Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 291-299)


19 JUNE 2007

  Q291 Chairman: Can we start this session, Minister? You have another official. Would you introduce her, please?

Ed Balls: Gwyneth Nurse, who is Team Leader, who leads on savings and taxation issues in the Treasury and wider savings policy, but closely working with my colleague Sue Catchpole.

  Q292  Chairman: You did mention you have a ministerial statement this morning.

  Ed Balls: Only very briefly. I have put out a written statement this morning, just as an update, and I thought it would be relevant for the Committee partly because we are talking about financial inclusion and partly because you in your capacity as Chairman of the Committee worked as Chairman of the Working Group to try to deliver a greater availability of free cash ATMs around the country. Your report set an objective of 600 new, free cash machines, and I was reporting to Parliament today that as of 15 June sites for 471 of the 600 new ATMs have been identified. Of those, 127 are already issuing cash to the public, with a further 344 confirmed ATM sites under contract, and 41% of those being provided by independent ATM providers, providing non-charging ATMs because of the financial inclusion premium, and to say that I was writing to all Members of Parliament with yourself this morning to encourage Members of Parliament who have not done so but who have one of the 1,700 target low-income areas in their area to still come forward with proposals for possible sites, because there are still 130 sites to identify, and hopefully more than that if we can find viable or good sites for machines to be set up. So I was wanting to report on the progress and say that I hope you would agree this has been a very, very worthwhile initiative indeed in meeting our financial inclusion objectives, but there is still more work to be done.

  Q293  Chairman: I think it is a good example of the financial services industry and Parliament working together. From your written ministerial statement it is gratifying to note that more than one million individuals on low incomes stand to benefit. So I think it has been a good contribution towards financial inclusion. From our reports last year on financial inclusion and your own involvement with the issue, would you agree with the proposition that saving and savings issues need to be accorded a much higher priority in the Government's financial inclusion strategy in the future?

  Ed Balls: In my experience over the last year, savings have indeed been quite an important priority and have been reflected in the financial inclusion document which we produced a month or so ago. When I came before you a year ago, three issues, I think, you highlighted, from my memory. One was the lack of certainty about funding after 2008; secondly, whether there was effective co-ordination in government, and, thirdly, the need to focus on saving. On the first, I announced in the spring that the financial inclusion fund would now be extended at the same level of intensity up to 2011, but it would continue as a stand-alone fund. We not only published that strategy document but, also, established a ministerial working group which has had its first meeting and, in the autumn, will produce an action plan for how different departments can contribute to delivering those financial inclusion objectives—a group chaired by the Treasury, by the Economic Secretary. Thirdly, in that document, we identified three strands for financial inclusion policy: first, trying to make sure that more people have day-to-day contact with the mainstream financial services industry, in particular reducing the number of people without bank accounts; secondly, trying to increase the number of low-income households which have access to savings and to small loans, if that is appropriate for them, and, thirdly, focusing on how we help people to manage if they get into financial difficulty without needing to turn to debt and, in particular, illegal or extortionate lending. So we have put within our three objectives savings on the table. Over the last year we have had the publication of the second pilot from the Saving Gateway, we have had the publication of the child trust fund constituency data and also, following the Farepak scandal last autumn, I asked Brian Pomeroy to do a report for us on the lessons we learned from the Farepak scandal for savings policy for low income families. In announcing that the task force would continue its work after 2008, I think we have given a pretty clear indication that, therefore, the savings would be added to its remit in order to take forward those three main strands of financial inclusion work, so I hope that gives you some reassurance that, following your excellent report in the autumn and your hearings, we have tried to address a number of the issues which you raised at that time.

  Q294  Chairman: On the Saving Gateway, Andy has a few questions, but I am particularly interested in that area, given the discussions we have had with Elaine Kempson who assessed the Saving Gateway, but on the financial inclusion task force, Brian Pomeroy indeed has appeared before the Committee and we were talking about the issue of savings. Is there any reason why his committee remit could not be extended to include savings?

  Ed Balls: I think the issues around savings and learning the lessons from Farepak have been a central part of our financial inclusion work and, by asking Brian as chair of the task force to do that review, it is clear that we saw this as a big priority and we are extending the life of the task force. As I said, savings and insurance are issues which are adding to the financial inclusion agenda, so I do not want to pre-empt the formal process that you have to go through, but this will end up with savings being put into the remit of the task force.

  Q295  Chairman: So this is an order to Brian Pomeroy from this committee hearing this morning that savings is a really important issue and, whether formal or informal, he should be looking at that?

  Ed Balls: As I said, Brian actually did the review for us on lessons from Farepak for low income savings, so he is absolutely on the case, but, if it would help to clarify this by making it clear that the new remit will include savings, I do not see personally any difficulty with that at all.

  Q296  Chairman: Martin Weale has suggested to us in evidence that the burning economic issue today for the Government, or his burning economic issue, is whether your view that the overall level of savings in the country is adequate.

  Ed Balls: The overall level of savings in the country?

  Q297  Chairman: Yes, is it adequate?

  Ed Balls: Do you mean for low income savers or for savers in general?

  Q298  Chairman: Overall.

  Ed Balls: I think that the overall level of savings is both about how much households are saving, the financial balance of businesses and the overall level of public borrowing. Across the piece, I do not take the view that the level of national savings at the moment is too high or too low, to be honest. I think it is very hard to make those kinds of judgments. The point at which the overall level of national savings in our country was at its highest in recent years was around 1989/1990/1991 when consumers in distress had to hugely increase their savings to deal with the consequences of negative equity. National savings then fell because the public sector deficit opened gapingly wide in 1990/1991/1992, so I think we always have to be slightly careful that the times when the level of national savings and consumer savings has been at its highest was when the economy was doing badly and individuals were having to rebuild their balance sheets. Successful economies which are stable at our stage of development tend to have lower levels of national savings than economies which are either at an earlier stage of development or where consumers are in distress, so I think you have to be rather careful about making these simple comparisons, but, as for low income savers, I definitely think their savings rates are too low and we would like to increase them.

  Q299  Angela Eagle: Firstly, on the cashpoints, can I thank you for all the work you have done and just make an official bid for some of the free cashpoints in Seacombe and Leasowe wards in my constituency.

  Ed Balls: Duly noted.

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