My Lords, it is a pleasure to start our Report stage consideration of the Saving Gateway Accounts Bill. In speaking to Amendment 1, I shall speak also to Amendments 3 and 4, which relate to the maturity period of the saving gateway account—in other words, how long each account will last. As noble Lords will know, we intend to set the maturity period at two years or 24 months. I think that noble Lords will agree that it is appropriate for regulations rather than primary legislation to set the maturity period. These amendments will continue to allow regulations to do that but will prevent them from setting a maturity period of less than 12 months. That is a response to the arguments made by the noble Baroness, Lady Noakes, in Grand Committee. I have carefully considered what she said and I agree that a maturity period of less than 12 months would not encourage saving. It would not be long enough for saving gateway account holders to develop a strong savings habit. I therefore cannot foresee a situation in which a maturity period of less than 12 months would be desirable. Amendment 1 will remove that flexibility. Amendments 3 and 4 will then make some consequential drafting changes to the rest of the clause. I beg to move.

My Lords, when I moved a similar amendment in Grand Committee, it did not meet with instant success, but I am grateful to the Minister for reflecting on this and bringing forward the Government’s amendment, which of course I support.

My Lords, in moving the amendment, I shall speak also to Amendments 5, 6 and 8 in this group. These are repeat amendments of those that we debated in Grand Committee. They concern areas in the saving gateway scheme that caused particular concern to the British Bankers’ Association. There have been continuing discussions since Committee stage between the Government and the BBA. The Minister in another place subsequently wrote to colleagues in another place and I am grateful to him for copying that letter to me. Those discussions have not resulted in government amendments, so I have tabled my amendments again largely as a vehicle to ensure that the commitments that the Government have made to the British Bankers’ Association in connection with the topics covered by the amendments are clearly on the record.

It has been clear that, while there is good will towards the saving gateway scheme among potential providers—principally the banks, the building societies and the Post Office—there has been great concern about the cost of operating saving gateway accounts. Suffice it to say that it would not be difficult for a potential account provider to conclude that participation was not economic.

One issue is that the draft regulations allowed complete freedom to account holders to transfer their accounts to other providers, which potentially imposed significant costs on account providers. While we would normally support the freedom to transfer, we could see that the cost implications were so considerable that transferability might kill off the scheme. My Amendments 5 and 6 allow transferability in only limited circumstances.

The draft regulations were satisfactory in two other respects—in not requiring the payment of interest and in not requiring statements to be sent more frequently than six-monthly. These matters are crucial to the economics of participation in the scheme. The BBA wanted to see them dealt with in the Bill, because regulations can be changed by the Government pretty much at will, subject only to the inconvenience of pushing through statutory instruments. Hence the economics of saving gateway accounts could be wrecked at the stroke of a pen. Amendment 2 deals with interest and Amendment 9 deals with statement frequency.

As the Minister pointed out in Grand Committee, my Amendment 5, dealing with transfers, did not quite do the trick technically. I have not chosen to table a more perfect version for today, since the purpose of my tabling these amendments is to give the Minister an opportunity to place the Government’s position on the record. I beg to move.

My Lords, I welcome the explanation of the intention behind the amendments. I must, of course, be cautious if I am to respond positively to suggestions for improvements of legislation coming from the Opposition Benches even if I am then to be accused of being rather slow on the uptake. But in a number of points to be debated this afternoon, the Government have shown a real willingness to listen with good and respectful attention to comments from the Liberal Democrat and Conservative Benches and to incorporate the best of those in our proposals.

As I said previously, we have no intention of requiring account holders to pay interest or of requiring statements to be issued more frequently than six-monthly. The Economic Secretary also confirmed in a letter last month to the British Bankers’ Association, which was copied to noble Lords who had contributed to the Bill’s passage, that account providers will not be required to allow account holders to transfer their accounts other than in certain circumstances where they are unable to operate the accounts to maturity. As with the payment of interest and statement frequency, we do not intend to change our position on transferability. But on all three issues I believe that the Bill should provide the flexibility for changes to be made in the future by regulations, rather than by the requirement for primary legislation. After all, there has been a range of reviews on all these questions. I also believe that detailed points such as the frequency of statements and the exact circumstances in which transfers should take place are more suitable for secondary legislation in any case.

Having said that, I appreciate the noble Baroness’s argument that we should not leave potential saving gateway providers wondering whether these characteristics of the scheme might change. I am therefore very happy to put on record our commitment that these features will not be changed without full consultation, including with account providers. We have discussed this with the British Bankers’ Association, which said that it provides the reassurances that it requires. I hope that it will also provide the noble Baroness with the reassurance that is sought and that she will seek leave to withdraw the amendment.

My Lords, I am most grateful to the Minister for placing on the record the assurances that have been given in private to the British Bankers’ Association. It is important that those who choose to start providing saving gateway accounts are given an opportunity to make full representations in consultation if the Government decide to change the economic framework within which saving gateway accounts are operated. I hope that the Government do indeed adhere to that commitment. On that basis, I am pleased to beg leave to withdraw the amendment.

My Lords, Amendment 7 would amend Clause 8 so that the maturity payment may be at the rate of no more than 100p. One of the features of the Bill is that it contains very little in the way of detail of the saving gateway scheme and is one long regulation-making power. There are some very long draft regulations which easily outweigh the Bill itself. The maturity payment is one such example. Clause 8 says that there will be a maturity payment of a number of pence for each eligible pound which has been saved but the number of pence is to be specified in regulations.

The draft regulations give effect to the Government’s decision that the maturity rate should be 50p, giving a 50 per cent matching rate. We have no problems with that matching rate, but it remains wholly within the Government’s power, subject only to the minor irritation of an affirmative order, to raise that to whatever amount they choose.

The rationale for the Bill is about promoting a habit of saving. Allowing the maturity payment to be whatever amount the Government choose is tantamount to allowing them to abandon the underlying principle of promoting savings and using the provisions of the Bill to be a conduit for additional benefit payments. There should be a quite separate mechanism for determining benefit payments.

We believe that this Bill should be confined to savings, and accordingly Amendment 7 proposes that a cap on the maturity payments should be set at 100p, that is, that the matching rate should not exceed 100 per cent. We understand that the Government wish to preserve flexibility. That is a conventional way in which Governments approach the drafting of Bills, but the Minister gave no substantive reason for having unfettered flexibility in this area in Grand Committee. My amendment gives him a second chance of explaining that rationale, if there is one. I will take some convincing that a so-called saving scheme could be turned into a benefit scheme merely by order. I beg to move.

My Lords, this amendment would prevent regulations from setting a match rate of higher than £1 from the Government for every £1 saved by account holders. As noble Lords may know, we intend to set a match rate of 50p for each £1 saved, so this amendment would allow some flexibility for increasing the match rate. However, the amendment would limit that flexibility, and I am not convinced that there is a good reason to do so.

Of course, too high a match rate would not represent good value for money for the taxpayer. It would depart from the concept of encouraging saving. However, it is important that we are able to respond to any lessons we learn from the operation of the national saving gateway scheme. We should bear in mind that there are matched savings schemes elsewhere in the world that have match rates of higher than £1 for £1. Although those schemes tend to prescribe a fixed end use for the funds saved, for instance home purchase or to evidence commitment to education, they are still about saving, so it is conceivable that a Government in the future may want to set a match rate, in certain circumstances, higher than £1 for £1. Although that is not our intention, and the noble Baroness has indicated that it would not be hers either, I am not convinced that we should take this option away.

I also remind the House that any change to the match rate would be subject to the affirmative procedure, and therefore not unfettered as described, which means that Parliament would have the chance to scrutinise any change. I hope, in those circumstances, that the noble Baroness will withdraw her amendment.

My Lords, the Minister disappoints me. I invited him to give a rationale for having this very wide, if marginally fettered, flexibility. He responded that I had not given a good reason to restrict flexibility. It is not done that way round. It is for the Government to justify why they should have their flexibility. The Minister referred to some schemes going beyond 100 per cent, but only in very restricted cases where there was a specified purpose for the saving, which is not what this saving gateway account is currently drafted as, and nor could it be turned into such an account, given the powers in the Bill. I continue to believe that we should restrict the Bill to something that resembles saving, and I have thought hard about whether or not to seek the opinion of the House on that. However, since the powers in this Bill may not be exercised by the current Government for very much longer, and we have yet to see what the outcome of the next election might be, I have decided to trust the British electorate, and entrust the powers to a sensible Government, and on that basis I withdraw my amendment.

My Lords, the amendment would add an additional subsection to Clause 10, which deals with accounts ceasing to be saving gateway accounts. This new subsection says that if an account is assigned or charged or is subject to an agreement to be assigned or charged, it ceases to be a saving gateway account. Importantly, that means that the account would no longer qualify for a maturity payment. The amendment is similar to one that I tabled in Grand Committee and seeks to deal with the possibility that a saving gateway account holder could use eligibility for a maturity payment as a source of profit without even waiting for the two-year maturity period. That would not be compatible with the scheme being designed as a pathway to a savings habit.

For example, if I qualify for a voucher to open a saving gateway account, I might make an arrangement with a lender to borrow the £20 a month to put in the account on the basis that we would share the maturity payment, which would represent a jolly good rate of return to each of us. If such an arrangement exists informally, there is little we can do about it, but if the account was formally transferred or charged by the account holder we could, with my amendment, prevent the maturity payment from accruing. Similarly, if a saving gateway account holder has saved the maximum for, say, 18 months, thus qualifying for a matching payment of £225 if held for the full two years, that person might want to cash in early. He could borrow from one of the people whom the Minister graphically described in Grand Committee as,

“scoundrels operating in the margin in the unbanked community”.—[Official Report, 1/4/09; col. GC363.]

Those people would be using the accounts as security. I am sure that the Minister would not want to encourage that.

I know that the Minister agrees with these sentiments and that the Treasury has looked further at the regulations. I invite him to set out how the Government intend to tackle the problem, because I think that he has accepted that it is a problem area, and whether the Government’s proposals will achieve the results that I seek to achieve with my amendment. I beg to move.

My Lords, I understand the noble Baroness’s concerns in this area and, since our debate on this matter in Grand Committee, we have considered this issue carefully. While we do not anticipate that the situations referred to in the noble Baroness’s amendment will be common, we have decided to strengthen the draft regulations to provide a stronger and broader defence should such cases arise. We now intend to provide in regulations that a saving gateway account can be held only by the person who applied for the account and made the necessary declaration of eligibility at account opening. That is covered by draft Regulation 10(1)(a). We intend that regulations shall also provide that the account must be in the beneficial ownership of the account holder, and not held on behalf of any other person.

The effect of these provisions would be that should the person sell, transfer, assign or otherwise allow a charge over their account, it would cease to be a saving gateway account, and any right to a maturity payment would be lost. We intend that draft regulations should provide that an account provider shall have no right of charge, set off or other security against amounts held in a saving gateway account. That is covered by draft Regulation 10(2)(g). We therefore intend to achieve the effect of the noble Baroness’s amendment in regulations. We think that detailed provisions of this kind are most appropriate for regulations, where they can be updated and strengthened where necessary in response to learnings and developments, without the need for primary legislation.

In view of that confirmation, I hope that the noble Baroness will seek leave to withdraw her amendment.

My Lords, I am grateful to the Minister for explaining how the Government intend to strengthen the draft regulations to meet the points raised by the amendment that I tabled. The only point that I would leave with the Minister is that it is important to ensure that the information provided to saving gateway account holders when they open accounts makes it clear to them that they are not to use the accounts in this way. That should be clear at the outset.

My Lords, that is rather a good point. I shall go away and talk to officials about that. I thank her again for her constructive suggestion.

I beg leave to withdraw the amendment.

My Lords, Amendment 10 would insert a new clause before Clause 11 setting out a requirement for annual information flows to Parliament. We will later come to a government amendment that will require an independent review of the saving gateway account scheme, but this does not report for seven years. In the mean time, Parliament will need to vote each year a significant amount of public money to fund this scheme. The Government’s estimates are for £100 million in the first three years, falling to £60 million a year after that. There is no provision in this Bill for any information on the progress of the scheme to support that.

The Minister in the other place and the noble Lord have made vague promises of information being made available to Parliament, but there has been nothing concrete. We have been invited to trust HMRC to do the right thing on the basis that it is good at providing information on ISAs and on child trust funds. I am not convinced that HMRC’s history justifies that confidence. It certainly has provided regular information, but it has been like getting blood out of a stone to get any further information, whether by Written Question or otherwise. It seems that HMRC decides on the information that it wants to provide and gears up to do that; if it does not align with what parliamentary or other users want, that is tough. If we had our time again with the ISA or trust fund legislation, I suspect that we would be taking the same approach as I am taking with Amendment 10.

While HMRC has responsibility for the saving gateway scheme under this Bill, in practice information about eligibility will be held by the Department for Work and Pensions and not by HMRC. In Grand Committee, I argued—admittedly unsuccessfully—that DWP should be in the lead, rather than HMRC. I will wager that, if information provision is left to HMRC, it will not give any information that could be relevant, such as analyses of take-up or eligibility by benefit type. One of the things that we know for sure about HMRC is that it cannot see beyond its own backyard. That is why my amendment would place the information requirement on the Treasury rather than on HMRC, so that a wider base of information could be addressed.

That is the background to the approach of Amendment 10, which specifies what information, as a minimum, Parliament should receive on an annual basis. This covers information about eligibility and take-up, about maturity payments and early closure of accounts and about the universe of account providers. This is clearly not all the information that could be provided and there is clearly no bar to further information. It does, however, set down a basic data set, which should not be onerous for the Treasury to collect. I hope that the Minister now sees the logic for a minimum information requirement to be hard-wired into this Bill. I beg to move.

My Lords, I spotted the noble Baroness’s amendment in Committee and I spot the substance of it now. The question as to whether the amendment goes on the face of the Bill or whether we have an assurance from the Minister to the effect that the substance of the amendment will be covered is of secondary importance. I hope very much that the Minister is able to give us an assurance that every aspect of the amendment that the noble Baroness has put on the Marshalled List today will be covered by any report produced on a regular basis by HMRC.

My Lords, there is a good deal of weight behind this amendment. First, the suggestion that the Treasury should issue this report is appropriate, given the origins of this Bill and the wide context in which the Treasury placed its initial proposals. I wonder also whether, if this idea finds any favour, we could consider not merely communicating this to Parliament but also providing the bare headings of information to the holders of saving gateway accounts. The purpose is, after all, to educate them in principles of financial management, which is an education that they have not previously undergone. It seems to me that other kinds of savings schemes for wealthier people are informative. Perhaps that principle could be extended to the holders of these accounts.

My Lords, as I indicated in our debate on this matter in Committee, I agree with the noble Baroness about the importance of publishing data about the operation of the scheme. I also indicated in that debate that we wished to consider carefully the data that should be published and the frequency of publication. I am therefore grateful for the opportunity to set out further details of the approach that we propose to take in this area.

I am happy to confirm on the record that HMRC will be publishing data on the saving gateway at least annually, in a similar way to how it currently publishes data on ISAs and child trust funds. This will include data for the relevant period on the number of notices of eligibility issued; the number of accounts opened, closed and reaching maturity; the net balances held in accounts that have reached their 12th month of operation; the match payments earned on these accounts during their first year of operation; the net balance held in accounts that have reached maturity; the total amount paid out by HMRC in match payments; and the number of match payments made.

I can also confirm to noble Lords that HMRC will be publishing details of providers that are approved to offer saving gateway accounts. This information will be sent to each eligible person alongside his or her notice of eligibility and will be available on the HMRC website. Further consideration will be given to whether any additional information will be collected or published by HMRC in order to inform the evaluation of the operation of the scheme.

While I am more than happy to put this commitment on the record, I remind noble Lords that detailed information is published on ISAs and child trust funds without any statutory requirement. It remains my view that it is not necessary for a provision on annual reporting to be placed in the Bill and I hope that this commitment provides the noble Baroness with sufficient assurance that detailed data on the operation of the saving gateway will be published regularly.

I note the comments made by the noble Lord, Lord Newby, and my noble friend Lord Morgan. I will consider my noble friend’s point, although, at first blush, I suggest that the type of information that will be published is unlikely to be material in helping people to understand how to manage their savings, investments and personal financial affairs. However, before I close that option down, I will reflect further on it. The fact that we will be publishing details of saving gateway account providers on the notice of eligibility and on the website will be enormously helpful to those who are eligible.

I note the noble Baroness’s comments on the competence of HMRC. In some way, I feel that she gave me a get-out-of-jail-free card earlier by suggesting that in all respects of this legislation she would be working on the assumption that there would be a change of Government and that therefore, even if there were deficiencies, they would, no doubt, be remediated instantly under the wise and informed guidance of the noble Baroness and her colleagues. However, I would not stoop to suggest such cheap politics. I invite the noble Baroness to withdraw her amendment in the light of the statement that I have placed on the record.

My Lords, I thank the noble Lords, Lord Newby and Lord Morgan, for their support for my amendment. I am grateful for that. I also thank the Minister for placing on the record what the Government expect HMRC to publish on an at least annual basis. What the Minister said was all right in so far as it went. The issue, which I raised in my opening remarks, is whether HMRC is willing or able to publish information that is not in its own bailiwick. There clearly is a crossover between information that is held by DWP and information that is held by HMRC. There may well be issues about the nature of eligible persons and whether we can track relevant information about take-up by eligible persons, which would require HMRC to go outside. It was to this that I alluded. I hope that the current Government or any future wise Government will bear in mind the need to provide relevant information to Parliament and not simply information that happens to be available to the information provider—in this case, HMRC. The Minister has offered more than half a loaf, for which I am grateful, and on that basis I will not pursue my concerns further. I beg leave to withdraw the amendment.

My Lords, in moving Amendment 11, I shall also speak to Amendment 12. Both amendments relate to Clause 12 of the Bill, which deals with HMRC’s powers in relation to the recovery of amounts that have been incorrectly paid. As usual with this Bill, all is to be specified in regulations.

Amendment 11 deals with the position of account holders. It is common ground between these Benches and the Government that HMRC must have powers that allow it to protect the public finances. My amendment would ensure that the full range of HMRC powers is modified when HMRC is dealing with the consequences of one of its own errors or mistakes. It would limit the power of recovery in such a case only where the account holder materially contributed to the error or mistake.

The wording in Amendment 11 is taken from the guidance to which HMRC works in the case of tax credits. For ordinary taxpayers, the HMRC can throw the full weight of its powers, which are increasing with every Finance Act, at a taxpayer who ends up underpaying even through no fault of his own.

When the tax credit scheme was introduced with such disastrous effect by HMRC, it initially responded in its customary heavy-handed way. HMRC was set up to collect taxes and has none of the culture that is necessary for dealing with benefit recipients, which is what most tax credit money in fact involves. One of the outcomes of the outcry over the way in which HMRC dealt with the problem of billions of pounds of overpayments was the guidance that severely limits the ability to recover overpaid tax where this is due to HMRC’s error or mistake. It is this that I am trying to replicate for the saving gateway accounts.

Much has been written and researched about the lack of financial capability across a large swathe of the population. The Government are taking some action on this, but it will remain the fact that the poorest in our society, including those on the benefits or tax credits that will passport them to the saving gateway scheme, have limited or no financial education, experience or even literacy. What is blindingly obvious in financial terms to those who sit in your Lordships’ House, even those without financial credentials, is quite likely to be incomprehensible, or at least confusing, to those on benefits.

When HMRC makes a mistake in a saving gateway account, it cannot be presumed that the beneficiary of that mistake ought to have spotted and responded to it. HMRC should not be allowed to throw the book at such people. This softening of HMRC’s powers is, in my view, the right thing to do, even if it results in some loss of public money. In any individual case the loss of public money is likely to be small. It is HMRC that should be penalised, through loss of bonuses and the like, not the saving gateway account holder. In Grand Committee, the Minister seemed unconcerned at the plight of these benefit recipients getting on the wrong side of an HMRC error or mistake. I hope that the Minister has had a chance to reflect further on that.

Amendment 12 deals with account providers. The regulations deal with overpayments but, as I pointed out in Grand Committee, the wording of the draft regulations seemed to imply that HMRC could pursue an account provider that had assets even if the provider had already paid money over to the account holder. Furthermore, the draft regulations provide for joint and several liability. That seems to give HMRC carte blanche to pursue the deepest pocket available, which is inevitably that of the account provider, whatever the detail of the recovery rules set out in Regulation 20.

My amendment would ensure that HMRC cannot proceed against an account provider if in good faith the money has already been paid over to the account holder or someone else entitled to the money. I understand that the Treasury has looked again at the regulations in this regard and that some changes are being proposed, and I look forward to the Minister setting that out for the record. I beg to move.

My Lords, I know from our debate at Grand Committee that these matters are of concern to the noble Baroness, and I hope that I can allay some of those concerns with my response.

Amendment 12 concerns cases in which a provider has been paid an amount by HMRC in respect of an account where it is later necessary for HMRC to recoup that payment. We listened carefully to the points made at Grand Committee and said that we would look again at the published draft regulations on this point. I can confirm that we now intend that regulations will only require a provider to account to HMRC for such payments to the extent that the provider still has assets relating to the account, or assets directly or indirectly representing any of the payment, in its possession or control.

I trust that that reassures the noble Baroness that we intend to achieve by regulations the outcome that is being sought through this amendment. I should explain to noble Lords that we believe that it is appropriate for this matter to be addressed alongside other provisions on HMRC collection and recovery in regulations, rather than in the Bill.

Turning to Amendment 11, I should point out to the noble Baroness that Clause 12 already contains flexibility for the outcome that is being sought through the saving gateway regulations. It is therefore not necessary for the achievement of the noble Baroness’s objective for there to be any further provision in the Bill. However, I am of course happy to address the issues that have been raised.

The noble Baroness cites HMRC’s approach to tax credit overpayments made in error, and suggests that a similar approach may be desirable in relation to the saving gateway. We have considered that carefully, but do not believe that this would be either appropriate or necessary. First, the saving gateway is very different from tax credits. As noble Lords will be aware, tax credits is a flexible system designed to be responsive to people’s changes in circumstances. Regular payments are made directly from HMRC to claimants, and it was always anticipated that there would be a need within the tax credit system for end-of-year adjustments. This necessitated a tailored HMRC policy for recovering overpayments.

The saving gateway is very different. It will not reflect changes of individual circumstances and there will be no need for an end-of-year adjustment process. Once an account has been opened, a change to the account holder’s circumstances will not make any difference to their entitlement or payments under the scheme. That means that overpayments will not be a normal part of the saving gateway system in the same way that they can be for tax credits. There will also only ever be a one-off maturity payment made to an account holder once the account matures, and that will be paid through the account provider.

There is also an in-built safeguard with the saving gateway system that should prevent payments made in error by HMRC reaching account holders. Payments by HMRC under the scheme, including any made in error, will be made to an account provider only on the basis of a claim made by that provider. It is reasonable to expect that an account provider will check the payments that they receive from HMRC against the claim that they have made and discuss any incorrect or unexpected payments with HMRC, rather than simply pass an incorrect amount on to a customer.

Furthermore, because HMRC will not make payments under the saving gateway until the relevant account has matured, any HMRC errors could—and, we hope, will—be picked up and addressed during the lifetime of the account, before any maturity payment has been made by HMRC. My first argument is that the saving gateway is very different from tax credits and that overpayments to account holders under the saving gateway should be very rare. This reflects the current experience of the child trust fund. Secondly, we do not believe that people can legitimately expect to retain taxpayers’ money that has been wrongly paid to them under the saving gateway, even where they have not materially contributed to the error. It is right that HMRC should be able to recover public funds where appropriate to prevent individuals obtaining a windfall at the taxpayer’s expense. In this respect, the saving gateway is closer to the child trust fund—where one-off payments are made through an account provider and there is no requirement for any adjustments once a payment has been made—than it is to tax credits.

Under the child trust fund system, HMRC seeks recovery of any payments that have been made incorrectly without there being any specific procedures relating to official error. For these reasons, HMRC should have the right to recover overpaid amounts in the circumstances that the noble Baroness outlined. It is important to remember that, in each case, HMRC will consider the facts and circumstances to assess whether it is appropriate to take recovery action. There will, for example, be issues of cost and proportionality to consider. The maximum single payment made to an individual under the saving gateway is £300. In using its powers of recovery, HMRC is guided by value-for-money considerations, so where the cost of pursuing a debt would likely outweigh the debt collected, or the debt is unlikely to be collected due to the individual’s circumstances, HMRC may take the view that it would not be appropriate, in such circumstances, to pursue recovery of such amounts. If HMRC were to decide to recover the amount, it would allow time to pay where this is justified and will have arrangements in place to deal with financial hardship.

In conclusion, I know that the noble Baroness is concerned to avoid a repetition of some of the problems that arose in the early days of tax credits. I hope that I have assured her that these problems should not arise from the saving gateway, which is a very different system in structure and character. If I have not managed to reassure the noble Baroness on this matter, I point out again that, should the Government choose to adopt the course that the noble Baroness advocates, there is already sufficient flexibility in the Bill to support that. The amendment is, therefore, unnecessary. In the light of this explanation, I hope that the noble Baroness will withdraw the amendment.

My Lords, I thank the Minister for that explanation and for stating clearly how the Government intend to respond to the issues that I raised in connection with Amendment 12. On Amendment 11, which concerns account holders, the Minister said that child trust funds are different from tax credits, which of course they are. The difference is not that there happen to be end-of-year adjustments for tax credits and that it is an annual payment. That is not the important issue. The important issue is that the recipients are fundamentally the same and they are not financially very clever. They do not have the expertise that many others have; that, indeed, is what was found before. While some of the errors that led to problems in child trust funds were in relation to end-of-year adjustments, some were not. Some were HMRC putting in the wrong figures in the first place, which resulted in overpayment. To some extent, therefore, the two can be placed on all fours.

My Lords, Amendment 13 would add a new subsection to Clause 16. Clause 16 in effect allows saving gateway accounts to be transferred to an ISA on maturity, which is a fine and sensible home for the product of a saving gateway account. But there is nothing else in the Bill about what will happen to a saving gateway account post-maturity. It ceases to be a saving gateway account at that stage and therefore has to be transferred to another account.

It is not unduly cynical to say that banks do not routinely help their customers to hold their funds in the most suitable accounts or in the ones which offer the highest yield for the customers’ preferred notice period. Anyone who has cash on deposit has to be vigilant in watching how banks vary their rates and terms. I do not know about building societies, but I have no reason to think that they are any different.

If banks do not help their regular customers to maximise their returns from cash held on deposit, it is hardly likely that they will do so for saving gateway accounts with their rather marginal economics. In Grand Committee, the Minister said that the Government expected that account providers would,

“want to help their customers access the option most suitable to their needs”.—[Official Report, 21/4/09; col. GC 371.]

That represents the triumph of hope over experience.

The Minister in the other place also talked about wanting to establish a competitive marketplace which would include rollover arrangements. We are far from convinced that there will be any real competition in the saving gateway market. But even if we are wrong on that, it is unlikely that account holders, with their lack of financial sophistication, will be able to differentiate at the outset between those account providers which offer a good default account at the end of the maturity period and those which do not. In any event, the banks are rather good at changing their terms and conditions when it suits them, and so what looks good when a saving gateway account is opened may be pretty unattractive two years later.

A likely scenario is that the money will be transferred to a low-interest account or, even worse, to a current account which does not pay interest. The Government should have some responsibility to protect account holders when the saving gateway period comes to an end. As far as I am aware, there is no provision in the Bill which would allow the Government to specify a default rollover provision, such as into the provider’s highest-rate instant-access deposit account. There appears to be no relevant regulation-making power.

I do not advocate that the initial regulations should include requirements for funds at the end of the maturity period. It may well be that account providers behave impeccably. But I advocate the Government having the regulation-making power in reserve to use if it transpires that account holders need some protection. That is all that my amendment does and I hope that the Minister will agree that it would be desirable for the Bill to contain this reserve power. I beg to move.

My Lords, as the noble Baroness said, the amendment relates to the maturity of saving gateway accounts, and it may be helpful if I remind noble Lords of what will happen at that point. Our key principle is that savers should be able to choose what happens to their money. There is no defined purpose that the account balance or the maturity payment must be used for, and there is no defined product for it to move into. Account holders will be able to spend their money, continue to save it, or spend some and save some.

However, we want to make it easy for people to continue to save if they choose to—which the pilots suggest many will. Therefore, providers will put in place default rollover accounts, and if an account holder does not make an active decision about what they want to happen to their savings, their money will be transferred into one of these accounts. The amendment raises the question of whether the characteristics of the default rollover accounts should be regulated, or whether the Government should at least have the reserve power to regulate them in future. The noble Baroness spoke about this in Grand Committee. I have also looked closely at the thoughtful comments made on the subject by Mr Mark Hoban in the other place.

We believe that there are certain desirable characteristics for these accounts. They should be interest-bearing and cash-based, and allow account holders access to their money. We have carefully considered the option of regulating the accounts. However, we have decided against this for four principal reasons. First, we believe that providers will want to be fair to their customers and put in place appropriate options, and that regulation therefore will not be necessary. The noble Baroness may say that this is a triumph of hope over experience. When I listen to the noble Baroness castigating the banks, I often think that she and I should swap parties. I have considerable confidence in the fact that banks can be relied upon to behave towards their retail customers in a fair manner, consistent with competitive conditions; whereas the noble Baroness brings considerable scepticism to that conclusion. By nature I have a sunny disposition and am inclined to give people the benefit of the doubt.

We believe that providers will want to be fair to their customers and put in place appropriate options. That view was supported by the representatives of the potential account providers from whom the Public Bill Committee heard in the other place during evidence sessions. I realise that the noble Baroness, Lady Noakes, would point out that this argument is only against regulating now, and not against taking a reserve power in case it is required. However, the remaining three reasons that I will offer are arguments against regulating at any point.

The second argument is that regulation simply would not achieve a great deal. I suspect that all noble Lords will agree that default rollover accounts should be interest-bearing. However, even if we were to regulate for that, I do not believe that it would be appropriate for the Government to set a minimum interest rate, which would imply a judgment on what level of interest it was right for saving accounts to pay. Even if accounts were required to be interest-bearing, providers could still pay derisory interest rates if they chose to do so. I remind noble Lords that when the Conservative Party was last in government, interest rates reached 17 per cent as a consequence of the extraordinarily high rate of inflation.

My Lords, can the Minister remind us how long that rate applied for?

My Lords, on reflection, I think that it applied for about as long as the credibility of the economic policy then being pursued by the noble Lord, Lord Lamont of Lerwick—in other words, not very long at all. However, the very fact that interest rates had to be moved from, I believe, 15 to 17 per cent in one day, having gone to 15 per cent only that morning, will remind the House of the chaotic conditions of economic management that prevailed at that time.

Perhaps I may get back to the point that I was making. The fact is that, if we had been contemplating this legislation at that time and had decided that we wanted to specify a very low rate of interest, we might well have concluded that that rate of interest should be 3 or 4 per cent—an unbelievably low rate compared with the 15 or 17 per cent then prevailing. Of course, that would have proven to be a very foolish decision in the light of the fact that interest rates are now at their lowest level for 350 years. Therefore, there is a very real danger in seeking to specify what that rate of interest should be. That leads me to the conclusion that we could not simply specify a rate of interest because, if the noble Baroness is correct in her warnings to the House that we should be cautious in our dealings with banks because of their mendacity and their capacity to pull the wool over the eyes of their customers, we would have to find something that avoided this being satisfied by complying with a requirement to pay a rate of interest of 0.0001 per cent per annum. I think that that exposes the very practical problem that would arise in specifying a rate of interest.

The point is compounded by the third reason that I want to put forward. There are, in any case, constraints on the Government’s ability to regulate in this area. In particular, once a saving gateway account has matured, any new account that the account holder has with his provider will be a normal commercial arrangement. Using regulations to set certain boundaries for it would amount to a significant interference with the right of both the account provider and the account holder to enter into the sort of contractual relationship that exists between any provider of a savings account and their customers in the formal banking sector. For this reason, we believe that it will be possible to regulate the default rollover account only at the point of transfer, when the saving gateway account rolls over into it, and not beyond that. In theory, therefore, the characteristics of the default rollover account could change completely the following day.

My main argument therefore is that, even if we were to regulate for default rollover accounts, we would still be forced to rely on providers to put in place appropriate options. Even if we required them to pay interest, they could choose what rate to pay, and even if we required certain characteristics to be in place at the point of transfer, they could choose to change them after that point. As I said, therefore, I do not believe that regulation could achieve a great deal, and I think it is better to put our trust in providers and to use our more informal influence to suggest, perhaps through guidelines, the sorts of default rollover accounts that we would like to see put in place.

My fourth and final point is that, even if this were not the case and we felt that we could regulate these accounts effectively, there is an argument that we should not do so. One thing that we hope the saving gateway will achieve is a greater level of financial capability among account holders, as my noble friend Lord Morgan observed earlier, and an increased ability to manage their finances and make financial decisions. Regulating for what should happen at the end of their accounts could be at odds with that, although of course we will want to ensure that account holders are able to get any support and guidance that they need.

In conclusion, therefore, I am not convinced that regulation of default rollover accounts is necessary because I believe that account providers will put appropriate options in place. If we are to support people in making their own financial decisions, I am not convinced that it is desirable to insert regulation at this point. I am not convinced that it would achieve a great deal in any case because of the limited conditions that we could impose.

For those reasons, I am not convinced that we should take this reserve power, and I hope that the noble Baroness will seek leave to withdraw her amendment and will forgive me for my jousting about high interest rates.

My Lords, I thank the Minister for that response. I shall not forgive him for jousting about interest rates. It is interesting that his Government have so mismanaged the economy that we now have interest rates that are negative in real terms and, as such, a great disincentive to saving. Current rates will make it very difficult to convince people, once they have stopped qualifying for the Government’s generous top-up in the saving gateway, to continue to be savers. It would have been better if the Government’s management of the economy had not required the Bank of England to reduce rates to such catastrophically low levels for savers.

I would also like to place on record—since the Minister got a little carried away with himself, as he does from time to time—that I did not accuse the banks of mendacity. I hope that when the British Bankers’ Association reads Hansard, it will have the assurance that I do not believe that banks are guilty of that. However, I do believe that banks do not necessarily treat their customers as we would always prefer them to be treated.

The Minister has given me a number of reasons why the Government do not want to regulate and it is always a rather curious thing when on these Benches we stand up and ask for regulatory powers and the Government say they do not want to regulate. In this instance, we will probably have to agree to differ. I believe having a reserve power may well be useful, even if it can only be used at the point of rollover because of the way that inertia applies to accounts. The Government have set their minds against it and so, if there are problems and savers find that they are not being treated as well as they might by the saving gateway providers, they will know who to blame and they can add it to the long list of things that they have to blame this Government for. On that basis, I beg leave to withdraw the amendment.

My Lords, in Committee we had a very useful debate on the importance of ensuring that the saving gateway is effectively reviewed. At that time, in response to the points made by the noble Baroness and the noble Lords, Lord Newby and Lord Williamson, I indicated that I would seek an opportunity to bring forward a government amendment on this point on Report. I am, therefore, pleased to propose a new clause on review and report to Parliament. I will also use these remarks to address the noble Baroness’s amendments to this proposed new clause.

The new clause would require HMRC to commission an independent review of the saving gateway. The requirement that the review be independent means that it must be carried out by a person or body other than HMRC or HM Treasury, so I do not believe that the noble Baroness’s Amendment 18 is required. There will be a commissioning, and possibly a commercial, relationship between HMRC and the reviewer, which will flow from HMRC’s obligation to make the arrangements for the review. However, neither HMRC nor HM Treasury will be involved in the day-to-day conduct of the review.

As noble Lords may be aware, independent evaluations of the two saving gateway pilots were carried out by the Personal Finance Research Centre at Bristol University, the Institute for Fiscal Studies and Ipsos MORI, and we would envisage following a similar model for this review. Our amendment specifies some of the matters to be considered in the review. We think it is important for the review to focus on the performance of the scheme against the objectives we have set for it. Therefore, the matters specified at subsections (1)(a) to (d) of the new clause directly relate to the development of a saving habit among account holders, account holders’ engagement with mainstream financial services, and barriers to the opening of saving gateway accounts. However, it would not be appropriate this far ahead to be too prescriptive about all the matters to be considered. The amendment therefore also makes provision, at subsection (1)(e), for other matters to be included in the review where appropriate.

I know that the noble Baroness, Lady Noakes, and other noble Lords are concerned about the advice and information available on saving gateway accounts, that HMRC issues notices of eligibility in an effective and timely fashion, and that there are sufficient providers of saving gateway accounts to ensure customer choice. Amendment 15, in the name of the noble Baroness, would require the review to consider these issues. However, the review, as set down in our new clause, is already broad enough to encompass consideration of these important matters if they remain relevant. For example, the review can look at the available advice and information on the scheme, any issues associated with the issue of notices of eligibility, and any barriers to potential account providers, as part of considering barriers to the opening of accounts.

The review can also look at the advice and information that is available to account holders from their providers—for example, when accounts near maturity and savers are considering further saving options—when it considers the effects of the scheme on saving behaviour and on involvement with institutions that offer financial services. Alternatively, it may be appropriate for the review to take a more detailed or wide-ranging look at some of these issues. If so, our new clause would allow this, but it should not require it. Instead, it should be focused on the published objectives of the saving gateway.

The new clause requires HMRC to make arrangements for the review, so it is appropriate that the reviewers provide their results and conclusions to HMRC, rather than to HM Treasury as the noble Baroness’s Amendment 16 would require.

Finally, I assure the noble Baroness that the requirement that the report be laid before Parliament creates an obligation for HM Treasury to lay the report before both Houses of Parliament, so Amendment 17 would not add anything to the Bill. I hope that I have sufficiently assured the noble Baroness that she seeks leave to withdraw her amendment. I beg to move.

Amendment 15 (to Amendment 14)

My Lords, I thank the Minister for tabling his amendment in response to our debate in Grand Committee about the need for a review of the saving gateway scheme. I shall speak briefly to my four amendments to Amendment 15. The Minister has sought to answer some of the points that he thinks I am going to make, but I have one or two extra points to put to him.

I am quite sure that the review is needed. This week, for example, the Government released the findings of the latest Ipsos MORI report on the second pilot, but it tells us relatively little about the saving gateway scheme in the Bill because the coverage of the pilots was quite different from that in the Bill. We therefore have very little research information to help us to understand the effect of savings on the target group, which has been narrowed down for the purposes of the Bill, so I remain quite convinced that we need work to be done and a review to be carried out, and I am pleased that the Government have now come to that view.

Before I get into the detail of my amendments, I have one point to note but not pursue. The amendment to which I spoke in Grand Committee sought a review of the effectiveness of the saving gateway scheme. The Government’s Amendment 14 calls for a review of the effect of various things, and while “effect” and “effectiveness” come from the same linguistic stable, they mean rather different things. I had hoped for a review that set out how well the saving gateway scheme had performed and that did not merely confine itself to what effect the scheme had had. Obviously it will be for Parliament to judge the effectiveness of the saving gateway scheme, but it would have been helpful if the review had provided some assistance in that regard. As I said, however, I do not intend to pursue that further.

Amendment 15 sets out three additional things that should be included in the list. I completely accept that subsection (1)(e) of the proposed new clause allows the Treasury to specify additional things, if it chooses, before the review is commissioned and that could be included. However, the matters covered in my Amendment 15 arose during consideration of the Bill’s proposals not only in your Lordships’ House but in another place, and it is surprising that they are absent. In particular, the first item in my Amendment 15 is,

“the provision of financial information and advice”.

While some of that could be read between the lines in the government amendments, it is not there explicitly. I find that surprising; it kind of assumes that all the current actions by the Government on financial inclusion will be perfectly executed by the time that seven years is up. I rather doubt that that is the case.

The second item is the impact of the provisions on eligibility. I am not sure whether the Minister quite understood the points that I was going to try to make here. There is a concern that, at one end of the spectrum, the scheme could in a sense be abused by those with a transient relationship with the benefits system. When they get their notice of eligibility, they have parents who can bankroll their ability to fund a saving gateway account and to get the Government’s generous 50 per cent maturity payment at the end. We would not want the saving gateway account to be heavily used in that way, if at all.

At the other extreme, the vouchers only last for three months. It may well be that those on longer-term benefits cannot, for one reason or another, feel able to open an account within that period and are not aware of their ability to apply for a further voucher to be issued. We would not be happy if the saving gateway scheme missed those people if, at a later point, they could effectively have opened an account. From whichever way you look at it in here, there are ways in which that scheme’s eligibility mechanism may not work to achieve the end result. The Minister did not quite address that, and I could not see it being addressed in the Government’s own amendment.

Then there is the issue of account providers. I specifically sought to address that because we had much discussion about whether there will be a vibrant and competitive marketplace for account providers. The Government say that that is a barrier to eligible persons opening an account, rather than looking at it from the account providers’ end of the telescope. Those are the three items I would raise in connection with that amendment.

The Minister sought to justify the way in which the independent review is to be provided to HMRC, which would then,

“provide the results and conclusions … to the Treasury”.

I am rather suspicious of that formulation. It has an independent review getting fed into HMRC, which then has the opportunity to interfere with the “results and conclusions” before they are passed on to the Treasury, which has to lay them before Parliament. I do not understand why the review itself is not provided straight the way through the system. Why is there an opportunity for the commissioners to rephrase the findings? The Government have, for example, released the whole of the Ipsos MORI report this week but there might be occasions in future where the information is modified. That is not a helpful formula; it is not even the normal one for these kinds of things.

On whether Parliament is both Houses of Parliament, I used to think it was not necessary to separate out each House in relation to Parliament, but the Government do not always use “Parliament” to mean both Houses. For example, the Prime Minister in one of his many makeover statements announced that public appointments would be subject to confirmatory hearings by Parliament. When we pressed that further, we discovered that in this case the Government meant Parliament was only the other place. Therefore, whenever we see a reference to Parliament now, we always feel that it is necessary to clarify whether the Government mean both Houses of Parliament or simply the other place, because they have form, if you like, on using Parliament to mean both things and not necessarily being clear at the time.

My Lords, I am grateful for the Government bringing forward this amendment. I supported the broadly analogous amendment put down by the noble Baroness in Committee. I am particularly pleased that the review will look to any barriers which may exist around the opening of saving gateway accounts, as the Minister knows. One of my principal concerns about this Bill is that, far from there being competition between saving gateway providers, there will not be any providers because it will not be economically viable for banks, building societies or the Post Office to do it. That provision in this amendment is helpful because it allows that potential problem to be looked at.

I have one remaining concern about the amendment, which is the suggestion that no review will take place until after seven years of Clause 6 coming into force. Seven years is a long time. If the scheme is working well, seven years may be fine. But if there are problems with the scheme in any material respect, to wait seven years before you even start looking at it seems to be too long. Although I know the Minister believes that seven years is the right period, I want to confirm the provision in the amendment. It does not say that the review will be after seven years, but that it will be within seven years. Therefore, if there were strong arguments for having a review earlier, you would still be able to do it under the legislation even though, were the Minister still to be in his post in seven years’ time, he could wait for the seven years to elapse before he did it.

My Lords, I support my noble friend’s amendment, which, in general, seems to be important and sound in substance. I also think that there are important points in the amendment tabled by the noble Baroness. I hope that we can somehow disinter her first point about financial information and advice. I do not see why that is not put specifically in the Bill. As I said earlier, the educative aspect of this Bill is a central part of it. I hope that that could somehow be embodied. I note that my noble friend says, “Well, it would happen anyway”, but I would like something a bit more specific than that.

I have two little points about the government amendment. I take it that the reference to the Ipsos MORI material means that the support will be an account in terms of not merely historical consequence but expectations. I hope that this Ipsos MORI material can be related to what appears in the report, because it shows, first, how carefully this scheme has been researched and prepared for and, secondly, it shows that socially it is potentially extremely significant in that people’s habits are changed. People who have embarked on schemes of this kind seem to stay on them and have a very different view of their own financial competence.

Finally, I sympathise very much with the noble Lord, Lord Newby, that seven years seems an extraordinary period. It is longer than the life of a Parliament even without reforming the rules on when we have elections. I hope that we can have a slightly optimistic gloss on these words from my noble friend.

My Lords, I thank the noble Baroness, Lady Noakes, the noble Lord, Lord Newby, and my noble friend Lord Morgan for their most helpful and constructive contributions to the debate on this matter. I have listened closely to the points made. The noble Lord, Lord Newby, raises again a point that has been raised previously; namely, will there be sufficient account providers? I have shared with noble Lords my concern on that point as well. I have been engaged in active discussion with banks, building societies and other potential providers of saving gateway accounts. I am confident as those discussions continue that there will be a range of providers to meet the requirement of the intent behind the creation of saving gateway accounts at launch.

Questions were asked about the review period being seven years. It is important to remember that the seven years specified is the latest that this report can be published and not the earliest. If there are benefits to conducting and publishing the review earlier, the proposed new clause would provide sufficient flexibility for that to happen.

The noble Baroness, Lady Noakes, raised a number of points, one of which I can handle swiftly and, I hope, effectively; that is, the laying of reports before Parliament. “Parliament” in this context encompasses this House and the other place by virtue of the Laying of Documents Before Parliament (Interpretation) Act 1948. The noble Baroness raises important questions about eligibility for the scheme and whether the scheme is effectively targeted. It will be possible for this and other matters to be considered by the review if Treasury Ministers consider that to be appropriate. However, consideration of issues around eligibility creates a risk that the review might become a more general survey of savings, attitudes and behaviour among a wider group of people, rather than a consideration of the impact of the saving gateway on saving habits and financial inclusion among participants. The Treasury will keep eligibility for the saving gateway under review in any case, but this reinforces the view that the precise specification of the review within the framework as defined in my amendment is a matter where judgment is better made in the light of experience and observed practice.

Questions were raised as to whether my new clause would allow the Treasury to present the review in a report, whether this would be Treasury spin and whether we would see the reviewer’s own words. I assure noble Lords that that will not be the case. There will not be spin and the report will be presented in the reviewer’s own words. That is consistent with the sincerity of intent which has always been in our contemplation. This is a novel approach to tackling a significant problem around financial exclusion for the least fortunate in the community. We proceed on the basis that we are best informed by experience and the development of the account. It would be entirely consistent therefore for us to want there to be a full, broad-ranging and appropriate review at an appropriate time in order to assess whether the saving gateway account was having the intended effect.

The noble Baroness also raises a question around whether we should be using the word “effect” or the word “effectiveness”. I think that “effect” is what we had in mind and we would wish to leave it at that stage, but I will reflect further on the issue, as I have endeavoured to do at all times during our discussions on the Bill. I have stated again the importance that I attach to the effective post-implementation review of the saving gateway, and I believe that the proposed new clause provides for such a review, as well as being targeted on the scheme’s published objectives. It also provides a great deal of flexibility for any other relevant issue to be raised. I hope that the noble Baroness will withdraw her amendments. I beg to move.

With respect, my Lords, it is for me to withdraw my amendment before the noble Lord moves his. I thank all noble Lords who have spoken in the debate. We are satisfied that the Government have tabled the amendment. I am sorry that he has not responded to the points that I have put before him in terms of greater specificity of what the review should cover. In my remarks, I fully accepted that paragraph (e) would allow a judgment to be made in the light of experience, as the Minister said. If that were all that were necessary it would be necessary only to put in paragraph (e) and the other matters are regarded as important. It is a pity that the Government do not believe that the matters I have raised in my Amendment 15 are as important.

I am glad also that the Government are happy for the report of whoever is commissioned to go straight through the commissioners to the Treasury and onwards to Parliament. It is not what the Act says, and it is a pity that the Government have phrased it that way. They have moved a long way and, as I said at the outset, we are grateful to the Government for tabling the amendment. It is a pity that they are not prepared to engage in improving it further, but I live in hope that there is a week before Third Reading and the Minister might wish to consider the matter further. I beg leave to withdraw the amendment.

My Lords, this amendment increases the parliamentary scrutiny of the use of the regulation-making powers provided by the Bill. As noble Lords may know, most of the Bill’s delegated powers will be subject to the affirmative procedure on their first use and the negative procedure on subsequent uses. That will allow appropriate parliamentary scrutiny of the scheme’s details that will be introduced, but also the flexibility to make minor or technical changes to the scheme. As the Bill stands there are four exceptions, where every use of a power will be subject to the affirmative procedure. These are the three delegated powers that relate to eligibility for the saving gateway and the power for regulations to set the match rate. The delegated powers relate to central features of the saving gateway and so it is right that any changes should be subject to full parliamentary scrutiny.

The noble Baroness, Lady Noakes, proposed in Grand Committee that several further powers should also be subject to the affirmative procedure. My noble friend Lord Davies and I agreed to consider the points carefully. As a result, the amendment would make a further three regulation-making powers subject to the affirmative procedure on each use, rather than just on their first use. They are the powers to set the monthly deposit limit, set the maturity period that we discussed earlier and finally to set the number of accounts that people can hold, either at the same time or in their lifetime.

Having considered the matter closely, I agree with the noble Baroness that changes in these areas could affect the cost of the saving gateway relatively significantly and that the affirmative procedure is appropriate. I hope that noble Lords will welcome the increased parliamentary scrutiny of the Bill’s powers. I beg to move.

My Lords, the Minister said that I tabled amendments in Grand Committee to achieve the same effect as the amendment before the House today. I am grateful to him for taking on board the points that I made. I merely remark that this is a most agreeable way to conclude Report stage.