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Ms Keeble: Does the hon. Gentleman accept that even reasonably wealthy people who save tend to invest money for a shorter time than they can afford--for five years rather than 10? The real challenge is not to get non-savers to save for one, two or three years but to save at all. Having got them used to that, with the confidence that they can get access to their money in a crisis, the aim is then to get them to save for longer periods. Does he accept that people with money do not always put it into great long-term investments, because they want access to it?

7.30 pm

Mr. Loughton: I agree with the hon. Lady's aims, but, with the greater flexibility of ISAs and enabling people to take out cash and, in a confused way, refund it later--whether it is capital or accumulated income that is taken out and replaced is not clear--the Government are not encouraging longer-term investment. That is a fallacy. There was an inflexibility with PEPs, but one advantage of that was that people were committed to longer-term saving.

The real problem is that time is ticking away, especially for older investors, as my right hon. Friend the Member for Hitchin and Harpenden said. The ISA regulations are not even out yet and are not due before 10 May, but ISAs will start in 11 months. City firms and independent financial advisers will have to set up systems ready to work by the end of this year, but we do not have full details of how the scheme will work. It will cost a vast fortune in personnel, time and new computer equipment at a time when financial institutions are juggling with self-assessment, corporate tax self-assessment, the euro, the millennium bug and everything else.

Mr. Hammond: Does my hon. Friend agree that financial institutions face a major task in persuading existing regular savers in PEPs to sign the necessary paperwork to convert their contracts to continue saving regularly in ISAs, and that it is vital that we do not allow those people to slip through the net?

Mr. Loughton: That is right. Will we need to have completely new client agreements for PEP holders who

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will hold ISAs? There is much paperwork still to be done. Six months on from the original disastrous consultation document, many questions remain, and we have no idea of the answers.

Will the money that can be transferred from TESSAs after their maturity be the capital or the capital and the interest? No answer has been given. Will TESSA holders be able to transfer the cash from the cash component of an ISA to the equity component? We do not know. There is a raft of questions on regulation and monitoring, which is of particular concern to older people who do not want the hassle and confusion of changes and much more paperwork. How will the reporting of what people have got in ISAs happen? Whom will they report to? How will we cope with the different components of ISAs being run by different plan managers in the same year? Who will monitor the multi-provider component parts to avoid the risk of over-subscription in one year or five years or whenever it will be?

When will we get details about the proposed maxi or mini ISAs that have been dangled in front of us by Treasury representatives? What happens when ISA holders reach the cash, insurance or equity ceiling when they have different plans with different managers over several years? What will happen with withdrawals? Will capital or accumulated income be taken out? Who will monitor it when it is put back a few years later? Who will oversee best advice on a continuing basis, particularly with the insurance element, which demands a higher degree of best advice?

When a 55-year-old goes to Tesco, which has a link with a large Scottish pension and investment product company, and decides among his frozen peas and bargain yoghurts to put money into his ISA, it is likely that he will be offered an ISA linked to that company's plan. That is fine; he may go back a few months later and add more money. He may have a regular savings plan. When that investment is no longer the most appropriate--it may have fallen from the first to the third or even fourth quartile--whose is the responsibility to advise that investor to move to a different product? What onus is there on a supermarket, whose major responsibility and profit centre is flogging groceries, to ensure that that investor continues to have the best and most appropriate investment?

That brings me to benchmarking, which was mentioned by the hon. Member for Northampton, North. When will we get the consultation document on benchmarking or kite marking? Whenever the Revenue opens its mouth, it leaves open more questions than it answers. The Paymaster General knows that the head of regulation at the Treasury, Paula Diggle, gave one of her many presentations on the subject at a recent meeting of the Personal Equity Plan Managers Association. She likened benchmarking to the pure new wool mark on jumpers or the real dairy cream mark on dairy products. It sounds simple, but wool shrinks and cream is full of clots and can go sour if it is not looked after properly. Investments can go wrong and markets can go down, but the Government want to attract 6 million virgin investors without making them properly aware of the risks of equity or insurance investment and no idea yet of how investors will get on-going best advice to ensure that they get the best deals. It is unclear how ISAs will work, how they will be regulated and how on-going best advice will be guaranteed.

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Benchmarking is important because of its ability to make the market in ISAs grow fast, if it is to be successful. People will look for benchmarks, if that is how the Government are going to mark things, but what is benchmarking? I asked the hon. Member for Northampton, North about that earlier. It represents the replacement of advice and suitability tests with the judgment of the Government. It inherently means that the Government, through the Treasury, endorse the product as having a wide-ranging suitability for almost everyone. Before long, everyone will be shuffled into tracker funds. No doubt it will be called the people's tracker fund. All our 55-year-olds and younger investors will be encouraged to save in it by a nice little Government-approved benchmark, but if it goes wrong who is to blame? Where does the investor go for compensation?

Mr. Gibb: What would happen if all investors generally put their money into tracker funds, which track the stock exchange index? Would not that have a distorting effect on the stock market's top 100 or 200--depending on which index was being followed--companies?

Mr. Loughton: That would depend on what the fund was tracking. An artificial amount of money could go into one index that was being tracked. Inherently, tracker funds are fully invested. All the proposals have been formulated in a period in which markets have gone up by at least 20 per cent. over the past few years. At some stage, that bubble will burst. Growth may be more modest or markets may go down and tracker funds will track the relevant index down. Someone sucked into the Tesco hype by the ISA marketing glitz promulgated by the Paymaster General, who--

The Second Deputy Chairman: Order. The hon. Gentleman is straying wide of the amendments. I would be grateful if he returned to them.

Mr. Loughton: I apologise. I have almost finished. Benchmarking is a key issue and was raised by Labour Members.

I fear that if investments go the wrong way, as is highly possible, we will have a misbuying scandal that will make the Albanian pyramid selling scheme and the pensions business so often mentioned by Labour Members look like a tea party.

Ms Keeble: Will the hon. Gentleman give way?

Mr. Loughton: May I just make this point, as I am sure that the hon. Lady will take me up on it?

What is benchmarking actually benchmarking? Is it against charges--that someone is or is not offering a good-value product? Is it against the soundness and financial credibility of the investment manager handling the ISA products? Is it against the past investment performance of the products offered by that investment manager?

Ms Keeble: The hon. Gentleman has made much of the fact that people on low incomes who invest in ISAs

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might suffer because tracker funds, into which some of the money may go, track the market downward as well as upward. Does he agree that one of the attractions of PEPs is that they allow entrance into an extremely lucrative market and that, by and large, stock market investments have gone up faster than the interest rates obtainable on conventional savings accounts? Part of the ISA's attraction is that it gives people on low incomes who cannot afford to go trundling off to a stockbroker access to the stock exchange and to the greater returns that that can give, accepting that there is of course a risk. Does he accept that--

The Second Deputy Chairman: Order. That is an extremely long intervention of a very general nature.I should be grateful if the hon. Member for East Worthing and Shoreham (Mr. Loughton), who is about to respond, is not drawn in that general direction, but returns to addressing the amendment.

Mr. Loughton: I shall indeed, Mr. Lord--I have almost finished my remarks. The hon. Lady makes an interesting point; the Paymaster General himself in Committee last year said:


There is no guarantee that the stock market is a one-way bet, as the Lady suggests.


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