Examination of Witnesses (Questions 291-299)|
MP, MR CLIVE
19 JUNE 2007
Q291 Chairman: Can we start this session,
Minister? You have another official. Would you introduce her,
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 objectivesa 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.