Examination of Wintesses (Questions 20-39)|
1 MAY 2007
Q20 Mr Breed: When you did your review,
did you cover these rather more informal schemes that some shops,
butchers and others have themselves in a local context? I have
no idea how widespread they are but when the Farepak situation
came up, one suddenly became more aware of an awful lot more of
these smaller, informal schemes.
Mr Pomeroy: I noted their existence
but I concentrated my review on firms which were in the business
of Christmas savings schemes as opposed to those which ran them
as an ancillary activity. I do not have good information about
that. I am not sure, frankly, that it exists at the moment. You
are absolutely right to say that up and down the country there
are butchers, grocers, toyshops, dairies and probably others running
informal schemes where contributions are probably recorded in
a very informal way. As to the extent of that, I suspect that
numerically it is large but I cannot tell you what amount of money
Q21 Mr Breed: This is terribly important.
The effect is that whatever that money is, it must be held in
some sort of trust status, no matter how large or small a business,
but of course it is not.
Mr Pomeroy: That would be the
ideal but I would be very surprised if you pay £1 a week
to a butcher for a turkey at Christmas if there was a trust status.
Q22 Mr Breed: This is a more general
question about credit unions, which are slow to get off the ground
in many places. Do you think that is partly due to the fact that
they are called credit unions, which does not mean an awful lot
to most people? Would it be much more sensible to call them community
Mr Pomeroy: I have a personal
view, which is not necessarily the Taskforce view or shared by
others in the Taskforce, that it would be useful to look at some
kind of re-branding.
Q23 Mr Breed: You can ask relatively
sophisticated people to explain what a credit union is and they
will look blank. If it was a community bank, the idea of saving
in a community bank would be a much more logical concept.
Mr Pomeroy: It would and, progressing
that one level further, I visited the USA with a team from the
Treasury about two years ago and did see community banks. They
are called community banks there; they are full service institutions
that serve local communities. They do run the whole range of products.
Of course the credit unions at that time did not offer a banking
service but now do, which is a very important development in credit
unions. In a sense, they are now and probably could call themselves
community banks. That is a personal view and I think some re-branding
would be useful. That is not necessarily a view held by the Taskforce.
Q24 Mr Breed: In previous times,
until about 20 years ago, we used to have licensed deposit takers,
which of course provided that measure of protection for people
who saved in a licensed deposit taker. There is no reason why
that could not be resurrected under the term of the community
Mr Pomeroy: I quite agree.
Chairman: We have the Credit Unions Act
on the stocks at the moment ready to be legislated on, hopefully
at some time, and ABCUL are coming to the next presentation here,
so that is a good issue to take up. It may be the basis for another
Q25 Peter Viggers: Almost half of
the adult population have no savings at all and Citizens' Advice
and the Association of British Credit Unions, both of which have
specialist experience in this field, believe that it is enormously
advantageous if people can be encouraged to save, even a modest
amount, and even if they are in debt. Do you think that the Government's
strategy of financial inclusion takes sufficient account of the
importance of promoting savings by those who are in debt?
Mr Pomeroy: The strategy document
which was published at the end of 2004, when the Taskforce was
set up, tended to give that a second priority; it prioritised
banking, advice and affordable credit. The latest strategy document
does I think give saving more emphasis and certainly I think it
is right to give saving emphasis because having saved even small
amounts of savings provides a buffer. Very often it might avoid
the need for borrowing expensively. You can fund small purchases
from savings rather than to borrow at very high rates. It starts
to connect people to the financial services system and get them
used to the way financial service work and the mechanics of financial
services. I think savings has an important role to play, particularly
in financial inclusion. I welcome the fact that the Government
is giving it more prominence, and indeed if they ask us to look
at it as a Taskforce, as I have already said, we will be happy
to do that.
Q26 Peter Viggers: Looking at the
choices available to a person who is likely to have both hire
purchase debts and credit card debts, how would you categorise
the payment off of those debts, which has a clear financial advantage,
as against encouraging savings? Just to follow that point through,
if the Government were to take positive steps to encourage savings,
it would need to change the rules of expense through the credit
industry, would it not, so the credit industry would need to say
to an individual, "Yes, we accept that you will not be able
to pay off your obligations at the moment because you are saving".
Mr Pomeroy: I am afraid my answer
is probably going to be rather unhelpful because since the Taskforce
has not looked at savings in the general sense, and therefore
I have not myself looked generally at them, it is not a question,
frankly, at the moment I would feel competent to answer. I have
no doubt if and when we look at savings, we will look at those
Q27 Peter Viggers: It seems a worth
subject for a study?
Mr Pomeroy: I completely agree.
It is simply not in my field of competence at the moment.
Q28 Mr Fallon: You have drawn quite
a sharp distinction in your Review between Christmas savings schemes
and the Saving Gateway. I just want to press you here on the principle
of matched funding from the Exchequer which has been piloted for
private saving. Why could that not be applied to Christmas saving?
Mr Pomeroy: It probably could.
The reason I drew a distinction was that I felt that a Christmas
saving scheme is aimed at a very different kind of saving with
very different objectives for saving from the Saving Gateway.
It has a very specific short-term purpose and, for example, the
lock-ins would be very important. The Saving Gateway, as I understand
it, is a longer term, more general saving mechanism. Lock-ins
for example would probably be less appropriate. That is the sort
of thing I meant. They really are serving different savings purposes
and therefore it is probable that you need different vehicles.
I have not considered very specifically the point you make, that
is to say a matching scheme for Christmas savings. Going to the
point I made earlier about the need to have incentives for saving,
it may well be such a scheme could work. When I drew that distinction,
what I really meant to say was that I could not really see the
Saving Gateway and Christmas savings schemes coming together and
serving both purposes, but it may well be that matching schemes
that you describe could well be useful.
Q29 Mr Fallon: I understand that.
I am not asking you whether it would work. Of course they are
different vehicles. I am asking you whether the principle of matched
funding could not or should not be applied to Christmas savings
Mr Pomeroy: My understanding is
that the Saving Gateway has indicated a positive response to matched
funding and therefore, yes, it could be.
Q30 Mr Fallon: Do you think it should
Mr Pomeroy: That is a matter for
Q31 Mr Fallon: Do you not have a
view on this?
Mr Pomeroy: It is very hard for
me to say how public expenditure should be used. What I can say
is that the more incentives that can be given to people for Christmas
savings to be matching, the more that will be saved. Looking purely
from the point of view of wanting to promote savings, yes, I would
say it would be a good idea. Clearly, I am not in a position to
prioritise the Government's expenditure.
Q32 Mr Fallon: Do you have views
Mr Pomeroy: I have a view that
if it is to promote Christmas saving, it would certainly be valuable
if it was matching but that is different from me saying if I were
the Government, would put money towards matching for that purpose.
Q33 Mr Fallon: On the Saving Gateway
more generally, have you been consulted on the next stage after
the second pilots?
Mr Pomeroy: No, the Taskforce
has not yet looked at savers at all and therefore we have had
no contact, and I have had no contact personally, with the Saving
Q34 Mr Fallon: You have not been
asked how they should be taken forward. Do you expect to be?
Mr Pomeroy: My understanding is
that if we are asked to look at savings, it will be once decisions
have been made about the Saving Gateway, but I would hope that
if we are to be asked to look at it, that we would be given some
kind of monitoring and advisory role, as we have been over the
advice on the credit schemes in the past.
Q35 Mr Fallon: Do you have any evidence
yourself about the success or otherwise of the second pilots?
Mr Pomeroy: Personally, I have
no evidence. I have not had any personal connection with it at
Q36 Mr Fallon: Does the Taskforce
Mr Pomeroy: Because we have not
yet looked at savings, the Taskforce has had no contact with that
Q37 Mr Fallon: Could I now turn to
Child Trust Funds. The Children's Mutual estimates that now around
a quarter of children from low-income families who are having
their Child Trust Funds topped up. Are you aware through the Taskforce
of any other evidence to suggest that the Child Trust Fund itself
is strengthening the savings habit?
Mr Pomeroy: No, and again because
the Taskforce has not looked at savings, we simply have not addressed
that issue at all.
Q38 Chairman: On the issue of the
shorter-term savings, I note that in the Treasury document mention
is made of a number of building societiesSkipton, Scarborough
and Furnesswhich are launching Christmas saver accounts.
How would you like to see that market develop further, particularly
in the light of Christmas 2007 coming up?
Mr Pomeroy: I would like to see
a development of those products, whether by building societies
or by credit unions, or indeed the Post Office which does not
yet have such a product, but I think it could be a very valuable
provider of such a product and it has said that it is interested,
and indeed by supermarkets that I think could also develop their
product. I would like to see, and indeed this has happened to
an extent in response to Farepak but it happened for the wrong
reasons almost, those developed and a greater range of choices
available and communicated to savers so that they know there are
alternatives to the hamper market and how to use them.
Q39 Chairman: Will we be too late
to miss the Christmas 2007 market?
Mr Pomeroy: Probably not but it
is getting on in the year.
Chairman: Brian, may I thank you for
your evidence but also for the work you are doing in the Taskforce.
I wish you well. I return to the first question I asked about
savings. I hope you knock on a few doors about that and that that
it is included in your remit.