Select Committee on Treasury Written Evidence

Memorandum submitted by HM Treasury

  The Chairman of the Treasury Select Committee has asked the Economic Secretary to the Treasury for written evidence covering three particular points:

    —  A response to the recommendations in paragraphs 68 and 69 of the Committee's First Report of the current Session on Financial inclusion: the roles of the Government and the FSA; and financial capability.

    —  A summary of the information available to the Treasury on the second round of Saving Gateway pilots, together with any indication about the precise timetable for decisions on next steps.

    —  An update on the progress in the implementation of the agreement that had been secured from the hamper industry to establish an industry-led scheme to ensure that consumers' interests are fully protected through the establishment of secure, ring-fenced accounts.



    Paragraph 68:  We welcome the establishment of the Financial Inclusion Taskforce and its progress during the first 18 months of work. It has brought a much needed focus to the issue of financial inclusion and ensured wide consultation with those throughout the financial services industry and voluntary sectors who have a role to play in promoting financial inclusion. The Taskforce has made much progress in its work programme under the chairmanship of Brian Pomeroy. We believe its remit should be expanded to include access to savings and insurance. The Treasury should ensure that additional resources are provided to the Taskforce so that the expansion of its remit does not limit the ability of the Taskforce to complete its substantial programme of current work.


  1.  The Government recognises that savings and insurance products, as well as affordable credit, are important tools for helping people to plan for the future and cope with financial pressures. The Government's new financial inclusion strategy document, Financial inclusion: the way forward, published in March, sets out the Government's goal that affordable credit, savings accounts and simple insurance products should be available to all who need them.

  2.  To work towards this goal, the new strategy announces that the Government will work with the Financial Inclusion Taskforce and the Association of British Insurers to address key questions around how to take forward insurance within the financial inclusion strategy. A new member from the insurance industry, Bridget MacIntyre (UK CEO of Royal and SunAlliance plc), has been appointed to the Taskforce to provide an expert perspective on its insurance work.

  3.  The Government agrees with the Committee that it is important to consider inclusion issues that relate to saving and that is why the remit of the Government's financial inclusion strategy has been extended to include saving. In this context, the Government has been using the Saving Gateway to explore ways to encourage saving among lower-income households and promote engagement with mainstream financial services. Evidence from the Saving Gateway pilots will inform policy decisions on the Government's approach in this area and any potential involvement of the Taskforce in saving issues going forward.

  4.  HM Treasury will continue to work with the Taskforce Chair to ensure that the Taskforce is adequately resourced to carry out all of its responsibilities effectively.


    Paragraph 69:  While we recognise the need to keep the Financial Inclusion Taskforce at a workable size, the Taskforce needs to engage with other partners that can help promote financial inclusion, such as the Post Office and housing associations.


  5.  The Government agrees that the Financial Inclusion Taskforce should engage with a wide range of stakeholders, including organisations outside the mainstream financial services industry. The Government is confident that the Taskforce is carrying out their responsibilities in this way, and that it has responded to this effect in its own response to the Committee's recommendations.


  6.  The second Saving Gateway pilot was announced at PBR 2004. The pilot started in March 2005 and an interim report was published in July 2006[15]. The final evaluation of the second pilot is published today[16]. Both documents are available publicly on the HM Treasury website.

  7.  The first and second Saving Gateway pilots have provided useful information on which to base policy decisions about the Government's approach to promoting saving among lower-income households. The Government now encourages external stakeholders to contribute to the debate over the coming months and will make further announcements on the next steps for the roll out of the Saving Gateway in the Pre-Budget Report.


  8.  The Department of Trade and Industry has been working closely with the hamper companies to ensure the industry-led scheme to establish trust accounts are put in place as quickly as possible. The scheme is designed to protect customers by ring-fencing payments made into accounts controlled by independent trustees. Good progress is being made. The companies are in the process of restructuring their businesses to accommodate the new trust arrangements and hope to identify suitable independent trustees shortly to administer the accounts.

  9.  A new trade body—the Christmas Pre-payments Authority (CPA)—will take over the role of monitoring the establishment of these accounts as soon as it is operational. The Minister for Trade, Investment and Foreign Affairs announced on 17 May that Derek Walpole, deputy Chief Executive of the Family Fund, and Suzy Hall, founder of the Unfairpak campaign, have agreed to take on the roles of Chairman and Director of Consumer Affairs in the CPA respectively.

May 2007

15   Interim Evaluation of Saving Gateway 2, Institute of Fiscal Studies and Ipsos Mori, July 2006. Back

16   Final Evaluation of the Saving Gateway 2 Pilot: Main Report, Institute of Fiscal Studies and Ipsos Mori, May 2007. Back

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Prepared 9 October 2007