway among the eligible population. There can be no doubt about the challenge that presents. We are currently developing a detailed marketing strategy that will draw on lessons learnt from the pilots and other financial inclusion initiatives. We will discuss the important role to be played by organisations that work with the eligible population in providing advice and promoting financial inclusion. The Committee will be aware of the efforts the Government are making in that respect.

At the moment and for the reasons I have set out, we do not intend that notices of eligibility should be automatically reissued, but the Bill and the draft regulations give us the flexibility to do so in the future. The Bill defines what must be done, but it does not prohibit the possibility of the strategy identified by the noble Lord being followed. We are not persuaded that it is the best marketing tool at present. I hope that he will recognise that he has provoked a debate about how the Government can increase awareness, and that we are concerned about that matter. However, we do not think that this stratagem should be in the Bill.

I am grateful to the Minister for that reply. The idea is that the answer to the problem of someone who does not take this up after three months is that they request a repeat notice by phoning HMRC. The thought of phoning HMRC, frankly, fills me with dread because I am a busy man. The idea that the majority of people on these allowances would take the opportunity to phone HMRC is absolutely fanciful.

They would not speak to a human being.

They may or may not speak to a human being, but even if they did, it is at odds with the reality of the way people view HMRC and the willingness with which they take the opportunity to speak to it. The concept that it is alien to HMRC to send out notices that people do not want is curious. Most of the notices HMRC sends out are not particularly well received by the person who receives them, but that is not the point. The notices are sent out because HMRC and the Government think that is in the public interest. I do not find the argument particularly compelling.

The Government say that they are not sure that having an automatic notice is the best way to increase awareness, but they have not set out any convincing arguments about what better ways there are, other than talking in vague terms about marketing tools. My experience of many marketing campaigns by the Government is that they are almost all total failures, even when a huge amount of money is spent, advertising agencies engaged, posters drafted and so on.

The noble Lord will know that with regard to financial inclusion, we are concerned about how to reach certain groups. For example, we have already been talking to carers’ associations and those involved with carers to look at ways in which they can be informed about these opportunities and spread the word. Financial inclusion—making sure that people become aware of opportunities of which they have not availed themselves in the past and which they might not pick up through formal notices and so on—often requires using organisations that are helpful to people and can help to spread the word. We are doing that side of the work, as well as offering a telephone line, which I hope will be operated with rather greater efficiency than has been said; I know the foreboding that the noble Lord has about certain lines.

I am grateful for that comment. My concern about financial literacy and the effort that the Government are making is that the sensible proposals in the Thoreson report, for example, which are being implemented by pathfinder, are being implemented very slowly. It is yet to be ascertained how successful that pathfinder will be. While I am grateful to the Minister for what he says, I am not absolutely persuaded that the argument for the automatic reissue of a notice of eligibility is a poor one, and I may want to return to it on Report. For today, however, I beg leave to withdraw the amendment.

Amendment 7 amends Clause 3(1) which deals with the definition of eligible persons. Under the subsection, a person is eligible if he is entitled to the benefits or tax credits listed in subsection (2). The Government have consistently said that they wish to use passporting as the basis for eligibility for a saving gateway account. I assume, therefore, that the word “entitled” in subsection (1)(a) means that a person has made a successful claim for the benefit concerned.

The Minister will be aware that the take-up of benefits and tax credits is far short of the total of those who are eligible. It varies between the benefits. The recent PAC report, to which I have already referred this afternoon, said that take-up of working tax credit is only 61 per cent, and that one in five families do not take up child tax credits. Jobseeker’s allowance take-up is, again, only around 60 per cent. In another place on Report, the Minister said that an additional 2.8 million people could qualify for a saving gateway account if they actually claimed the benefit for which they are eligible.

The way in which the Government are approaching the saving gateway account is to remove those persons from saving gateway eligibility because they do not, for whatever reason, wish to apply for one of these benefits. However, why should they be denied access to an opportunity for a savings incentive if they wish to apply for that alone, independent of applying for a benefit? My amendment is designed to allow a person to establish an entitlement to a saving gateway account if they otherwise satisfy the requirements for one of the benefits or tax credits. Thus, if the person is entitled to claim, under the terms of my amendment he could have a saving gateway account.

The amendment is probing for today’s Grand Committee because I recognise that the processes that have been designed around saving gateway accounts are predicated on the establishment of an entitlement to a payment of benefit or tax credit, and there would need to be a different approach for those who did not want to do anything but apply for a saving gateway account voucher. The Minister will doubtless say that costs would increase that way but, since the non- take-up of benefits and tax credits is very high—we are talking about millions of people being excluded from the saving gateway account—the justice of passporting looks to be very rough indeed. There is a case for allowing through those who for reasons of dignity or otherwise do not want to apply for a means-tested benefit, but take a different approach to a beneficial savings scheme. Why should they not be allowed access to the saving gateway scheme? I beg to move.

I note that the noble Baroness describes this as a probing amendment. It would extend the scheme to people who could claim a qualifying benefit or tax credits but do not do so. As the noble Baroness said, these are people within our target group but who will not be eligible under a system of passporting. Unfortunately, it would not be possible for HMRC to identify this group, so I do not believe that the amendment would be workable. There is simply no way of knowing whether someone would be eligible for these benefits unless they make a claim for them. One option would be to introduce a means test alongside passporting. We will come to that in more detail when we discuss Amendments 8 and 12, also in the name of the noble Baroness, but this seems to be particularly problematic. Given that the people in this group have chosen not to claim the qualifying benefits or tax credit, it seems unlikely that many would choose to complete a means test to apply for the saving gateway.

Many people do choose to claim benefits and tax credits. For example, 82 per cent of eligible families receive child tax credit. That is the highest level of take-up for income-related support ever achieved. The take-up is even higher for households with incomes below £10,000, at 96 per cent, and for lone parents at 95 per cent. Take-up rates for out-of-work income-related benefits are also relatively high at between 49 per cent and 60 per cent for income-based jobseeker’s allowance, and between 81 per cent and 90 per cent for income support. We are also simplifying and streamlining the benefits system to make it easier to understand and to help further increase take-up rates. While I understand what the noble Baroness is trying to achieve, I hope that she will seek leave to withdraw the amendment.

I am disappointed with the Government’s approach. It means that savings, which are a good thing and should be promoted throughout society, will be restricted to those whom the Government have within the tax credit or benefits net and are therefore dependent on the state. The Minister has quoted some higher rates of take-up, but there are also low rates of take-up; some groups do not want to be regarded as benefit recipients, whether it is called a tax credit or a benefit; there is no getting away from that. Because they refuse to become dependent on the state for their income, they will be denied access to the saving gateway scheme. The approach being adopted by the Government is regrettable and I shall consider it further before Report. I beg leave to withdraw the amendment.

I shall speak also to Amendment 12. The amendments would allow the Government to extend the category of individuals who are eligible for a saving gateway account beyond passporting. Amendment 8 refers to eligibility by reference to regulations to be made under proposed new subsection (2A), set out in Amendment 12. The combined effect of the amendments would allow eligibility to be set by reference to annual income rather than a successful claim for a specified benefit or tax credit. That is a wider concept than I argued for in my previous amendment. It would allow but not require the Government to extend the opportunity to save to other groups not included in the selected benefits set out in Clause 3(2).

For example, it would allow carers on limited incomes to be drawn into the scheme whether or not carer’s allowance is claimed, and would go beyond the government amendments to which we shall come shortly. It would also allow older people who are poor to come within the scheme, regardless of their pension credit status. Pension credit take-up is another of the notoriously low take-up benefits. The amendment of the noble Baroness, Lady Hollis, which is a couple of groups away, goes only so far as pensioners who fall within the pension credit net. It would also allow the Government to extend the saving gateway scheme to slightly higher income levels than those within the means-tested benefits limits if that were thought to be socially desirable in terms of the aim of increasing savings.

I am definitely not arguing that the Government should immediately extend the saving gateway scheme to all others on low incomes. Apart from the public expenditure implications, which could be very significant in view of the current economic situation, very careful consideration would need to be given to which groups would benefit most. However, I am arguing for the Bill to be more flexible so that if we return to an economic environment which allows the Government to pursue additional worthy schemes for incentivising savings, the saving gateway scheme could be extended without the need for further primary legislation.

In my keenness to draft an additional power for the Government to extend the scheme, I forgot my parliamentary manners and omitted the essential affirmative order which would be necessary for such an extension of the saving gateway scheme. I should have tabled an amendment to Clause 27 because I certainly would not want the scheme extended as I have described without further parliamentary scrutiny. That apart, I believe that, if circumstances allow, the Bill should be able to move outside the envelope of simply passporting this measure by way of benefits or tax credits if that were thought desirable in the longer term. I argue simply for flexibility. I beg to move.

This is an area where I think it would be very desirable for the Government to have reserve powers on which they could draw should the need arise. My noble friend’s response in terms of the statistics of those carried by passported benefits into the system are very persuasive. However, there are benefits which are not included here which knock out some of the income-related benefits. I take, for example—though this is, obviously, a diminishing number—somebody on a widow’s benefit, which is not listed, who, were they not on a widow’s benefit, would qualify for, say, income support if they had children, but choose not to take it up because they prefer to remain on the widow’s benefit. That is an older group of people and one that is diminishing in number, but they possibly would be eligible under means testing but not under passporting.

I have not thought about this but I suspect that if I dug around on things such as industrial injuries I might find other groups who would come within the framework of the measure but are knocked out because of this listing effect. I do not know how many people would be involved, and I do not know how widely they would be drawn. Obviously, if my noble friend were minded to accept my amendments, or to revisit my Amendments 11 and 15, it would be a very wide group indeed, but I am not confident that he will feel able to do that. It seems to me desirable for the Government to take up this power. Although I think that the Government’s passporting approach is absolutely the right one, which should bring the vast majority of people into the system very easily and straightforwardly without the hassle factor, the means testing would allow a belt-and-braces approach to be adopted towards people who we may wish to include in the scheme some time down the line but would not be able to include as we would not have the primary powers so to do. My noble friend would be wise to take up the power even if there is no intention or need to take advantage of it in the next three, four or five years.

At first blush, the amendment has quite a bit to recommend it, but the more I think about it—this was exemplified by the noble Baroness’s speech—the more I feel nervous about it for two, or possibly three, reasons. First, I see complexity beginning to emerge when one starts to work out who will be eligible even under what appears to be a simple requirement. I can see all kinds of groups benefiting who we will not really have in our minds to benefit. We should think how many middle-class students will leave university this year, and who, certainly for the first six months after leaving university, will probably have virtually nil income. If there was means eligibility here, many of them would be eligible and, as I said at Second Reading, their parents would happily enable them to save. That might be a good thing, but it is not what we are aiming for.

I sense that this amendment, if it were put in the Bill and implemented, would leave us with a scheme that is not only more complex, but could also create a series of unintended consequences. The advantage of the scheme as it stands, with or without the proposed amendment of the noble Baroness, is that it has a clarity to it, and that goes very much in its favour.

These amendments relate to eligibility for the savings gateway account, and as with Amendment 7, aim to extend it to people who will not be eligible under the system of passporting. To that end I am greatly encouraged by the support of my noble friend Lady Hollis for the concept of passporting. As he so often does, the noble Lord, Lord Newby, has hit the nail squarely on the head in terms of seeing the spectre of greater complexity as a result of the good intention that lies behind this amendment, and that comes into conflict with the basic approach of keeping this scheme as simple as possible—an approach that is also consistent with the observation of the noble Baroness, Lady Noakes, that HMRC might be better at administering something simple than something terribly complicated.

As Members of the Committee will know, the focus of the saving gateway is on working-age people on lower incomes. In an ideal world we would like to include everyone in that group and no one outside it. However, there is no easy way of doing that. One option would be to introduce a means test, but that would require people to apply for eligibility for the saving gateway. The alternative, for which we have opted, is a system of passporting eligibility from certain benefits and tax credits. We believe that this is the most simple and effective method available for determining saving gateway eligibility, and in contrast with a means test, people will not be required to approach the Government or fill out detailed forms about their income. This approach will be much more effective in encouraging people to open saving gateway accounts. It would seem rather disingenuous to have a power to introduce a means test, but with no intention of using it. 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 as set out in the Bill. As we have said, we expect around 8 million people to be eligible for the scheme, which is a sizable proportion of the 40 million or so adults in the United Kingdom.

However, we have always been clear that while we think passporting is the best system for determining eligibility, we also recognise that it is not perfect. Some working people on lower incomes will not be eligible for the scheme, and there will be some rough edges. The Economic Secretary to the Treasury gave an indication of the numbers in his contribution in another place. As he said, we believe that around 4.5 million working age people on lower incomes will not be eligible through passporting, taking a definition of lower income as £10,000 to £11,000 for an individual and £16,000 for a household. However, it is important to remember that this is a snapshot and that people’s circumstances do change. Many in this group will therefore be eligible for the saving gateway at some point, and in any case we intend to allow people to have only one account per lifetime, so this is an important point.

Amendments 8 and 12 would introduce a second way of becoming eligible for the saving gateway in addition to passporting—by means of having an income below a certain level which would, of course, require a means test. As the noble Baroness has said, this would give some additional people a way of accessing the saving gateway, which in itself would sound a laudable and commendable outcome. It would also introduce a significant increase in complexity and cost. We do not believe that this would be proportionate.

First, it would involve extra costs for HMRC, which are estimated at around £2.5 million per year, reducing to a steady state of £1 million after introduction. Secondly, there would also be an increased compliance risk of operating a means test, as individuals would be able to open saving gateway accounts without having previously been through DWP and HMRC checks to establish their eligibility to other benefits or tax credits. Inevitably, some accounts would be opened but subsequently have to be closed; for example, accounts opened by people who had misstated or misunderstood their income. That would be very burdensome for providers. We know that opening and closing accounts will create costs for them and we are keen to minimise the costs of operating saving gateway accounts. It must be very clear to Members of the Committee that the operation of saving gateway accounts will not be a terribly profitable activity for banks to engage in, but it is one which we think banks will welcome in terms of their commitment to promoting financial inclusion. However, we must be careful that we do not deter the provision of product by making the scheme too complicated. Thirdly, having two methods of determining eligibility for the saving gateway could be confusing and would add complexity to an otherwise simple system.

It is also important to be realistic about the impact that a means test would have. As we discussed in relation to Amendment 7, of the 4.5 million working-age people on lower incomes who we believe would be missed out by passporting, we estimate that around 60 per cent—or 2.7 million—could claim the qualifying benefits and tax credits, but have not done so. While that is not a reason to exclude them from the scheme, it does seem unlikely that large numbers of them would choose to complete a means test for a saving gateway account when they have not done so for a benefit or for tax credits.

Clause 3(6) allows flexibility to add more qualifying benefits through regulation, which would potentially include those benefits mentioned by my noble friend Lady Hollis. We would need to consider this carefully, but that flexibility has been built into the Bill. While I understand the noble Baroness’s aims with these amendments—on several occasions, I expressed a good and supportive understanding—I do not believe that it would be sensible to introduce a system of means testing, which would add complexity and cost. Instead, I believe that we should continue with a simple, efficient system of passporting, which will allow a large majority of our target audience to be eligible at some point in their lives. I hope that the noble Baroness will therefore withdraw her amendments.

I thank Members of the Committee for taking part in this short debate. This amendment is different from the previous amendment, which tried automatically to bring additional people within the scheme. This amendment is designed only to give the Government longer-term flexibility. I am amazed at the ingenuity of the Treasury in costing something which was not specified. I introduced my amendment, which was quite wide, to allow eligibility though an annual income of a prescribed amount, which gives a lot of scope for setting the possible alteration. Yet the Minister came back with some numbers; namely, that it would cost £2.5 million reducing to a steady state of £1 million—I am astonished by that—regardless of how any regulations might be constructed. Clearly, the powers of the Treasury are getting greater by the day.

I will investigate the details of the numbers I have shared with the Committee. If it would be helpful to give more credibility to those numbers by explaining how they have been determined, I will share that information with those who have participated in this debate.

I thank the noble Lord for that. At the heart of this is whether any extension of the scheme would be too complex, which I would not like to prejudge. I accept the points made by the noble Lord, Lord Newby, that certain types of extension of the scheme could raise the problem of unintended consequences or excessive complexity. There could be extensions that are not captured by simply adding additional benefits. The benefits that the noble Baroness referred to might be a step too far without some counterbalance. Of course, I am not normally in favour of means testing, but I recognise that it may be desirable to expand the envelope where appropriate if we are trying to encourage savings. I do not rule out including students, because one problem is that young people have not grown up with a habit of saving; they have grown up with a habit of consumption. There is a great need to re-educate a whole generation about the benefits of saving.

I was disappointed that the Government did not want to include that flexibility in the Bill. As I tried to emphasise, I do not think that it is a foregone conclusion that it would be right to extend the provision. Clearly, it would be right to weigh complexity and cost, as well as unintended consequences, in the balance if an extension were pursued. I shall consider carefully what the Minister said, and beg leave to withdraw the amendment.

Amendment 9 amends Clause 3(1)(b). Paragraph (b) states that the connection with the UK necessary gateway eligibility is to be prescribed in regulations in its entirety. My amendment would narrow that flexibility. I do not think that there is much of substance between us and the Government on this. The point of my amendment is to ensure that as much as possible is in the Bill, leaving only detail and genuine flexibility to be the preserve of regulations.

During Second Reading, we touched on the fact that the Bill is one long regulation-making power. The amendment is a modest attempt at rebalancing between primary and secondary legislation. The Government's draft regulations set out in Regulation 4 that the necessary connection is to be ordinary residence. We agree with that, which is why the first leg of my amendment, paragraph (i), picks that up. Regulation 4 then contains some savings for Crown servants posted overseas and some EU workers, but does not require the persons concerned ever to have been resident in the UK, which I found rather surprising. Hence paragraph (ii) states, in effect, that the minimum requirement is for actual residence at some point, which can then be coupled with regulations to deal with ordinary residence.

When he replies, I hope that the Minister can explain two things. First, why cannot the Bill contain the restriction to ordinary residence? The Government usually argue for flexibility in leaving everything to regulations, but I cannot see that it would ever be appropriate to propose regulations that were not based on the fundamental notion of ordinary residence.

Secondly, can the Minister explain why it is possible to satisfy the definition in the regulations without ever having established residence in the UK? We are all rather wearily resigned to EU workers coming here to claim all our benefits, which is what Regulation 4(3) allows. However, I am concerned about someone being deported here without ever having been resident here, which could occur under the draft regulations, but could not occur if my amendment, which would insert a requirement for residence, were passed. I beg to move.

I have considerable sympathy with the spirit behind the amendment; I am not sure if the words are absolutely right, but that is not to say that they are not. The argument for having regulation-making powers is that the provision covered by regulation will change. It is very difficult to change primary legislation, whereas you can easily change secondary legislation. I cannot for the life of me see why eligibility in terms of a link with the UK will change. Whatever the definition is now will surely be the same definition in five years’ time, or for however long we expect the Bill to be in operation. Can the Minister explain why the Government feel that they need the flexibility, which is the only reason why regulations should be preferred to primary legislation.

The noble Baroness’s amendment would put more details of the residency requirements for the scheme in the Bill, and make the Bill expressly provide that, to be eligible for a saving gateway account, a person must be ordinarily resident in the United Kingdom.

In the Bill, to be eligible a person must, as well as being entitled to a qualifying benefit or tax credit, have a connection with the UK that will be prescribed by regulation. The draft regulations essentially set out that a person will have the prescribed connection with the UK if they are, or are deemed to be, ordinarily resident in the UK.

We have taken the power to define the connection with the UK in regulations, rather than doing so in the Bill, in order to provide the flexibility to respond to any future changes in residency requirements in other areas and definitions underpinning the concept of ordinary residence, without the need for further primary legislation. The amendment would remove such flexibility. Any regulations about eligibility for the saving gateway will of course be subject to the affirmative procedure. I therefore hope that the noble Baroness will withdraw her amendment.

I am sorry, but the Minister has not answered my question or that of the noble Lord, Lord Newby: why there should be any need for flexibility around a definition by reference to “ordinary residence”. How could the Government ever define this scheme by anything other than “ordinary residence”? We accept that there may be some need for flexibility in some of the detail, for people such as Crown servants—other categories may come in over time. However, one of the issues that I raised was why that bit is required to be in secondary legislation, not primary. Powers to make secondary legislation should be restricted to things that might change over time, not things that should be fixed points.

I am most grateful to the noble Baroness for further amplification. I am advised that residency requirements differ across different government services and departments. We are keen for there to be flexibility for the saving gateway residency requirement to be changed in line with any wider changes that might take place. The different definitions of “residence” and “ordinary residence” are generally not defined in statute and may therefore change as a result, in particular, of case law decisions or updated interpretations. We are keen that the saving gateway residency requirements can fit in with any such changes if appropriate.

Well, I will try the second question that the Minister did not answer before deciding what to do with the amendment. I also asked him why there was no restriction to residents. The Minister has explained how residence and ordinary residence would form the basis, but is it possible for somebody to be deemed to be ordinarily resident under the draft regulations, which fit within the power given here, without having any residence connection with UK? One aspect of my amendment was to seek to anchor the regulations in at least the mere fact of residence. That is to say, a person had to be resident, but could then go on and have something that deemed him to be ordinarily resident without escaping from being resident.

European Union law changes may mean that the Government have to extend eligibility beyond ordinary residence. Government and the courts constantly grapple with the complexities of “residence” and “domicile” and their definitions. We have endeavoured to find a simple and straightforward formulation to support eligibility for the saving gateway.

Is the Minister saying that the EU may require eligibility beyond residents or those who are ordinarily resident? I think that he said “ordinarily resident” but my question was about residents.

I said “ordinarily resident”.

In that case, I return to my previous question. Why is the Bill not restricted at least to residents? At the moment regulations can be made that do not even require residence, which is one leg of the amendment. The Minister has not yet answered that point.

We believe it is right that people who live or work in the UK and claim one of the qualifying benefits or tax credits should be eligible for the saving gateway. The draft regulations will ensure that people must be ordinarily resident in the UK, in addition to having entitlement to a qualifying benefit or tax credit, to be eligible for the saving gateway. That would mean, broadly, that only people who live or work in the United Kingdom can open a saving gateway account. EU law means that we must extend it to those who work in the UK despite not living here.

This has been an interesting debate. I could not have anticipated that the Government would say that they needed a concept that was other than ordinary residence and needed to have flexibility around future changes if case law were to change. It is a difficult concept and I am also struggling with the extent to which we have to accommodate EU law for people who do not live here.

Being of a charitable disposition immediately before a Recess, I am happy to admit that I am also struggling. Most of us struggle with the concepts of residence and ordinarily resident, domicile, living and working, et cetera. This might be an area where an offer to write to participants in the debate would give me the opportunity to provide something that is crafted in the language of lawyers but which, having been edited by me and my team, is, I hope, understandable to the lay person. It is complicated. I look across at the noble Lord, Lord Newby, and immediately see that this is one of those times when the pursuit of simplicity comes into conflict with complexity. We are trying to find a simple, straightforward way of setting up something that we think is laudable and worth while. I understand that the noble Baroness is asking legitimate questions and I would like to help the Committee by writing to each Member before we look again at the Bill.

If my noble friend and the noble Baroness will allow me, I should like to comment because I did not take part in the earlier discussion. I would welcome such a letter if it were to address the situation of, say, someone from Poland who is working in the building trade here and whose wife and children are back in Poland. His earnings are such that he does not qualify for working tax credit but he qualifies for child tax credit, which is an exportable benefit. For these purposes, is he resident in the United Kingdom and therefore eligible for the saving gateway scheme? There are issues which I accept are almost impossible to untangle. Given that that is a high value benefit, it is of some concern.

The noble Baroness, who knows more about the benefits system than all of us put together has, as usual, highlighted some of the difficult areas. I am grateful to the Minister for agreeing to take this away. I look forward to his reply, which I hope will be one of his speedy rather than last-minute versions, when perhaps he will also reflect on whether the balance between primary and secondary legislation in this area is correct. My amendment was intended to probe that as well as the specifics that have taken us into some interesting byways. I look forward to receiving that letter as I am sure do other Members of the Committee. I beg leave to withdraw the amendment.

In moving Amendment 10, I shall speak also to Amendment 13. Together, they would make all recipients of carer’s allowance eligible for the saving gateway. This issue was discussed in the other place, and the Economic Secretary said that the Government were minded to bring forward amendments. My noble friend Lady Pitkeathley also spoke passionately and eloquently on this subject at Second Reading. I am pleased to be able to bring forward amendments on this issue today. Even without them, we believe that around 225,000 claimants of carer’s allowance would be eligible for the saving gateway through the qualifying benefits, but this amendment adds a further 300,000 carers to that number, taking the total to over half a million. I hope that noble Lords will welcome these amendments. I beg to move.

I put on the record my welcome for these amendments. Some of us in this House have spent a lot of time saying, “Don’t forget the carers”, most notably the noble Baroness, Lady Pitkeathley, and we are glad to see that they have not been forgotten on this occasion. I have already declared that my wife and I are carers. We are not affected by the amendment, because we do not claim a carer’s allowance, and we do not intend to do so. I am also a patron of the charity Rethink, and in that capacity I have had a good number of meetings with carers. My wife has regular meetings with carers in south-west England, so we know quite a lot about it.

As the Minister may know, some carers feel that they are neglected. Indeed, that has been a feature of life over quite a few years. For myself, I do not think that the financial effects will be all that great, but certainly the effect on opinion among carers will be highly favourable, and that is important. They form a large category, and for that reason we should warmly welcome these amendments from the Government.

Noble Lords will not be surprised to learn that I, too, welcome these amendments, and I think I speak on behalf of many carers when I say how glad we are that the Government have introduced them. They indicate not only that the Government recognise the financial problems faced by carers, but that it would be quite wrong to exclude a group of people who make such a huge contribution to society from the opportunity to take advantage of this modest savings measure. As I said at Second Reading, the original decision to exclude the recipients of carer’s allowance went quite counter to the Government’s previous record so far as carers are concerned. They have been extremely supportive, as set out in the national strategy. I am sure that carers everywhere will welcome this amendment, as I most certainly do.

I join my noble friend in thanking the Minister. This is the next step in a whole package of wonderful things that the Government have done for carers, including bringing them within the national insurance credit system for the state pension when their caring duties occupy more than 20 hours. We congratulate my noble friend Lady Pitkeathley on campaigning so actively, and my noble friend Lord Myners on being in a position to deliver what we all want.

Apropos of nothing at all, at some point I hope that Her Majesty’s Treasury will be able to link the child trust fund, the saving gateway and pensions, including the tax-free lump sum, into a lifetime account so that we string the beads on to a necklace instead of having a series of separate though highly desirable initiatives. Whether that time will come, we shall see.

I am revisiting an issue I raised at Second Reading, which is to allow pensioners on pension credit to come within the saving gateway. My noble friend responded, as always, fully and courteously but, on rereading, I was not persuaded even by the elegance of his arguments—and he offered us five.

One of the arguments against the noble Baroness’s amendment, with which I have considerable sympathy, is that a purpose of the saving gateway accounts is to help inculcate the savings habit. The argument is presumably that if you have not acquired the savings habit by the time you reach pensionable age, you are probably not going to.

However, that principle does not apply to other government incentives to save, of which the ISA is the most obvious example. With ISAs, which apply throughout an individual’s life, the Government are giving a considerable incentive to save, much greater than via this provision, on the basis that they want promote saving full stop. If you accept the argument behind the ISA—somebody earning enough to get tax relief on savings is eligible for it throughout their life because the Government think that one should be able to open an ISA aged 65 or 75, rather than it be age-limited—it is difficult to see the logic in not applying that principle to the Bill. I therefore have considerable sympathy with the noble Baroness’s amendment.

I also give qualified support to the amendment of the noble Baroness, Lady Hollis. I do not think that the amendment is required, as the Government have taken the power to add the credit if they believe that it is necessary. Probably the one thing that would worry me is the extent to which this would add to the cost of the scheme. Allowing the saving gateway accounts to be set up is not cheap, and I worry about the cost. Of course, there would be no pilots on pensioners, so we do not know what the effect would be and whether it would have some unintended consequences.

Like the noble Lord, Lord Newby, however, my first instinct was that this does not help a savings habit because if you are of pensionable age it is too late to acquire it. However, I recognise that considerable numbers of older people, like younger people, have no reserve savings. Anything that assists them to acquire some is worthwhile. Many people cannot cope with even the smallest financial upsets, such as cookers blowing up and things like that. Anything that helps more people to cope with that themselves can only be regarded as a good thing, but I do have a concern about cost.

To come back on that question of cost, I have been enjoying reading the Ipsos MORI note that the Minister made available earlier. It said that one of the main reasons why people did not continue to save under the scheme was that they had since retired. The proportion of people who would take up this proposed eligibility would not be great. There obviously is a cost, but I wonder what proportion of people would take it up, and just how great that cost would be.

As the noble Baroness has said, these amendments would make some or all of the claimants of pension credit eligible for the saving gateway. As I said at Second Reading, we greatly value the expertise of the noble Baroness on these issues and have very carefully considered the points that she has made. However, I have to say that we do not necessarily agree. Her main point was that it is wrong to assume that pensioners should necessarily run down their assets in retirement and that pensioners do need income and capital. It is true that people tend to build assets over their working lives and run them down once they reach pension age. This is the so-called life-cycle hypothesis of savings behaviour put forward by Modigliani and others, based on people saving in order to smooth consumption over their lifetime. That does not mean that no one wants to save in their retirement and that is not what I am trying to suggest.

But who should the additional incentive of the saving gateway be targeted on? I do not deny that some pensioners would benefit from this, but many will already have developed a savings habit and have built up their assets. As I said at Second Reading, there is significant support from the Government for them to do that—for example, through tax relief on pension contributions. As the noble Baroness has said, the difference is not large but it is there. The evidence is that pensioners have higher savings ratios than average.

While I am not trying to argue that no pensioners would benefit from the saving gateway, we believe that it should be focused on people of working age rather than pension age. The other reason for this is the significant support already available to pensioners. The noble Baroness spoke about pensioners who might run down their assets and was rightly concerned most about the poorest pensioners. However, more so than for the rest of the population, there is support in place for pensioners who find themselves without assets; namely, through specific measures to help them to meet particular expenditures, such as the winter fuel allowance or free prescriptions and through support, such as the basic state pension and pension credit. These measures, as the noble Baroness pointed out at Second Reading, are focused on pensioners’ income, rather than capital, but they help to tackle the symptoms of having low levels of assets and make that easier to deal with.

The noble Lord, Lord Newby, asked about ISAs, which followed his observation at Second Reading when I believe he spoke about a class division; namely, that we seem to be giving huge benefits to people who already are on higher incomes or have a higher level of assets. I am very sympathetic to that. There are many benefits to savers and the middle classes, which are significant, welcome and very much a part of government policy, but they are probably underappreciated and undervalued in the hands of the recipient, and in terms of general acknowledgement and recognition of the cost to the Exchequer.

The noble Lord, Lord Newby, asked whether this would be a one-off situation. As Members of the Committee will know, one of the aims of the saving gateway is to get people to save, sometimes for the first time. Therefore, it offers a very strong incentive to save. From our studies, the evidence suggests that this can happen. We have had encouraging responses from the first pilot. We believe that the saving gateway should be a one-off, acting as a catalyst rather than an ongoing incentive, which would also dramatically increase its costs if it was to be hardwired into being a benefit for all time.

That approach was supported by the witnesses who gave evidence to the Public Bill Committee in the other place. In particular, Miss Sharon Collard of the Personal Finance Research Centre at the University of Bristol agreed with the idea that the saving gateway was,

“to provide an initial boost to get people into a savings habit”.

She went on to say that,

“there is evidence that that can happen”.

In addition, Mr Brian Pomeroy, the chair of the Financial Inclusion Taskforce, also said that it was right,

“that they get only one shot, because the basis of the scheme is that it should be a kick-start”.

I shall be withdrawing the amendment, but I thank noble Lords for taking part in this short debate, even if their support has been qualified in various and, in some respects, conflicting ways. As always, I am grateful for my noble friend’s courtesy and consideration. I am reassured by the point that both he and the noble Baroness, Lady Noakes, made about the reserve power, should that be regarded as desirable in future. I return to the simple point that a savings habit is not about moral fibre; in the end, it is to help people acquire savings. The question is: what happens if you are someone who struggles through their working life—for example, a woman who has been a lone parent and been bumping along on various forms of income support and all the rest—and enter retirement with no savings at all? It is too late to revisit choices that you might have made previously, but your need for that modest financial buffer remains.

My noble friend is right to say that we hope that will be a diminishing group, given the initiatives that the Government are proceeding with, but currently the Government have no offer available to pensioners who enter retirement or to current pensioners who have no savings. That is, unless they use an offer like the winter fuel payment and do not spend it on keeping themselves warm but save it—hoard it—in ways that we would not want them to do, given all the evidence about hypothermia. There is evidence that there are 30,000 winter deaths a year from hypothermia beyond the standardised mortality figures. Instead of using it to keep themselves warm and avoid hypothermia, they save it to replace the cooker or the washing machine. That is not a choice that is decent to ask them to make.

I take my noble friend’s point. I understand where he is coming from: that this was designed as a benefit for those of working age. However, to some degree it shows a failure to understand the situation of someone who has had a rough life and is entering a difficult retirement without any reserves. In that case, something such as this would give them a desirable cushion. However, given that we can revisit this in future—some of us may well do so—I beg leave to withdraw the amendment.

In moving this amendment, I will speak also to Amendments A16 and A17 in the group. They amend subsections (4) and (5) of Clause 3 and deal with restrictions on the passporting of child tax credit recipients. Again, I do not think that there is much in substance between us and the Government since the draft regulations give effect to the already stated intention of restricting child tax credit recipients to those on no more than the income threshold for child tax credit. That will rule out those who have considerably higher incomes because child tax credit goes up to around £60,000 of income or even higher if the £25,000 disregard comes into play. We have absolutely no problem with that policy.

What we do have a problem with is that the legislation makes it optional for the Government to issue regulations restricting the right of a child tax credit recipient to gain access to the saving gateway scheme as set out in subsection (4). The effect of subsections (4) and (5) is that even if regulations are made under subsection (4), they need not contain income or similar restrictions to narrow the scope of those eligible for child tax credit also to have access to the saving gateway. We believe that the construction of child tax credit, with its extraordinarily long income taper, means that if eligibility is the passport to the saving gateway scheme, it must be accompanied by restrictions. We agree that restrictions are best set out in secondary legislation, but we are clear that there must be such secondary legislation, which is why I have tabled the three amendments in this group. I beg to move.

I agree with the noble Baroness that there is not much between the position she has adumbrated and that of the Government so far as the Bill is concerned. It is our intention to apply the conditions set out in the draft regulations. We propose that people can be eligible for the saving gateway only by virtue of entitlement to tax credits where their income does not exceed a specified threshold or where they are entitled to one of the social security benefits specified in Section 7(2) of the Tax Credits Act. The amendments would require that such conditions must be applied in regulations, whereas the current subsections provide the flexibility for this and future governments not to do so.

I have set out our intentions with regard to the legislation, but we think it right that the Bill should allow some flexibility for the future. I should say to the noble Baroness that if I had £5 for every time I have replied to an Opposition amendment which would replace “may” with “shall”, I would be very wealthy indeed. This is another clear case where it looks desirable that there should be some determination because we agree about the intention of how the scheme will work. We have “may” rather than “shall” so often in legislation, and we are not the first Administration to do so. Gladstone’s Administration probably set up the practice, if not even earlier than that. I use Gladstone as an illustration to try to get the noble Lord, Lord Newby, on board.

The obvious fact is that governments have an intent. They have a Bill that they intend to turn into law which should work according to the parameters of the time. “May” comes into legislation instead of “shall” because legislation is primary and cannot easily be amended. Replacement by primary legislation is a fearsome task and governments want to preserve a degree of flexibility for the future, if only to have regard to the trials and tribulations of those who come after them. I speak almost in hereditary terms about Labour, of course, but I have to expect that at some time in the future we might have to contemplate a Liberal Administration—I know that the noble Baroness was rising to that possibility with enthusiasm—or even a Conservative one. Within that framework, I want to defend the necessary flexibility. As time evolves and circumstances change, this legislation will still hold good for the concept of the saving gateway. We are at one with the noble Baroness, which is why we built in the requirements. We will operate it and we have already indicated in our draft regulations that that is how we intend to apply it. We have some regard for flexibility in legislation. I hope that I have succeeded in persuading the noble Baroness of the virtues of that approach.

The Minister says that he should have had £5 each time he had been in a “may” or “shall” debate and that he would be a rich man. That may be the case, but I have to tell him that it is not the last such debate—not even the last in this Bill. He will have to deal with some more. As he knows, we table amendments in areas in which we think there should be no discretion or flexibility for the Government over time. I am aware that parliamentary draftsmen normally default to “may”, but we have occasionally won an amendment on “shall”. I shall remind him of that when it is clear that the regulations must be passed. I could cite a recent example from the Pensions Bill from last year, but I shall not taunt him with it. This is probably not one of those instances that I regard as most important, and I accept the Minister’s clear assertion, as is laid out in the draft regulations, that the Government intend to restrict the availability of child tax credit recipients to the saving gateway account. I am sure that the Minister knows that the conditions of the saving gateway account are far too generous for the context of that account. But I accept his undertakings on that, without necessarily buying in to the whole need for flexibility for the Government in regulation-making powers. I beg leave to withdraw the amendment.

Amendment 19 would add a new subsection to Clause 4, which deals with requirements relating to accounts. Subsection (1) sets out the basic rule that HMRC will approve account providers in accordance with the ever-present regulations. My amendment says that when HMRC does this, it must have regard to the desirability of choice being available to persons who wish to open a saving gateway account. This is not a mere doctrinal issue about choice, although that is important; my amendment speaks to the difficulties that the Government may have in getting account providers to put themselves forward for inclusion in the saving gateway scheme. We debated that at Second Reading, when the noble Lord, Lord Newby, and I both drew attention to the evidence given in the Public Bill Committee in another place about the willingness and enthusiasm to take part in the scheme from potential account providers.

The banks’ view, as expressed in another place and in subsequent briefing to noble Lords taking part in this Bill is based on commercial viability. They believe that the accounts may be too costly to be worth taking on, and we shall return to some of the issues that lie at the heart of their concerns in later amendments. The noble Lord, Lord Myners, seemed not to recognise this; he told us at Second Reading that banks, together with building societies,

“now recognise the increased value of a loyal depositor base from retail deposits, rather than reliance on wholesale deposits”.—[Official Report, 17/3/09; col. 138.]

I believe that the Minister chose not to understand that banks and others will welcome a depositor base only if it can be operated profitably. There is no point in attracting deposits if it costs money to maintain the accounts. A saving gateway account will not amount to more than £600 before a maturity payment, and let us say that the average is half that. I do not think that the Minister can seriously claim that accounts at that level are likely to be attractive to banks as they will face costly record-keeping and potentially face transfer requirements and the like. The record-keeping is exacerbated by the fact that this is designed to encourage regular saving and not lump-sum saving, which means a lot of transactions.

This amendment raises an issue that I addressed at length at Second Reading, which is whether any national organisation at all will be likely to offer saving gateway accounts. It is absolutely clear that the Post Office is very keen on them, but when its representative gave evidence to the Bill Committee in another place, he said in terms that it did not have a financial model which enabled him to have any confidence that it could make them work financially.

As for the other banks, the BBA made it clear that none was committed to the scheme, and none was looking at it with any enthusiasm whatever. Although the noble Baroness talks about the desirability of choice, I do not think that we are in that luxurious position. My concern is that, as things stand, there will not be a single national provider at all.

The noble Lord, Lord Myners, mentioned earlier that he thought that the banks had a commitment to promoting financial inclusion. Well, they do as long as it does not harm the bottom line. I do not believe that this scheme can work on a straightforward commercial basis; the amount going into the accounts is just too low compared with the inevitable costs, however minimal, surrounding them. The noble Baroness says she thinks that the choice would be inadequate if it was only between the nationalised banks. If the choice is only between nationalised banks, it will be a far greater choice than we will get otherwise. That may be the only option for having any choice at all.

I therefore urge the Government to have discussions with the nationalised banks about their doing this. I am sure that they will say that they cannot do it on a commercial basis. If they cannot do it commercially—I have no idea how much subsidy will be required—and if, as the Government believe, it is a matter of great significance, perhaps they could take it out of some of the other funds that they are devoting to community investment. The banks spend considerable sums in community investment, and it is a question of priorities. If it will cost them, say £2 million or £5 million to subsidise a scheme like this, perhaps they could take it from that budget or from a marketing budget. We know, for example, that RBS is reducing the amount it is giving to Andy Murray, Sachin Tendulkar and various others in sponsorship. But it is still spending a huge amount on sponsorships. Perhaps it could take it out of that and be absolutely up-front about the subsidy.

As I said, I very much doubt whether a straightforward commercial bank can run this scheme at anything other than a loss. If the Government want the scheme to provide choice, they will have to explain to the banks that they control how they can do it. The way that I have just described is probably the only way they will be able to justify it.

I understand the concern behind these amendments; the noble Baroness voiced them in moving the amendment and the noble Lord, Lord Newby, did so in returning to a theme that he strongly expressed on Second Reading. The scheme has been designed with the aim of securing exactly what the noble Lord said—national provision, but provision over a broad range of appropriately authorised providers. The saving gateway pilots showed that distance from a branch was a key issue. That means that we have to engage the concept of national providers, as has been demonstrated by the two representations made in this short debate. Ease of access is a very important dimension.

The Government have therefore sought to make the scheme as simple as possible for providers to operate. I recognise that simplicity reduces costs, but it does not remove them. The noble Baroness identified the obvious fact that relatively low sums will accumulate and there will probably be a significant number of transactions. However, the intention is that all providers which have the appropriate regulatory permission and are able to offer accounts that meet the requirements set out in the Bill and in regulations will be approved as account providers.

The gentle charge was made that my noble friend Lord Myners was complacent—I think that that was the word used. My noble friend is of a cheery disposition, so I think that it was optimism rather than complacency. It is not a question of being complacent about a scheme that is being set up. There is a great deal of work to be done and the Government are involved in a considerable amount of work. My noble friend was reflecting confidence. We expect saving gateway accounts to be offered by a range of providers—not just banks and building societies, but also credit unions. We are discussing this with potential providers and their representative bodies and are getting a positive response.

Reference was made in the other place to the views of representatives of the banks, building societies and credit unions, which indicate that broadly they want to be involved. We consider our discussions thus far to be making considerable progress. I am not in a position to name names because discussions are still continuing. As the noble Lord, Lord Newby, hinted when he talked about banks having community responsibilities, the banks have social responsibility agendas to which they subscribe and this scheme fits into that general prospectus. In the past, they have committed themselves to issues of social responsibility and an inclusion agenda.

After all, we have seen the banks involved in other areas. Only a year or so ago we discussed dormant accounts legislation, which also showed the banks in a constructive light on the work that needed to be done to release resources into the community. If it is thought that perhaps I am stressing too much the marginal commitments of the banks against the large problems that they currently face, it is also the case that providers will be able to capitalise on the saving gateway account holders who continue to save and will build up rather significant balances. Some will make progress and the banks will have the advantage of being responsible for their accounts, which is of potential advantage to them. The person in the category of obtaining this level of opportunity at one stage may, a decade on, be in a very different financial position. We all know the extent of loyalty of customers to banks, even when they are not treated particularly well, which is legendary. If banks set out to provide a service that is not necessarily profitable in the first instance they must have greater expectations among those of their customers who move into more prosperous circumstances. It is not as if we are asking them to take on a total loss leader.

Reference has also been made to the Post Office, which also has issues to discuss. It has a great advantage in terms of its range of branches. I cannot give a categorical response at this stage on how far on we are, but we are confident that these accounts will be serviced. The Government will be very active to ensure that the legislation is effective, and the Committee will recognise that it can only become effective on the basis of the co-operation of those that can provide such services as have been identified in the amendments.

It is not an issue of complacency; it is a reflection of the fact that considerable work still needs to be done. We are making very considerable progress and we have confidence in the fact that we will have providers that meet the criteria, identified by both noble Lords in speaking to the amendment, to make the scheme successful. I hope, with those reassurances, that the noble Baroness will feel able to withdraw her amendment.

I thank the Minister for that reply and the noble Lord, Lord Newby, for taking part in this short but important debate. This scheme will not get off the ground unless there are account providers. The noble Lord, Lord Newby, would be happy to default to the nationalised banks—as the noble Lord, Lord Myners, is here I should say the public sector banks. I am not clear about that. It seems to me that we are simply leaning on those banks because of the nature of our shareholding and our other dealings with the banks, but if we cannot get the non-public sector banks or other providers involved that would be a problem.

With all due respect, the noble Baroness has still not got it quite right. They are the banks temporarily in public ownership.

There is nothing wrong with public sector banks. As a matter of fact, they have been classified by National Statistics to the public sector. That is why I am entitled to say and why it is proper for me to refer to them as the public sector banks, as I shall continue to do whenever the noble Lord, Lord Myners, is present. When he is not here, I shall continue to refer to them as the nationalised banks.

I hope that the noble Baroness is not suggesting that there is some kind of ideological division in Government between those who can cope with the word “nationalisation” and those who cannot. The noble Baroness must not play games with us.

I know the particular sensitivities of the noble Lord, Lord Myners, on the subject of nationalised banks.

The noble Lord, Lord Newby, also referred to the fact that they have community investment funds or social responsibility agendas. Yes, indeed, banks have funds devoted to that but, of course, they have been leaned on for other things in recent years; for example, the provision of cash machines. In my experience, banks tend to think that social responsibility is their agenda and not necessarily the Government’s agenda. Of course, there are other calls on the banks waiting in the wings: for example, the funding of financial inclusion and financial education. At the moment, the Thoresen proposals, when rolled out, will be unfunded. Let us not pretend that there is an unlimited pool. Although banks are large organisations which have money that they devote to socially worthwhile projects, we cannot assume that the Government can highjack that.

The Minister said that he had had a positive response and that he was making progress, indeed that the Government were confident. However, the Government have not given us any more confidence today that this scheme will get off the ground. I detect from those contacts that we have, for example, with those in banking, that there is still a problem in this making sense to the providers coming in. Doubtless we can return to that at a later stage. The elements of banks wanting to come in or not, which will come down to the costs imposed on banks, will be covered in later amendments. This is an important issue and if it is not resolved we may not be having a saving gateway scheme at all because you cannot have a saving gateway scheme unless there are some providers to provide the accounts. With that, I beg leave to withdraw the amendment.

Amendment 20 seeks to amend Clause 4 and, like my previous amendment, adds another matter to which HMRC must have regard in approving account providers. The amendment requires HMRC to have regard to the desirability of eligible persons having access to financial information regarding savings. This is a very modest requirement and does not require HMRC to approve account providers only where the account providers agree to provide basic financial education about savings. In the light of the discussion we have just had, that simply might not be feasible.

At Second Reading, the noble Lord, Lord Newby, asked the Minister for an update on the Thoresen review and its proposals regarding generic financial advice. The Minister’s written reply, to which the noble Lord, Lord Newby, has referred today, showed that that this has not got very far at all, which is what both the noble Lord and I suspected. There is a large-scale pilot scheme in the north of England but, as the noble Lord, Lord Newby, has already said this afternoon, there is a long way to go before there is anything meaningful on a national scale around financial advice or even information. As I said a few moments ago, there is still no clarity about how that would be financed and paid for, if it were rolled out on a national basis. I am sure that the noble Lord, Lord Newby, and I both wish the Thoresen proposals well, but it is not clear that they will finally end up with proposals that would ensure that the kind of target groups that we are dealing with in the Bill would have access to financial information and financial education.

Without some level of financial information to reinforce the savings habits that are supposed to be acquired through the saving gateway scheme, it is quite likely that account holders will not acquire the long-term habit of saving. At Second Reading, we referred to the fact that the results from the pilot schemes for the saving gateway were not definitive, partly because they did not extend very far beyond the maturity date. The Minister promised to provide some information on the Ipsos MORI survey, which has been carried out subsequent to the pilots.

In the Chamber this morning, I received the Minister’s letter giving a one-page summary of the Ipsos MORI findings. That was clearly encouraging, but we need to see more detail of the findings. When the Minister replies, will he say when we should expect to get the full copy of the Ipsos MORI report? I ask that in particular because the pilots had much wider groups of people involved than those simply in the target group of the Bill. The Ipsos MORI overall findings do not necessarily speak to the kind of results that we can expect from the saving gateway scheme once it is operational. It is to do with that more granular level, in particular the difference between the relatively higher incomes that were included in some of the pilots compared with the lower incomes that were included in the saving gateway scheme, for reasons that we support. In the pilots, the propensity to save was higher, as is not surprising in those higher up the income scale.

A key issue that HMRC should take into account is whether the providers would be willing to provide at least some basic financial literacy material alongside the accounts. The pilot studies showed relatively little take-up of financial education. I do not know whether that was because of the way in which it was offered, or whether it was genuinely not needed. I have a basic gut instinct that there is a very real need to raise the level of financial understanding of those people at whom saving gateway accounts are targeted.

In another place, there was discussion of the undesirability of saving gateway account holders being bombarded with material offering other financial services inappropriately. Those of us who have accounts with the main clearing banks know the kind of credit and loan opportunities that we are constantly offered. There was a feeling in another place that it was undesirable that those should be pushed at this group of account holders. I toyed with whether something along the lines of HMRC abstaining from such marketing to such account holders should be proposed. Instead, my amendment focuses on the positive of giving information, raising awareness and educating people in this group, rather than prohibiting the banks from doing things.

Financial literacy is such a huge problem, as the Thoresen review showed, that any way of improving the level of understanding in society would be valuable. If we can link it to the saving gateway in a formal and positive way, that would be helpful, and it would improve the possibility of good outcomes from the saving gateway scheme. I beg to move.

I understand the noble Baroness’s intention in tabling these amendments, which would ensure that eligible people have access to financial information, support and guidance. I share the noble Baroness’s view about the importance of improving financial literacy, particularly for those who previously have been excluded from the formal financial sector. A point that has not yet come out in Committee is that the saving gateway will attract, we hope, significant numbers into the formal financial sector who are at the moment largely involved, or significantly involved, with the informal financial sector, with some of the risks that might be so attached.

The amendment would ensure that the commissioners for HM Revenue and Customs, which will approve account providers to offer accounts, will, in the exercise of this function, take into consideration access to financial information concerning savings. As I have said, I agree with the noble Baroness about the importance of appropriate access to financial information about savings. The Government and the FSA are working to deliver a shared vision of better informed, better educated and more confident consumers who are equipped to take control of their finances and play an active role in the financial services market, and, in so doing, enhancing their own lives. To that end, last year, we published jointly with the FSA an action plan for financial capability, which set out a number of measures and initiatives to help people manage their money now and in the future.

The Government have launched a number of initiatives in that respect that will also be well positioned to offer support to saving gateway account holders and those who are interested in opening accounts. The £12 million regional money guidance pathfinder, which is funded and delivered by the Government and the Financial Services Authority, is on track to launch in the north-west and the north-east of England in the spring. Financial inclusion champions, sponsored by DWP, have been asked to support and work to promote active engagement with government-supported saving schemes, including the saving gateway. HMRC will also send information direct to eligible holders, along with their notice of eligibility. This will explain the scheme and how to open an account. An HMRC contact staff centre will also be able to answer queries regarding the scheme and information will be available on the HMRC website. The Government will continue to explore the advice and support that will be available to eligible people at account opening.

The noble Baroness asked when we could expect to see the full Ipsos MORI report. I believe that it will be published next month. The noble Baroness also made the observation that pilots had wider flexibility, so the results were possibly not representative. Her observation is true, but we are carrying out further research, which focuses on people with incomes up to £17,000. We will report on that in due course. I therefore hope, in the circumstances, that the noble Baroness will agree that much is already being done—there is a recognition by the Government and the FSA that there is more to be done—and that the steps being taken are such that the noble Baroness will agree to withdraw her amendment.

I am slightly disappointed by the Minister’s response. He outlined the work that is already going on. The Thoresen review is worthy, but it will take a long time. It is only in the large-scale pilot, and we do not know when that will happen. We do not know whether there will ever be a roll out. On HMRC sending information to account holders, I do not think that you would look to HMRC to be a provider of financial education or to be within the financial inclusion envelope. Perhaps other mechanisms need to be found: I am sure that the DWP would be more likely to handle this better. The Government are missing a trick. My amendment simply said that, in selecting account providers, HMRC should bear that in mind. The Minister did not even tell me that it would. Not only does HMRC not need it in statute, it is not even described as a feature of what HMRC would look for in account providers. This does not just have “government programmes” written all over it. If delivery of information about savings and personal financial management through financial service providers can be extended more widely, that is better than relying on government schemes and bodies such as the CAB, valuable though they are. That is why I am disappointed that the Government are going to miss a trick. I beg leave to withdraw the amendment.

Amendment 21 amends Clause 4(2)(a). The paragraph says that a saving gateway account has to be held for a period provided by regulations. The Government say that they will start with a period of two years. My amendment would continue to allow the period to be prescribed by regulations, but that it must exceed 12 months. If it is possible for the Government to specify a maturity period of less than a year, I would argue that that is not a genuine approach to creating a savings habit. I could argue that two years, the period that has emerged from the pilot studies, is also hardly enough to represent a real savings habit, but I accept that that may need to be informed in the long run by studies of savings behaviour over a long period of time. However, no matter what happens to the upper limit, I cannot see that it is a good use of public money to incentivise short-term savings, which is what a period of less than one year would amount to.

I hope that the Government can agree that it should never be possible to set a saving gateway account at less than a year, and that they will be able to accept my amendment. I beg to move.

The amendment seeks to limit the flexibility of regulations to set the maturity period, or account duration. Specifically, regulations would not be able to specify an account duration of less than 12 months. Members of the Committee will know that the Government propose that these accounts should last for two years. Leaving this detail to secondary legislation provides the flexibility to make alterations in the future. That might be necessary if experience of the national scheme suggests that a different account length would better achieve the aims of the saving gateway.

Based on evidence from the pilots, we believe that an account duration of 24 months will best help to initiate a savings habit. I agree that too short a period is unlikely to be effective in achieving the goal of this policy initiative. However, it is important that we are able to respond to any lessons and information that we secure from operating the national saving gateway, and that we do not place restrictions on the account duration that regulations can prescribe. I therefore hope that the noble Baroness will withdraw her amendment.

One of the most frustrating things in a Bill like this, which is one long order-making power, is the unwillingness of the Government to put in the Bill even the bare minimum of how long a scheme should run. The Minister says that he would like flexibility, and I say it should not be for under a year. I cannot believe that there could be any difference of opinion about that, and yet the Government still want a degree of flexibility that would allow them to create a saving gateway account which would not represent savings at all; it would just be a sort of current account that gave you a bonus after a couple of months. I do not think that we should legislate for something like that.

The Government are taking flexibility to an undue degree. It is flexibility that they should not need, because they should be prepared to sign up to a bare minimum of what a saving scheme looks like. I shall consider what the Minister has said before Report, but what he has said today is unsatisfactory. I beg leave to withdraw the amendment.

I shall speak also to Amendment 23. Both amendments would amend Clause 4 and set out in primary legislation some basic financial rules about the burdens on account providers. Amendment 22 states that regulations made under Clause 4 may not require an account provider to pay interest. The British Bankers’ Association is especially keen on that. It acknowledges that the draft regulations do not require the payment of interest, but says that it would value the certainty that having that in the Bill would give.

The problem that banks foresee is that they might be persuaded to be saving gateway account providers on the basis of the draft regulations only to find, having invested in participating in the scheme, that the regulations are changed—whether before the final version is issued or sometime thereafter. Banks, like other businesses, need certainty to plan on anything other than a short-term basis. My amendment does not prohibit the payment of interest, although I think it is highly unlikely that any account provider would find it economic to pay interest, whatever the level of interest rates. I am aware that Citizens Advice believes that interest should be paid to make the account like a proper savings account, but the economics of starter savings accounts are unlikely ever to make that a realistic prospect.

If there were a competitive market where people wanted to attract that source of funds—about which the Minister was optimistic at Second Reading—account providers may need to offer interest to attract funds, but they do not want to be obliged ever to have to provide interest. That is why they seek to have that hard-wired into the legislation.

Amendment 23 addresses the other side of the coin. It prohibits the account provider from making charges. The regulations provide for no charges to be made against the saving gateway account. We have no problem with that, but if account providers are not to be allowed to levy charges on the accounts, it seems to us to be fair and reasonable that there should be no interest payable either. As I sought to put the interest rate provision in the Bill, for even-handedness’s sake, I have also sought to put the other side of the equation, the cost side, in the Bill. The main purpose of my two amendments is to raise the issue of interest, which seems to be a stumbling block towards banks wanting to take part in the scheme. As I said, that is something that they continue to express concern about. That is why I have raised it in Committee today. I beg to move.

Both of these seem to be sensible provisions, and I am sure that the Government agree with them. That brings us back to the issue that we have already discussed several times about what goes in or does not go in the Bill. It is difficult to see why these two provisions should not go into the Bill, because I am pretty sure that the Minister is going to get up in a minute to say that the Government agree with the substance of both of them.

These amendments are broadly concerned with the requirements that will be imposed on providers of saving gateway accounts. Amendment 22 would remove the Treasury's power to require in regulations that a provider must pay interest on a credit balance held in a saving gateway account. I can assure noble Lords that we do not intend to impose a requirement on providers to pay interest on account balances. That is our settled view and we have no intention of moving from that position, but we think that it is sensible to retain some flexibility so that, if the position were to change in the future, a change could be made without recourse to primary legislation.

The Economic Secretary said in the other place that there would be full consultation before introducing any such change, and I am very happy to repeat that commitment to the Committee today.

Amendment 23 would allow regulations to prohibit a provider levying charges on saving gateway accounts. My response here is straightforward. The Bill already provides a broad power to impose requirements on accounts and the draft regulations that have been published make clear that providers may not make withdrawals from a person’s account, by way of charges or otherwise. I refer here to Clause 4(2)(c) and draft Regulation 10(2)(e). I hope this provides the confirmation the noble Baroness is seeking.

I listened with care to the observation of the noble Lord, Lord Newby, about what is contained in the Bill and what is covered by regulations. This is a judgment call that has to be made in these situations. The Government welcome the report from the Delegated Powers and Regulatory Reform Committee. It states that,

“the principal features of the new accounts … are largely discernible from the provision in the Bill itself, with many of the delegated powers intended to provide necessary flexibility in fine-tuning the scheme”.

I hope that the noble Baroness will seek leave to withdraw the amendment.

I thank the Minister for his response and the noble Lord, Lord Newby, for his support. I shall deal first with the Delegated Powers and Regulatory Reform Committee because the Minister has often said that if that committee does not raise specific points, it is taken as an endorsement of the whole of the Government’s position. The plain fact is that the Delegated Powers and Regulatory Reform Committee does not replace the detailed scrutiny that takes place through the processes of your Lordships' House, and is not intended to, but highlights areas where it is obvious to it, from its examination and the explanations which are sought from departments, that the order-making powers need to be handled differently. But even if that committee makes general statements, that does not mean that it vouchsafes every order-making power as being appropriate. However, we should put that on one side because this Committee is examining the detail of the Bill, not the Delegated Powers and Regulatory Reform Committee.

The Minister says that the Government have a settled view on interest but that the position might change. I struggle to see how the position would change. The Minister did not give any examples of what might cause the position to change. Has he anything to add on how the position might change, which would cause the Government to change their view?

I simply want to keep the flexibility to respond to changes. As I think I made clear, none is anticipated. I have made a very clear statement to this House, as, indeed, did my honourable friend in the other place, that no changes would be introduced without extensive consultation.

I am sure that the Government would consult if they proposed making changes; I do not wish to imply that they would not. However, this goes to the heart of the banks’ concern about how saving gateway accounts might turn out. This is an area which I shall need to discuss with them further because it has been made very clear to me that this is one of the stumbling blocks that remain for them on saving gateway accounts.

I am grateful to the noble Baroness for allowing me to add that we are also in very active discussions with the banks. We have a common interest in avoiding anything that would deter banks from offering this product because we want to ensure that it is made available by private sector banks that are wholly in private ownership, and private sector banks in which the Government have an ownership on behalf of society, and we want to achieve broad geographical coverage.

I wish the Minister would be precise when he refers to the banks. They are not private but public sector banks. They are the ones in which he is a controlling shareholder. That is what the UK Statistics Authority says and that is what I will carry on saying.

The Minister will recognise that this is an important issue and he may expect us to return to it on Report. I beg leave to withdraw the amendment.

The amendment would amend Clause 4(3). Subsection (3) states:

“Regulations may … impose a limit on the amount which may be paid into a Saving Gateway account”.

I should perhaps have sought to require regulations to prescribe a limit since it should be axiomatic that there can never be an open-ended ability to pay money into a saving gateway account and thereby qualify for maturity payment. We support the imposition of a maximum. Indeed, a maximum should definitely be imposed. On the other hand, my amendment suggests that a minimum amount could also be specified. Draft Regulation 10(2)(d) says that the account provider must permit payments into the account by various means but does not specify anything related to the amount. It must surely be uneconomic for the account provider to handle very small amounts, given that providers are not allowed to make charges. I should have thought that a de minimis amount would be reasonable from that perspective.

In addition, a savings habit will not be worth while unless it is for a meaningful sum. Unless savings can accumulate to a sum that is itself worth while in terms of the kind of things for which savings are kept back, it can hardly qualify as genuine saving. I should have thought that a minimum of something like £5 would be reasonable because if that were all that was contributed to a savings account over the two years that is proposed, it would add up to only £120 before the maturity payment. I should have thought that anything less was not really saving at all. The purpose of my amendment is not to prescribe the minimum but merely to propose that a minimum should be prescribed. I beg to move.

The amendment would amend Clause 4(3) so that regulations may impose a minimum and maximum limit on the amount that may be paid into an account in a month. As the Committee may be aware, the draft regulations, which have been published, already impose a maximum of £25 per month limit on the amount that may be paid into an account. They do not specify a minimum amount.

The noble Baroness has indicated that her amendment is intended to enable regulations to impose a minimum limit per transaction on the amount that may be deposited into an account. We understand that providers may have concerns about the transactional costs of being required to accept numerous low-value deposits. There is nothing in the Bill or the regulations to prevent a provider setting a minimum per transaction limit for deposits in saving gateway accounts to bring them into line with a provider’s general practice for accepting counter deposits. That seems to be the most effective way of addressing this matter as those banks that are most efficient will see the greatest opportunity to cultivate a new target market or to make an important social contribution that will reach their own determination rather than one set by law or regulation. I therefore do not believe that the amendment would add anything to the Bill and I hope that the noble Baroness will withdraw it.

Did the Minister say that the Government are happy for account providers to set their own rules for saving gateway accounts?

I believe that our policy in respect of minimum contributions is that the account provider can set a limit. We have set a maximum limit.

The Minister is unwilling for the Government to say what minimum level would equal a saving, so would the Government be happy if £1 a month was saved under the saving gateway scheme? Would that be a satisfactory use of the saving gateway advantage?

I would be very disappointed if people were saving only £1 a month, but I would not be disappointed if, in a particular month, someone felt that they could save only what represented a very small sum. It is for the account provider, having knowledge of their own efficiency and business plans, to reach their own determination in that respect. That is a sensible blend of social objective and commercial market practice.

I am content with the assurance that it is for the account providers to set rules on not accepting uneconomic levels of deposit. I am sure that the banks will be pleased that the Minister has said that. I beg leave to withdraw the amendment.

Amendment 25 requires regulations made under Clause 4(2) and (3) to be subject to the affirmative procedure. The requirements for orders are set out in Clause 27, but I have drafted this amendment to Clause 4 so that it can be debated alongside the substance of Clause 4. That is for the convenience of the Committee. The regulations under Clause 4 allow the length of the maturity period and the maximum amount of the monthly payment to be set by regulations. These two items can drive the amount of the maturity payment, which is calculated in accordance with Clause 8.

I was surprised to see that the regulations, which can radically change the nature and scale of the saving gateway scheme and its overall cost, are left to secondary legislation subject only to the negative procedure. Admittedly, the first orders will be subject to the affirmative procedure. That is welcome, but as we have the draft regulations to assist us in our consideration of this Bill, the issues will not arise on the first orders because we have the opportunity to debate them now. If issues arise, they will be on subsequent orders.

We agree that these issues are best dealt with in secondary legislation. We have debated today and will doubtless debate again at Report whether more should be in primary legislation, but in general terms we believe that it will be necessary to change the size and shape of the saving gateway accounts over time. Secondary legislation is the best way to do that. However, where those details have a direct bearing on the total cost of the scheme—as they clearly could by regulation changes to Clause 4—the affirmative procedure is the only proper way to achieve those changes.

I might be persuaded that it is only appropriate for the other place to approve such an order, but I would be hard pressed to be persuaded that there should be no formal parliamentary approval to an order that could radically change the shape of the gateway accounts and therefore the cost to the taxpayer. I beg to move.

The noble Baroness has introduced an amendment that deals with some interesting issues. As she recognised in her opening statement, the first use of all but one of the delegated powers in the Bill will be subject to affirmative procedure, and I understand that she is content with that. That indicates that the Government are all too well aware of the significance of the secondary legislation. We are making those arrangements.

I listened carefully to what the noble Baroness said a few moments ago. Of course she is absolutely right when she says that scrutiny of the Bill is the responsibility of this Committee and the Delegated Powers and Regulatory Reform Committee comments as it sees fit, but when that committee comments in a way that clearly indicates that the Government have got an interesting area just about right, it is only appropriate that we draw attention to it. I am about to do it again. I know that I am straining the noble Baroness's patience because she is keen to introduce the Delegated Powers and Regulatory Reform Committee only when it is fiercely critical of the Government. I can recall it having been so on one or two occasions in the past on other Bills. She will therefore not mind that the shoe is on the other foot, as it were, because in its report it states that, given the limited nature of the power, it is content that the negative procedure is appropriate for one exception.

We have reached that position with the first stage of this legislation. Now we come on to the question of potential change. Making the first use of almost all the delegated powers subject to the affirmative procedure will allow the necessary parliamentary scrutiny of the detailed scheme we are introducing. After that, the subsequent use of most powers should, in the Government’s view, be subject to the negative procedure to provide the flexibility to make minor or technical changes to the scheme which are appropriate only for secondary legislation.

There are four exceptions to that: the three crucial delegated powers in Clause 3 that relate to eligibility and the power to set the match rate. Those are key features of the saving gateway, so every use of those powers will continue to be subject to the affirmative procedure. We have identified the key areas.

The amendment specifies that other delegated powers should be subject to the affirmative procedure on each use. In particular, it focuses on the powers to set the maturity period of accounts and the monthly deposit account, but we think that the negative procedure is appropriate for the subsequent use of those powers. As I said, they will be scrutinised on first use but, on subsequent uses, the negative procedure is appropriate. As I have said, that the Delegated Powers and Regulatory Reform Committee is largely content with that.

There are precedents for changes to the monthly deposit limit to be set by negative procedure. For both ISAs and the child trust fund, the subscription limits are set in secondary legislation and can be amended in both cases under the negative procedure. As for the length of accounts, we have been clear that they should last for two years. However, there should be flexibility to review this position in future. That can best be achieved by making use of the regulation-making procedure. We contend that that should be the negative procedure—not on first use, but subsequently.

I know the noble Baroness will not allow me to produce in aid the evidence that the Delegated Powers and Regulatory Reform Committee did not make any comment. As she said, it is not its job to comment on everything. On the other hand, when the Delegated Powers and Regulatory Reform Committee makes a recommendation she expects the Government to jump—as we always do—and treat it with great seriousness. When it does not, she must expect me to comment on the fact that our proposals have at least a clean bill health in respect of the anxieties of the Delegated Powers and Regulatory Reform Committee.

We do not believe that it would be an effective use of parliamentary time to debate some of these matters under the affirmative procedure, save for the first time when the scheme is implemented. Afterwards, it is clear that the negative procedure will be appropriate. It is not as if the negative procedure rules out parliamentary scrutiny. The noble Baroness will give some credence to the fact that I once had the somewhat invidious task of making sure that the Opposition was on the QV with regard to negative instruments, as we always referred to them. She knows that they are profuse, extensive, complicated and mind blowing. Nevertheless, we regarded it as our task. I am sure that the present Opposition discharge their task on negative procedures with the same thoroughness at the other end as they undoubtedly do here. Under that procedure, the legislation is still subject to parliamentary scrutiny, although different from under the affirmative procedure. On the basis of the case that I have put forward, we think that we have got the distribution of affirmative and negative just about right and I hope the noble Baroness thinks so too.

The Minister referred to the regulation-making powers for ISAs and child trust funds. Can he explain what can be done by negative resolution on each of those?

For both the ISAs and the child trust fund the subscription limits are set out in secondary legislation and can be amended only under the negative procedure.

If the Minister reflects on that he will realise that the subscription limits on child trust funds and ISAs are not on all fours with what is in the Bill. I wonder whether the Delegated Powers and Regulatory Reform Committee did not quite appreciate that while the matching amount in Clause 8, which is specified in affirmative regulations, clearly derives the amount of money that is spent out, less obvious is how you express the maturity and the monthly qualifying amount that derive the calculations when you get to Clause 8. It is that that will actually, and probably more significantly, derive the total cost of the scheme. That is different. It is not on all fours with changing the subscription amount to, say, a child trust fund account and an ISA, which are simply for getting tax relief on the interest. It is not the same as getting this rather large matching amount, which is in turn tax free under the scheme.

With respect, I do not think the precedents cited are conclusive precedents. The financial implications of the saving gateway are derived as much from the regulations in Clause 4 as they are from Clause 8, and I wonder whether the Delegated Powers and Regulatory Reform Committee did not realise that. Clause 8 refers to money and it would be easy to think that that is where the money derives from, but it is not—it derives as much from the earlier clauses.

I am not happy with what the Minister said or that the negative procedure is appropriate. The Minister said that all Oppositions have the ability to raise questions on negative resolutions, which of course they do. Affirmative regulation is not full parliamentary control but it is better than the negative because it requires the Government to come to Parliament to justify what they are asking for and to ask for approval. That is the significant difference between negative and positive. I urge the Minister to take the matter away and to reflect on whether the order-making power is correct. It is not on all fours with the examples he has given.

The noble Baroness tempts me, particularly as she has entered into the debate on the virtues of the subordinate legislation. Her description is right; I merely sought to indicate that there was a parallel. She went on to refer to the increases in costs. In the cases I cited, the ISAs and the child trust funds, costs would also increase when raising the limits. As far as the deposits are concerned, the sums are large in comparison to this scheme.

The noble Baroness has made an interesting case and I shall look at it again. Where the line is drawn is finely defined and I undertake to look at the matter further.

I am grateful to the Minister. I shall probably return to the issue on Report, because where parliamentary approvals should be set is an interesting point. The dynamics of the Clause 4 regulations in financial terms are greater than or at least as great as the dynamics of the Clause 8 regulations. For that reason, I thought that the matter should be dealt with that way. I have made that point; I shall not make it again. I look forward to revisiting the arguments on Report. I beg leave to withdraw the amendment.

Amendment 26 amends Clause 5, which deals with the regulations associated with the approval of account providers. The amendment says that the regulations may require account holders to be eligible for compensation under the Financial Services Compensation Scheme and eligible for access to the Financial Services Ombudsman. The amendment is permissive; I do not see how the Government can possibly object to it. Indeed, the regulations provide for an account to be covered by the FSCS or an equivalent in another member state or EEA state. I am aware that it is difficult, although not impossible, to exclude other members of the EU, but I am less clear about EEA states. Thinking back to the problems that we have had with Icelandic banks and some of the other EEA states, I do not think that it necessarily inspires confidence in financial terms.

The regulations do not refer to access to the Financial Services Ombudsman, which I thought was desirable given the valuable work that the ombudsman does, especially in relation to relatively small accounts. Why are the requirements on the compensation scheme and the ombudsman not in the Bill? It is jolly difficult to see why the Government would want flexibility here. Do the Government intend to include EEA states and, if so, what safeguards will there be for account holders? The experience of relying on Icelandic deposit protection does not give us any confidence in the EEA being problem-free. Will the Minister also set out the position as regards the ombudsman? Do the Government believe that it is necessary for the saving gateway account holders to have access to the ombudsman? I certainly believe that that would be desirable. I am not even clear myself what the position would be if a branch bank from another EU state or possibly even an EEA state were to offer a saving gateway account. Could the Minister help the Committee in that respect? I beg to move.

I wish to speak in support of the amendment for reasons that the noble Baroness may find rather startling or even disagreeable; that is, social rather than financial reasons. The important principle of the Bill is one of financial inclusion and the amendment would be helpful in that direction.

First, as I and one or two other noble Lords said at Second Reading, this Bill will in part help to eliminate the class bias in our savings and taxation system. It will help to provide poorer people, particularly working class people, with the range of advice, assistance and possible redress that wealthier people have tried to obtain through Equitable Life and other sagas of that kind. It is very important that a range of opportunity and scope should available for the poorer people whom we anticipate will be affected by the Bill.

The other point that the noble Baroness made very clearly was that the measure would be of assistance in reassuring people, particularly given the utterly appalling record of the banks in the recent period. Reference was made to the Icelandic bank; it is particularly important that the role of the ombudsman is made fully available and that people are told about it. So many of the amendments that we have discussed have dealt with the provision of information. These people are not well versed in financial management, or even in the management of their own finances. They simply would not know about the scope offered by the ombudsman. As I say, in the case of Equitable Life, even more affluent people found it extremely difficult to get information of that kind. In the interests of what I take to be the egalitarian principles underlying this measure, from a progressive Government, I hope that they will take it on board.

The amendment concerns account holders’ savings being covered by the Financial Services Compensation Scheme, and account holders’ access to the Financial Ombudsman Service. I can assure Members of the Committee that, under the powers already in the Bill, we intend to make it a requirement of the scheme that all saving gateway accounts are covered by the Financial Services Compensation Scheme or a similar deposit guarantee scheme recognised in an EEA member state. All deposits of up to €100,000 will be covered.

As Members of the Committee will no doubt know, the Financial Services Authority is currently consulting on the Financial Services Compensation Scheme. As part of that consultation, it is stimulating a debate about a significant increase in the level covered, as well as some of the issues that we touched on in considering the Banking Bill, around brands and other issues, where there is still some complexity and uncertainty.

The issue of EEA member states and the deposit protection provided is a matter of some concern for the Government. My right honourable friend the Chancellor of the Exchequer has raised this with the European Commission. Later today I will be going to Prague to attend the ECOFIN meeting, and I will be raising this matter with those attending. These concerns about the strength of the deposit guarantee schemes are exercising minds in a number of locations, have been touched on recently in speeches by senior officers of the FSA and are referred to tangentially in the de Larosière report produced for the President of the EU Commission.

In addition, I can confirm that all accounts operated in the UK will be covered by the ombudsman scheme, without the need for additional provision in the Bill or regulations. As with other accounts, such as ISAs and the child trust fund, as long as a provider has appropriate permission to accept deposits, there is no need to exclude them from offering the saving gateway. We do not intend to place a restriction on non-UK providers, but I add a caveat to that in reminding the Committee that the Chancellor of the Exchequer has expressed some serious concerns about the cross-border operation of the deposit guarantee schemes. We will no doubt be saying more about that in due course, having discussed these matters with member states of the European Community. I hope that the noble Baroness will agree that there is no need for this amendment, and will therefore withdraw it.

Before the noble Baroness replies, my noble friend says that the ombudsman will inevitably be part of the scheme. How would people know? What sort of reassurance could they receive to make them aware of this?

I anticipate that that will be included in the information that is made available by HMRC when advising an individual of eligibility, as well as in the information on the HMRC website. If I am misdirecting my noble friend on that matter, or if there is an even better answer, he can rest assured that I will write to him and copy that letter to other Members of the Committee who have spoken in this short debate.

I thank the Minister for his reply and the noble Lord, Lord Morgan, for taking part in this debate. I do not always just talk about financial issues; I know it seems like that. I occasionally stray into other areas. The majority of the Bill is not just about financial areas.

I was perhaps most distressed by the Minister’s final response to that final query about how people would get information about what compensation schemes they would be eligible for. The thought of this kind of basic information coming from HMRC does not feel right. It is not clear to me that the individuals who are going to receive their eligibility notices will be able to do anything significant with it, because this is part of a much broader financial inclusion agenda, rather than specifically here. We shall see.

The most concerning part is that there will potentially be saving gateway providers which would not have access to an ombudsman because they are not a UK bank or other financial service provider, and that is not automatically seen on a cross-border basis. That is unfortunate, and perhaps HMRC should be putting out information saying that people should only go to a bank when they can use an ombudsman. I hear what the Minister has said on the other points that I raised. I am pleased to hear that the issue around the EEA is being dealt with at government level. I hope that we may be updated in due course.

This has been a useful debate. I ought to put on the record for the Committee that the Minister has broken a record. He has managed to reply to a query raised in one of the earlier groups of amendments before we have completed today’s Committee sitting, which is quite impressive. I shall make no comment on whether the content is impressive; but the fact that I got a reply to a query that I raised on an earlier group of amendments before finishing the sitting is impressive.

I hope that in so doing I am reducing the average time of my response to something closer to a target that the noble Baroness would find acceptable.

We shall see if the noble Lord gets gold stars at the end of our consideration of the Bill. I beg leave to withdraw the amendment.

Amendment 27 deletes “true” from Clause 6(2)(b). I shall also speak to Amendment 28, which would delete, on a probing basis, subsection (4).

Clause 6 sets out what an application to open a saving gateway account must contain and has the expected regulation-making powers. Clause 6(2)(b) says that the application must include a “true declaration” about prescribed matters. My amendment deletes “true”, because the truth or otherwise of the declaration can be determined only by reference to the underlying facts, and the provider has no way of determining this.

Under Clause 6(3), an account provider must open an account if an application is made in accordance with Clause 6 and its regulations, and there is a penalty under Clause 21 if the account provider does not do this. It is reasonable for the account provider to check that a declaration has been made, but it is not reasonable for an account provider to ensure that the declaration is true. There is a penalty on a person who deliberately makes an incorrect declaration under Clause 6(2)(b), which is presumably one that is untrue. It is surely only in relation to the account holder that truth is relevant.

Linked to this are the regulations to be made under subsection (4) about circumstances in which the account provider may or must refuse to open an account. Amendment 28 deletes subsection (4) on a probing basis. The draft regulations at Regulation 13 require a provider not to open an account if it has reason to believe that the declaration is untrue. But providers do not seem to be required to make specific inquiries as to truth and thus the addition of the word “true” in Clause 6(2)(b) is misleading, as truth does not affect the provider unless the provider is somehow on notice that the declaration might not be true. Leaving the word “true” in the Bill may require the provider to carry out procedures to verify the truth of the declaration which, in some cases, might be quite difficult. An example is a person's residence status. What should a provider do proactively about establishing residence status? Or are providers simply to take information that comes to them?

Regulation 13 also requires the refusal of an application if the notice of eligibility might not be genuine. What do providers have to do in relation to notices to establish whether they might or might not be genuine? What can they rely on? Providers' staff may not handle more than a few notices each year and I will wager that notices will not be forgery proof. Modern photocopiers produce amazing copies nowadays and photocopied banknotes, as I am sure the noble Lord, Lord Myners, learnt when on the Court of the Bank of England, can fool most of the people most of the time. It is likely that it would be easy to forge a notice if people wanted to. My question on this regulation is: what are providers expected to do with notices to establish their genuineness?

These two amendments ask the Minister to say why the word “true” is included in Clause 6(2)(b) and, more broadly, to explain what providers are meant to do before they open an account, either in relation to the truth of a declaration or in relation to the genuineness of a notice. I beg to move.

Both of these amendments relate to account opening. As Members of the Committee may be aware from the draft regulations we have published—draft Regulation 13(2)—we intend that, at account opening, a true declaration will be required from the account applicant confirming that they meet the relevant connection-with-the-UK conditions set out in regulations; and that they have not previously opened a saving gateway account, other than an account closed within a cooling-off period offered by the account provider.

Amendment 27 would remove the word “true” from Clause 6(2)(b), so that the account applicant will be required only to make a declaration rather than, as the Bill currently states, “a true declaration”. I should explain that the word “true” was included in the Bill to add clarity. I recognise that it might be argued that the use of the word “declaration” implicitly requires that what is declared should be true. However, as this provision is the basis for the imposition of the penalty provided at Clause 19(1) of the Bill, we consider it prudent drafting to put the matter beyond doubt in the Bill.

Clause 6(4), which the noble Baroness’s Amendment 28 would delete, qualifies the requirement at subsection (3) that an approved account provider must open a saving gateway account for any eligible applicant so long as their application is made in accordance with the requirements of the scheme. We believe that there are only very few circumstances in which it would be legitimate for an account provider to refuse to open an account for an eligible person who is prepared to agree to the terms under which the account is offered. We propose to set these limited circumstances out in the regulations. One example relates to credit unions. An unqualified requirement to open accounts for all applicants could present difficulties for credit unions, which, as Members of the Committee may be aware, operate according to a common bond that determines who can become a member. We therefore propose to use subsection (4) to specify in regulations that credit unions will not be required to open accounts for people who are not members or who do not fulfil their membership qualifications. As the Committee may also be aware from the draft regulations, we intend that account providers should not accept an account application when they have reason to believe that a notice of eligibility presented to them is not or may not be genuine, or that a declaration or application made to them contains matters that are or might be untrue. The same applies when any requirements of money-laundering legislation are not satisfied.

The Bill allows for a penalty to be provided in such circumstances. However, the penalty will not be applied when an account provider has taken reasonable steps to comply with the rules. The penalty would not be provided, for example, when an account provider could not reasonably have known from normal account-opening checks that an applicant was not eligible for an account, that a notice of eligibility was not valid, or that a declaration was not true. In view of my explanation, I hope that the noble Baroness will withdraw her amendment.

I shall read carefully what the Minister said about the inclusion of the word “true” for clarity in relation to Clause 6(2)(b). Part of the problem is that Clause 6 is being used to drive what the account holder or applicant needs to do as well as what the account provider needs to do. That is really the source of my problems. Could the Minister expand a little on what reasonable steps might be expected of account providers? Part of my probing here is about what they need to do to establish whether something is true, as well as about the genuineness of the vouchers coming forward. It is important that banks should know how proactive or otherwise to be. We have seen in relation to money laundering that unless significant guidance is given, banks can over-interpret what is required.

I welcome the noble Baroness’s invitation for me to provide further clarity. Our proposed processes here are designed to allow account providers the security and comfort of knowing that they will not be required to open an account when they have reason to suspect that a person is not eligible. In meeting the requirement, we will expect account providers to do no more than to carry out their normal account-opening checks. We do not expect them to carry out any additional checks—for example, to establish an applicant’s benefit or tax credit status, their compliance with residency conditions or whether they have previously held an account with another provider. The essence of what we are trying to do here is to make the provision of such accounts as attractive as possible to banks and others. We hope that that will work to support the saving gateway initiative.

I am grateful for the Minister’s comments, and I am sure that it will be helpful to those who read the proceedings of the Committee. As I said, I should like to think a little more about what he has said about the inclusion of the word “true” in Clause 6(2)(b). Apart from that, I am happy with his response and I beg leave to withdraw the amendment.

In moving Amendment 29, I shall speak to Amendments 30 and 32 in this group. These amendments relate to whether it might be possible for a person to have more than one subsidised shot at creating a savings habit. However desirable it is for savings to be encouraged, this particular saving gateway scheme should be available only once; after that, an individual must not expect to be able to gain further access to the extraordinarily favourable terms that the saving gateway scheme embodies.

Clause 6(5) permits regulations to do several things. Paragraph (a) refers to preventing a person from holding more than one saving gateway account at a time. Amendment 29 changes this so that it would prevent a person holding a saving gateway account more than once in a lifetime. That is what the draft regulations currently allow, so we are not out of line with government thinking on that. But, as we often find, the Government are legislating for the flexibility to do something which they have no current intention of doing and which goes against the advice of their own advisers. We do not think that that is a sound basis on which to approach legislation.

Perhaps I may adapt the phrase: the noble Lady doth provoke too much. We are not about sneaking anything through—very far from it. We listened carefully to the expert advisers and the witnesses at the Commons Committee stage. As the noble Baroness has indicated and accepts at full value, we intend that people should have only one saving gateway account in their lifetime. It is in the draft regulations that we have published. It is our intent and the basis on which we are setting up this legislation. I know the noble Baroness agrees with that, because she has said so forcefully. She even suggested that the attempt by the Government to introduce an element of contingency for the long-distance future was sneaking something through. That is not so at all. We simply believe that there should be some flexibility on this point for the future, which is all that Clause 6(5) provides. It merely means that the position can be kept under review and that this or future Governments would be able to adapt the scheme without having to redraft and set up primary legislation. This can best be achieved by using the regulation-making powers under the Bill.

As the Economic Secretary said in the other place, and I repeat today, this is merely contingency planning. We will set the scheme up on this basis. The principles behind the scheme are exactly as the noble Baroness has suggested; namely, that it is a kick-start and is meant to provide for one opportunity. But in drafting legislation of this import, we introduced this reserved position of flexibility for the distant future, which is the only reason for Clause 6(5). It is not at all to sneak anything through; it is quite the opposite. We agree with all the main principles that the noble Baroness has adumbrated in her short contribution. The only thing that I am objecting to is the suggestion that the Government would do anything else except respond full-square with the intent that this is a kick-start and one provision for a lifetime. Nevertheless, when drafting primary legislation, you do not close everything off for the distant future if by drafting the legislation carefully you leave some scope for future contingencies which we cannot foresee. That is the intention behind Clause 6(5).

If I had £5 for every time a Minister responded with the need for flexibility whenever I queried one of the regulation-making powers, I, too, would be a rich person—possibly even richer than the Minister. The Minister said that he wanted flexibility for the distant future. That is probably the reason why, if we buy the flexibility, to which I could probably sign up, any regulations to change that in the distant future should formally come to Parliament for approval. It would be changing one of the essential components of the scheme which, we are all agreed, should be set up on the basis that you get one shot at it.

Let us suppose that evidence came over time that there was a group that was somehow excluded from the benefit for whatever social reasons and we needed the ability to return. There would need to be some evidence to go back to Parliament to extend the scheme beyond the one that Parliament thinks it is approving now. It is for that reason that I put my alternative, which was for the affirmative procedure. That is why I said that it could not be sneaked through. The Government should come and ask Parliament for approval. That is the difference between affirmative and negative.

The noble Baroness is now presenting the argument in more acceptable terms. I have never known any Government to use the negative procedure to sneak anything through. That is not the way we intend the legislation to work. However, there could be a significant change in the distant future, so she is saying that we ought to consider using the affirmative procedure. I will certainly look at that.

I am grateful to the Minister and I beg leave to withdraw the amendment.

This is a probing amendment in order to seek the Government’s view on the extent to which it might be possible to extend the two-year limit of eligibility for involvement in this particular scheme. At the risk of becoming a class warrior, I strongly support the assertion made by the noble Lord, Lord Morgan, at Second Reading that there is a strong class bias in incentives to save. It is extraordinary that the Royal Bank of Scotland should be given an incentive which amounts to hundreds of thousands of pounds to enable poor Sir Fred Goodwin to have a huge pension, yet poor people saving £25 a month are told that, after a two-year period, they have had their chance. They have had their one shot to adopt a savings habit.

Some of the language used about getting poor people to save is quite extraordinary. There is a sense that they should be grateful for having their one shot, whereas middle-class people, who as we go forward with the 45 per cent upper rate of tax, will be getting almost the same degree of subsidy on their pension contributions as we are proposing here, need this huge subsidy which amounts to billions of pounds a year in order for them to save. There seems to be a complete disparity in the approach to savings between two classes of people. Can the Minister answer two things? First, does this legislation allow the two-year period to be extended and, if so, to what extent? Secondly, what is the Government’s current thinking? I think that the Minister said earlier this afternoon that the two-year period was reviewable, but I would welcome any thoughts he might have on whether the Government intended to review it, and whether they have given any thought to what the outcome might be if they did so.

Since my name has been invoked, as a fellow warrior, the noble Lord, Lord Newby, will not be surprised that I totally endorse the spirit and substance of what he has said.

I did not doubt that my noble friend would make that comment. I have therefore had the argument, which the noble Lord, Lord Newby, has proposed on other occasions, reinforced. Of course, I understand his point about fairness in the provision of government support for saving.

However, the principle behind the scheme is different from ISAs. It is to give support to those with a low propensity to save because they have limited resources, and to kick-start the saving habit with a generous government subsidy. This legislation can be effective. For instance, the pilot indicated that, three months after the first pilot had finished, 41 per cent of participants were still saving regularly compared to only 16 per cent who saved regularly beforehand. That is encouraging evidence of the potential effectiveness of this scheme. It should act as a one-off catalyst rather than an ongoing incentive.

The noble Lord will recognise the costs involved in increasing the number of the accounts that could be held. We had a discussion earlier this afternoon on the costs of the scheme. Of course, we put this scheme in the framework of social responsibility and financial inclusion. With such small accounts, the number of transactions is unlikely to be affected; they are not bringing any profit—or only very limited profit—to the providers. So we are concerned about the costs of the scheme as it stands. As I indicated earlier, we are optimistic about the results of our fruitful discussions with a range of potential providers, but that is not to say that we should be anything other than careful about the scheme’s costs to such providers. We must therefore look at the scheme in those terms.

I understand the sentiment expressed by the noble Lord, Lord Newby, at considerable length, and reinforced by my noble friend Lord Morgan. It is important that we provide fairness in saving schemes. Prior to this scheme being made available, the position significantly benefits the better off. You can start an ISA at quite a low level, but we all know that the figures normally expected for ISAs are several thousand pounds: £3,600 in cash and £7,200 in equities. An awful lot of people subscribe monthly and hit lower levels than that over the course of the tax year. This provision is clearly directed at a different group of people, who have limited motivation to save because of their limited resources. They are targeted and will be supported, but we intend that this should be a one-off scheme to kick-start the saving habit. That is the essential principle of the scheme. Although the noble Lord has given voice to proper sentiments, I hope that he will recognise that the Government have to work within a proper framework of what is practicable to keep costs at a reasonable level so that the scheme can be successful.

I am grateful to the Minister for that reply. He set out the difference between the tax incentive here and the ISA. To paraphrase him, the effect of the ISA and pension tax relief is to support those with a high propensity to save, to maintain the saving habit with generous government subsidy. He then went on to say that this scheme is very different from that because it is a one-off catalyst. My question, which he has not begun to answer, is why it is a one-off catalyst rather than a more permanent scheme. He has not answered at all why it would be possible for the Government to extend the two-year period under the Bill, which is obviously of considerable importance to the longer-term outlook for the scheme. Can he answer that this afternoon?

I apologise to the noble Lord; I should have answered that question before. It is possible to extend the scheme—Clause 4(2) provides for that—but, in launching a scheme with many attendant difficulties, we are concentrating on making it effective. We are therefore concentrating on the scheme as set out, with a two-year period and the given level of support. We have elements of flexibility in the Bill, but the noble Lord cannot expect the Government to give the scheme extensively greater possibilities when we must get it launched with the full confidence of the providers and guarantee that it will be effective for those who are intended to benefit from it. That is why I emphasise rigidities in the scheme, while reminding the noble Lord that there is some flexibility on the point that he raised.

I am most grateful to the noble Lord for clarifying that point, and I beg leave to withdraw the amendment.

I say with some enthusiasm that this looks like a convenient time for the Committee to adjourn until Tuesday 21 April at 3.30 pm.