The
Committee consisted of the following
Members:
Abbott,
Ms Diane
(Hackney, North and Stoke Newington)
(Lab)
Barlow,
Ms Celia
(Hove)
(Lab)
Brown,
Lyn
(West Ham) (Lab)
Browne,
Mr. Jeremy
(Taunton)
(LD)
Cable,
Dr. Vincent
(Twickenham)
(LD)
Campbell,
Mr. Ronnie
(Blyth Valley)
(Lab)
Duddridge,
James
(Rochford and Southend, East)
(Con)
Gummer,
Mr. John
(Suffolk, Coastal)
(Con)
Hill,
Keith
(Streatham)
(Lab)
Hoban,
Mr. Mark
(Fareham)
(Con)
Howell,
John
(Henley) (Con)
McCarthy-Fry,
Sarah
(Exchequer Secretary to the
Treasury)
Shepherd,
Mr. Richard
(Aldridge-Brownhills)
(Con)
Soulsby,
Sir Peter
(Leicester, South)
(Lab)
Southworth,
Helen
(Warrington, South)
(Lab)
Stuart,
Ms Gisela
(Birmingham, Edgbaston)
(Lab)
Mark Oxborough, Committee
Clerk
attended the
Committee
Sixth
Delegated Legislation
Committee
Tuesday
3 November
2009
[Mr.
David Taylor in the
Chair]
Draft
Saving Gateway Accounts Regulations
2009
4.30
pm
The
Exchequer Secretary to the Treasury (Sarah
McCarthy-Fry): I beg to move,
That the
Committee has considered the draft Saving Gateway Accounts Regulations
2009.
The
Chairman: With this it will be convenient to discuss the
draft Saving Gateway Accounts (No. 2) Regulations
2009.
Sarah
McCarthy-Fry: Thank you very much, Mr. Taylor;
it is a pleasure to serve under your chairmanship this afternoon. I am
very pleased to open the debate on two linked sets of regulations
relating to the saving gateway. The Saving Gateway Accounts Regulations
2009, which set out the main requirements, features and processes for
saving gateway accounts, and the Saving Gateway Accounts (No. 2)
Regulations 2009 concern the tax treatment of these accounts. Alongside
the Saving Gateway Accounts Act 2009, which received Royal Assent
earlier this year, these regulations will allow for the establishment
of the national saving gateway scheme next year.
We intend
that the saving gateway will be a two-year cash saving account aimed at
working-age people with lower incomes. That group has tended to have
lower savings and to suffer from higher levels of financial exclusion
than other parts of the population. They also benefit less from
existing incentives to save that rely on tax relief, such as individual
savings accounts.
The saving
gateway will provide eligible people with a new incentive to save, in
the form of a Government contribution that will be paid at the rate of
50p for each £1 saved. We estimate that about 8 million people
will be eligible to open a saving gateway account. The objectives of
the saving gateway are to kick-start a saving habit and to promote
financial inclusion among our target group, which, as I have said, is
made up of working-age people with lower incomes. During the passage of
the 2009 Act, there was support from all parts of the House for those
objectives, as well as recognition of the potential for the saving
gateway to achieve them.
I turn first
to the Saving Gateway Accounts Regulations 2009. These are the
principal regulations for the saving gateway, in that they set out some
of the major account rules and features. They also detail processes and
requirements for account providers and account holders, as well as for
Her Majestys Revenue and Customs, which will administer the
scheme. The regulations cover the approval of financial institutions to
offer accounts and they set out rules and requirements for all stages
of the saving gateway, from HMRC advising a person that
they are eligible to apply for an account, through account opening and
operation, to the crediting of a maturity payment at the end of the
account.
One of the
areas covered in these regulations is eligibility. The 2009 Act
provides that eligibility will be passported from an
entitlement to certain benefits and tax credits. These regulations
provide additional eligibility conditions, which are designed to secure
effective targeting of the scheme. Such conditions include, at
regulation 3, an income threshold and other requirements that must be
met before a person can be eligible through an entitlement to tax
credits; and a requirement, at regulation 4, that a person must be
ordinarily resident in the UK to open an
account.
Applying
an income threshold for tax benefit recipients allows the saving
gateway to be better targeted at people with lower incomes than would
be the case if all tax credit recipients were to be eligible
automatically. We propose to align that annual income threshold with
the one for child tax credit, which is currently £16,040. The
condition that a person must be ordinarily resident in the UK to open
an account would, in broad terms, restrict the scheme to people who
live or work in the UK. Again, we believe that that requirement will
contribute to effective targeting of the saving
gateway.
These
regulations also provide that each eligible person will be able to have
only one saving gateway account during their lifetime, reflecting the
fact that the scheme is designed as a kick-start to saving rather than
as an ongoing incentive.
These
regulations also set out some of the main features that we are
proposing for saving gateway accounts. Under regulation 7, a saving
gateway account will last for 24 months. We believe that that will
allow account holders time to develop a saving habit and to build up a
decent maturity payment, while also ensuring that that maturity payment
can be accessed within a reasonable period of time. Under regulation
11, the monthly deposit limit for saving gateway accounts will be
£25. Our saving gateway pilot showed that lower-income savers
found that an affordable amount to save, and that £25
could be a realistic saving target for many.
Regulation 9
sets the match ratethat is, the amount that the Government will
pay for each £1 saved in the accountat 50p. We tried a
variety of match rates during the second pilot, which demonstrated that
the rate does not have to be as high as £1 to work as an
effective incentive to save. We believe that a rate of 50p for every
£1 will secure value for money for the Exchequer while providing
a strong incentive to savers.
Under the
regulations, account holders will be able to save up to £600 in
their accounts over two years and earn a contribution of up to
£300 from the Government. The contribution will be paid to them
within 21 days of their account maturing. The regulations also provide
detailed rules about the account-opening process, make provision for
the issue of six-monthly account statements to savers and require that
account holders be able to access their
savings.
Although
the regulations set down some features that must be uniform for all
saving gateway accounts, such as account duration, maximum deposits and
access to savings, they also allow scope for account providers to
develop and offer their own account terms and conditions in other
areas. We are in detailed discussions with a
range of potential account providers and anticipate that accounts will
be available from banks, building societies and credit unions, as well
as through the Post Office.
We want to
secure a wide range of suitable providers and believe that it is
important that the scheme rules and requirements are not prohibitive
for them. We have therefore discussed the rules and requirements
carefully with potential account providers and have modified a number
of our earlier proposals: for example, in relation to the payment of
interest on accounts and the availability of account transfers. In such
cases, we accept that it is right to give account providers flexibility
and believe that that should help secure a wider provision of accounts,
therefore increasing the choice available to eligible people.
I assure
hon. Members that the requirements on account providers set out in the
regulations, including in relation to record keeping and the electronic
submission of a monthly return to Her Majestys Revenue and
Customs, go no further than we believe necessary for the effective
operation and assurance of the saving
gateway.
Mr.
Mark Hoban (Fareham) (Con): Does the Minister believe that
credit unions will be able to comply with the submission of monthly
electronic
returns?
Sarah
McCarthy-Fry: We believe that the majority of the
institutions that I have mentioned, including credit unions, will be
able to comply. The larger ones will certainly have no difficulty in
complying, and I would hope that the smaller ones will be able to as
well.
Mr.
Hoban: I am grateful for that response, but the Minister
said the majority. What proportion of those with which
the Government have had conversations could not comply, and what would
be the consequences if they could not submit a return
electronically?
Sarah
McCarthy-Fry: The requirement is that we expect them to
submit their returns electronically. Under the regulations as proposed,
such institutions would not be able to offer saving gateway accounts.
We are still in consultation with all the providers that we are using.
They could, of course, use a third party to make an electronic return
if they wished. The same applies to HMRCs information audit and
recovery powers as proposed in the regulations, which have been
modelled where appropriate on powers already in operation for other
schemes such as the child trust fund.
On taxation,
there has been general agreement from all parties that saving gateway
accounts and maturity payments earned on account should not be subject
to tax. That will allow savers the full benefit of their savings and
should simplify accounts for savers and providers. The draft Saving
Gateway Accounts (No. 2) Regulations 2009 provide for that tax
exemption and set out a number of supplementary provisions that apply
when tax relief is claimed
incorrectly.
We
propose to announce an exact start date for the saving gateway and
details of approved account providers in due course, but I can confirm
that we are confident that there will be sufficient account providers
to support a national scheme and enable people to have a choice about
where they open an account. The detailed rules
set out in the regulations reflect our learning from two separate saving
gateway pilots, last years detailed consultation and our
further and ongoing discussions with a range of groups representing
potential account providers and account
holders.
I
thank the many groups and individuals who have given their views on our
proposals, including hon. Members who participated in debates during
the passage of the Act. We believe that they have contributed to the
design of a scheme that will be attractive to potential account
providers and savers as well as consistent with the objectives that we
have set. I am pleased to say that, to date, the saving gateway has had
widespread support in the House, and I hope that that support will
continue today in the
Committee.
4.40
pm
Mr.
Hoban: It is a pleasure to serve again under your
chairmanship, Mr. Taylor.
We welcome
the regulations. I shall not rehearse the arguments that we had during
the passage through the House of the Saving Gateway Accounts Act 2009,
because it was enabling legislation. We discussed many of the issues
set out in these regulations when debating that
legislationthings such as matching rates and maturity periods.
Questions that one might have raised this afternoon were dealt with at
some length during the Committee stage, and I do not propose to go over
that ground again.
I was
surprised that in her opening remarks the Minister did not refer to the
fact that the original draft regulations were withdrawn. They were laid
before the House on 7 July 2009, and we expected to debate them prior
to the summer recess. Will the Minister explain why they were withdrawn
and replaced by the ones before us today?
The Minister
was confident that a national saving gateway account programme would be
rolled out next year, but she did not give much detail about it or much
comfort that it would actually happen. Will she be a little more
specific about which institutions have signed up to the scheme? Credit
unions have limited geographical coverage. Will there be national
providers to ensure that wherever one is, one can gain access to a
saving gateway account? The Minister referred to the Post Office. At
the public evidence sittings, Post Office representatives were most
positive that it would be interested in providing saving gateway
accounts. As I recollect, that was to be done in conjunction with
another provider.
How firm are
those commitments, or are they just aspirations with no solid signed-up
providers? That would be dreadful; we would have worked on a consensual
basis to introduce the legislation for the scheme, but there would be
no providers. It would help if the Minister were to put a little more
meat on the bones about the state of the discussions that she and her
officials are having with the banks, the credit unions, the building
societies and the Post Office. That might give us some comfort that our
labours had not been in vain.
4.43
pm
Mr.
Jeremy Browne (Taunton) (LD): This is a welcome
opportunity for me to serve under your chairmanship, Mr.
Taylor.
Along with
the hon. Member for Fareham and others, I served on the Committee that
considered the legislation that became the Saving Gateway Accounts Act
2009. We are familiar with the details. Like the Conservative party,
the Liberal Democrats support the objective, which is to encourage
people on low incomes to save because it provides them with an element
of security and gives them a greater stake in the society in which they
live.
The
objectives of the 2009 Act are noble, but I have two lines of inquiry
for the Minister. First, I have always been uncomfortable with the
degree to which the Act was only framework legislation; the hon.
Gentleman alluded to it being a skeleton. When the Act first came
before the House, it contained 29 delegated powers in only 32
clauses.
What was
left out of the legislation that we were invited to support was as
significantarguably more sothan what was in it. We have
to sit in Committees such as todays because the legislation did
not include details about a persons eligibility, the amount
that they could save each month, the length of the scheme, the maturity
payment, interest payments and the time frame in which payments had to
be made to account holders. All that was left out of the original
legislation. That is an unsatisfactory precedent; it means that
Parliament is invited to take much of the detail on trust. Now the
fundamental meat of the proposals is being put on the skeleton and we
can get a better sense of what is proposed, but even soI very
much agree with the hon. Member for Fareham about thisthere is
a worrying lack of
detail.
Let
me deal with the time scale. The Government initially produced two
consultations on a possible scheme in 2001I think that that
might have been a Labour manifesto commitment that yearand
there were two pilot schemes between 2002 and 2005. We are talking
about a fairly straightforward initiative that does not require huge
amounts of public spending, but it will have taken about nine years
from its original inception to the point at which it might benefit some
of our constituents. Even now, it is unclear quite what the time scales
are. There is no commencement order for the Act, even though it
received Royal Assent on 2 Julyfour months ago. The explanatory
memorandum states that a commencement order will be
made
when
the precise starting date for Saving Gateway Accounts is
known
and
the Minister said today that that would be in due course. Again, that
sounds rather
vague.
The
Chairman: Order. I regret having to interrupt the hon.
Gentleman, but I would be grateful if he returned to the detail of the
regulations, rather than the background information, which he has
spelled out in quite some
detail.
Mr.
Browne: Thank you, Mr. Taylor. I am sorry; I
had not intended to stray off course, so let me get straight to the nub
of the matter. Will the Minister tell us the date at which my
constituents and others will be able to open a saving gateway account?
I have not heard a date from her and I think that that is an entirely
relevant question. Will she say what organisations or institutions will
supply the accounts for my constituents and others? Yet again, that
appears to have been deferred.
When we were
in Committee discussing the matter, we asked whether post offices or
credit unions could provide the accounts, which banks were interested,
whether building societies were interested and whether mutual building
societies would be treated in different ways. To all that we were told,
Oh, this is all to come down the track. Put the vote through
and, as an act of faith, pass the legislation. Well fill in all
the details afterwards, once we have got the legislation through
Parliament. Well, we have got the legislation through
Parliament, and we are sitting in Committee now. Months have passed
since Royal Assent and we still do not know when it will start. We
still do not know who will provide the
accounts.
We
do at least now have the information that the Government contribution
will be 50p, which is what we were always told it would be in any case.
However, there is a serious point, which is that our constituents send
us to this place to try to find out what provisions will be made for
them. We are still unclear on that point. I hope that the Minister will
realise that there is cross-party enthusiasm for the general ideas
behind the legislation, but it remains very unsatisfactory to leave so
much detail unresolved this far down the
line.
4.48
pm
Sarah
McCarthy-Fry: I thank both hon. Gentlemen who contributed
to the debate this afternoon. I am glad that both accepted that there
was widespread support for the saving gateway during the passage of the
Act. I shall now try to respond to some of the specific
points.
The
hon. Member for Fareham mentioned that these were amended regulations
and that that was as a result of concerns raised by the Joint Committee
on Statutory Instruments. There have been two changes since the draft.
The regulations do not now contain any provisions in relation to the
validity period or expiry date of a notice of eligibility. Those were
in the original regulations, but the Joint Committee felt that that
should be under HMRCs management powers.
Furthermore,
the new regulations specify that the money laundering legislation to
which an account provider should have regard when considering an
application for an account is the Money Laundering Regulations 2007.
However, there have been no changes to the details of saving gateway
eligibility or to any account features or
processes.
The
hon. Member for Taunton made several remarks about the length of time
that had elapsed since the original consultation. We used
the time between the original consultation on the principle of
the saving gateway and the introduction of the Bill to pilot different
saving gateway models and account features, evaluate the pilots in
detail, develop and consult on a national scheme and then
review earlier proposals in the light of consultation
responses. Given that commercial organisations will be the providers,
it is important that they have had the opportunity to shape the
detailed regulations.
We have
announced that the scheme will be available nationwide from 2010. The
precise starting date will depend on several factors, including the
progress of our discussions with potential providers about when they
can be ready to offer accounts. We are in detailed discussions with a
range of potential providers, including banks, which will give the
nationwide coverage that we have been talking about. We are also in
detailed discussions with building societies and credit unions, and
with individual credit unions and their representative bodies. We know
that they are community based, but we wanted to make it possible for
them to be providers because they can probably reach the type of people
at whom we are targeting the
scheme.
More
than 100 representatives of credit unions have signed up to attend an
HMRC event on the saving gateway next week. We shall, of course,
announce the names of account providers, but we do not want to do so
without their agreement, and they would rather complete further work on
account design before we announce who they
are.
Mr.
Hoban: Before the Minister moves on, may I ask whether
anyone has agreed in principle to provide the accounts? Secondly, she
did not mention the Post
Office.
Sarah
McCarthy-Fry: I have not got to the Post Office yet. We
also announced that saving gateway accounts will be available through
the Post Office, and I think that it was mentioned in Treasury
questions this afternoon that the Post Office has 11,500 branches
throughout the country.
Mr.
Hoban: You did not say
that.
Sarah
McCarthy-Fry: Did I not say that? I intended to say it in
an answer, but perhaps I did not get to it.
The
advantage of co-locating credit unions with post offices was also
pointed out. All that I am prepared to say at this stage is that we are
at the advanced stage of detailed discussions with account
providers.
Mr.
Browne: If the banks drag their feet and are not willing
to offer the accounts, will the Minister require the wholly or partly
nationalised banks to offer the service because of its desirable social
function, even if those banks regard it as not particularly in their
commercial interest to do
so?
Sarah
McCarthy-Fry: I can tell both hon. Gentlemen that there
are institutions that have agreed in principle, but I cannot give
details yet. As I said, the providers want to complete their work on
the design before the announcement is made. Of course, it has been said
from the beginning that the Post Office wants to be part of the scheme,
and its network is
important.
The
regulations will allow for the establishment of the scheme next year. I
think that it will give up to 8 million people on lower
incomes a strong, easily understandable and targeted incentive to save.
Those people have lower levels of savings than the rest of the
population, and much lower levels of financial inclusion. We think that
the saving gateway can achieve its aims of kick-starting a saving habit
and promoting financial inclusion.
Question
put and agreed
to.
Draft
Saving Gateway Accounts (No. 2) Regulations
2009
Resolved,
That
the Committee has considered the draft Saving Gateway Accounts (No. 2)
Regulations 2009.(Sarah
McCarthy-Fry.)
4.54
pm
Committee
rose.