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One point that came out of the evaluation was the importance of the branch network. The take-up of saving gateway accounts in the pilot increased in relation to the closeness of people to a branch of HBOS—the organisation involved in the pilot. If we are to encourage take-up, we need to think about an account provider’s branch network. So far, the only group that has expressed a clear intention to participate is the Post Office, which has a strong, if diminishing, branch network. It would
fit the bill as a good provider. Access should be easy; people should be able to take their certificate somewhere close to where they live. The more barriers we put in the way of access to the provider, the harder it will be to get a decent take-up of the saving gateway account.
Mr. Charles Walker (Broxbourne) (Con): As most banks are now in receipt of public money, it would not be impossible for the Government to apply some pressure to make the effort to deliver on this scheme.
Mr. Hoban: My hon. Friend makes an interesting point. Apparently, these banks are managed on an arm’s length basis, but it appears from press comments about the assets insurance scheme that strings are being attached to the receipt of such support. The Minister might like to think about my hon. Friend’s suggestion and attach a further string. Participation in a saving gateway account scheme might be a reasonable concession in return for the receipt of protection of apparently £500 billion—indeed, it would be a small price for banks to pay. The Minister might like to discuss with his colleagues in the Treasury and the Department for Business, Enterprise and Regulatory Reform whether this is a feasible concession for the banks to make and whether the Government will press for it. One would like to think that, as part of their broader responsibility, financial services organisations would take very seriously a commitment to broaden access to financial services products and view it as a way of fulfilling that obligation. Paragraph (c) of my amendment stipulates as one of the conditions for approval
“the provider’s willingness to expand access to broader financial services”.
It is an elastic and loose term, but I hope that when the banks and other financial institutions are thinking about whether they want to be a provider, they will bear it mind as part of their obligations.
Dr. Ladyman: I am grateful to the hon. Gentleman. His answer to my question might mean that I will not need to make a further contribution to the debate on this group of amendments. One possible effect of the hon. Gentleman’s amendment is that it might be used to exclude small friendly savings providers, such as credit unions, as they do not have the wider access to other banking services that the amendment seems to require. It might also prevent the Government from targeting these accounts through Post Office Counters—something that might help to keep some of the post offices in all our constituencies open. I hope that that is not the intention, but will the hon. Gentleman confirm that it is simply a probing amendment and that he does not intend to limit these accounts to the big banks? If that is his intention, I will certainly want to vote against it.
Mr. Hoban: We want there to be as many providers as possible. We want the widest possible geographical network. I do not want the amendment to be used to restrict provision to a single provider, such as the Post Office, or to exclude such bodies as credit unions, because this is part of the market that they exist to serve. If, for instance, a bank or building society decided to offer saving gateway accounts in only half its branches, I am not sure that either the hon. Gentleman or I would find that particularly acceptable. The condition can be used in different ways to maximise the inclusiveness of the product.
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Dr. Ladyman: If the hon. Gentleman’s intention is to widen the potential provision of the accounts, that would seem to contradict the wording of the amendment, which gives the Government further powers to restrict the availability of the accounts.
Mr. Hoban: I am not sure I agree. The amendment refers to conditions, and to the need to have regard to the location of the provider’s premises. It does not say that we can only allow big financial services companies with loads of branches to participate. It poses the question “Will all branches in a network participate, or only some branches?” Its purpose is to probe some of the conditions that might apply when potential providers are encouraged to come forward.
Dr. Ladyman: But the wording of paragraph (c) would empower the Government to limit provision to organisations that are willing to provide access to a wider range of financial services. Organisations such as credit unions that could not provide that wider access would be covered by that paragraph, with the result that the Government or a future regulator might prevent them from providing saving gateway accounts.
Mr. Hoban: In the course of discussion about financial inclusion, it has frequently been observed that some institutions are not very keen on encouraging access to financial services products. We want such institutions to commit themselves to widening the range of services available to people who are at present financially excluded. We do not want them to cherry-pick saving gateway accounts and not offer other products to those people. I do not intend to press the amendment to a vote, but it will depend on how the Government choose to use their powers to determine access to financial services products. I want institutions that participate to be committed to financial inclusion. I do not want them to view the saving gateway account as a product in isolation in which they are currently interested, while not being particularly interested in broadening financial inclusion.
Credit unions, as organisations, are committed to financial inclusion. That is the essence of their activities, as is clear from the extension of their offer of savings accounts to include current accounts and their offer of loans consisting of relatively small amounts. Part of their mission is financial inclusion, and I certainly do not believe that paragraph (c) seeks to exclude them. What they may not be able to offer is access. We need to ensure that providers operate in as many locations as possible, are keen to support financial inclusion, and are committed to financial education. One of the issues that emerged from both the public evidence session and the evaluation of the pilot schemes was the need to offer financial education along with saving gateway accounts. The hon. Member for South Thanet will recall, as I do, discussion of whether the accounts should be interest-bearing. Teresa Perchard of Citizens Advice pointed out that if they were not, it should be explained to people what they should expect at the end of the two-year period when their account rolled into a current or basic savings account.
Many factors will help to make the product successful. Three of them—the provision of easy access to account providers’ premises, commitment on the part of providers
to educating people in order to improve financial awareness, and a commitment to financial inclusion—could prove particularly powerful in that regard. We should ensure that those who are considering putting themselves forward as providers share the commitment to tackling financial exclusion. That is part of what the Bill is about, and it is no good having providers who are not interested in it. I hope that the hon. Gentleman is now reassured about the purpose of this probing amendment.
James Duddridge: The amendment refers to
“location of the provider’s premises”.
Given that more providers are using the internet, has my hon. Friend ruled out web-based providers? Does he believe that providers need a physical location? Having met a good many homeless people, I know that there is a high level of internet penetration. The internet provides a secure way for those without a stable location to manage their finances. Before meeting those homeless people, I had been under the impression that the web base was more for those with a little more money.
Mr. Hoban: That is an interesting question, and not one that we explored in Committee. Perhaps if my hon. Friend had listened a little more carefully in Committee, he would have raised the point then.
The system that we are discussing is based on a notice of eligibility. I had always assumed that a piece of paper would be posted to people, who would then present it to an account provider over a counter. However, like my hon. Friend, I have been contacted by a number of people who are homeless but have internet access. They might indeed prefer to manage their money in that way.
I do not know whether the Minister has had any discussions with potential account providers about how they might supply a web-based service. A point that emerged both from our debates in Committee and from the evidence sessions was that the greater the burden of cost imposed on potential providers, the fewer of them there would be. That is, to an extent, relevant to amendment 6. If we require providers to offer a web-based service, that may involve an additional cost making participation less attractive to them.
We must get the balance right. We want to encourage a wider range of providers because we want eligible people to have physical access to saving gateway accounts, perhaps not on every street corner but within a reasonable distance of where they live. That will mean ensuring that the cost to providers is appropriate, and it is possible that a requirement to provide a web-based service might deter them from participating because of the extra cost. Perhaps the Minister will be able to tell us whether any providers are interested in supplying such a service, which, of course, might pose challenges in the context of financial and digital exclusion.
Let me now turn to amendment 6, which proposes the deletion of clause 11(2)(e). Again, it touches on the costs issue. Regulations made under the Bill will set out how information will be filed by account providers. I am wary that we might create too much prescription on providers and therefore force up costs, and I wonder how permissive or relaxed the regulations will be in respect of the type of information providers will be required to produce for Her Majesty’s Revenue and Customs.
Amendment 5 is intended to probe the issue of the guidance that will be offered to providers and what conditions might be attached to them. We are keen for providers to offer commitments on access and on financial inclusion and education. I hope the Minister will recognise that our intention here is to encourage the success of the scheme—rather than to restrict the range of providers, as the hon. Member for South Thanet seemed to think, or hope.
Dr. Ladyman: Let me begin by saying that, despite the discussions we have had in Committee and today, I agree with the hon. Gentleman: I want the accounts to be provided through as wide a range of organisations as possible. I was saddened by the attitude of those representatives of the banking industry at the evidence sessions who seemed to say, “We may not be interested in providing these accounts, because there may not be enough profit in it for us.” The purpose of these accounts is to help people who would not otherwise have got the saving habit to acquire it. In any other sphere of activity in the markets of this country, that would be welcomed as increasing the customer base, yet bank representatives were sitting there saying, “We’re not sure we’re interested in expanding our customer base.” Given the money we have given to the banks recently, and the debt most of us think they owe to our society at the moment, I would have thought that they would have been falling over themselves to say, “We want to help.”
Mr. Jeremy Browne: Is the hon. Gentleman saying that banks that judge it not to be commercially in their interests to go ahead with this product ought nevertheless to feel obliged to do so because they owe a moral debt to the taxpayer?
Dr. Ladyman:
I would not, perhaps, put it that strongly, but, absolutely, that is broadly what I am saying. One of the reasons for our current problems is that we have lost the saving habit. The Prime Minister has made that point in recent weeks when he has spoken about people saving prior to taking out a mortgage and about whether or not it is a good thing that people have 100 per cent.—or 100 per cent. plus—mortgages, so never developing any saving habit or any notion of thrift prior to taking on the obligations of a mortgage. My understanding from contributions from Members in all parts of the House is that what we want the saving gateway accounts to encourage those people who would otherwise not have developed a saving habit to see the merit of doing so. Given our society’s current problems as a result of the banks’ activities, I would have thought that it would be absolutely on point for them to say, “Okay, we now accept that we need to do more to help people get that saving habit. We accept it is our job to get people to think about thrift. It is now our job to make people think they can’t always come to the bank and get 100 per cent. or 120 per cent. mortgages, and that they will actually have to put a bit of their hard-earned cash aside each week and save up for some things prior to borrowing the balance of the money.” When we were taking evidence, the banks should have come to us and said, “We don’t see that there are huge amounts of profit in this, but we do see that it is absolutely our duty to provide these accounts. It is absolutely our duty to be providing financial education and training and support to people who need it, and it is absolutely our job,
whether or not these things make money for us, to provide them and to do so willingly and to provide a good service.”
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To that extent, I agree entirely with the hon. Member for Fareham (Mr. Hoban), but I do not want credit unions and the Post Office to be excluded from providing such accounts. I do not think that is the intention of the hon. Gentleman’s amendments—indeed, he has made it clear that they are probing amendments—but the Post Office and credit unions can play a role. Credit unions tend to be small and to provide a good, almost pastoral, service to some of their customers. They are in a position to say to people, “Let’s sit down and talk about your budget. Let’s talk about where you’ve got some extra money, and about the benefits of saving.” The saving gateway account represents a big opportunity for credit unions and the Post Office, and I do not want anything to be done that would exclude them. I am happy to note that the hon. Gentleman has confirmed that that is not the intention of his amendments, and I think we have all-party support for how we want the accounts to operate.
I do not understand why the hon. Gentleman should propose in his amendment 6 to “leave out paragraph (e)”—I assume, again, that it is a probing amendment. I would have thought that making an option for electronic filing was a way of reducing costs for those who provide these accounts. If the effect of the amendment would be to prevent the Government from allowing people to file their returns electronically, we might be inadvertently increasing costs. I suspect that is not the hon. Gentleman’s intention, and I agree with him that our objective must be to keep the administrative costs as low as possible so that there is a plurality of providers, who are willing to provide the broad range of services that we want those who take out a saving gateway account to have.
Mr. Jeremy Browne: I must say that I do not see the point of amendment 5, unless its purpose is to make it clear that we want competent, reputable financial institutions to provide those accounts. I am sure that we all agree that that is desirable, especially given that significant sums of public money will be involved. I share the view of both previous speakers—I think there is general consensus on this point—that we wish to see the broadest possible number of providers, and I would very much like credit unions to be among them as they offer a different type of service, and one that some of the potential customers may feel particularly comfortable with. I would therefore regret it if the amendment were to restrict the scope for, or inclination of, credit unions to provide the service, as the hon. Member for South Thanet (Dr. Ladyman) feared.
Although the hon. Gentleman has said that he wants to see a wide range of providers, I hope that by expressing our enthusiasm for credit unions we do not sound unenthusiastic about banks providing the service, because I think the one great advantage of banks doing so is that that feeds into the mainstream banking and saving system people who otherwise might not participate at all in normal banking arrangements. That lack of experience acts as a barrier to participation in financial services among wider society. There are some people in my constituency and elsewhere on very low incomes who do not have a bank account or have one but use it in a very limited fashion. Those of us, like everybody
participating in this debate, who get used to a monthly salary being paid direct into our bank account should occasionally step back and reflect on how little in cash terms we actually see of the money we have been paid. Most of the money flows in and out of the banking system, and quite a small proportion is withdrawn in cash.
People who are generally better off or in longer term employment get used to how banking systems work and become confident with them. Some people who have less money or who have not been introduced to formal banking by becoming a customer at a younger age may have less confidence in the system. I do not mean confidence in the banking system as a whole, because we all have less confidence in that than we did a year ago: I mean confidence in the experience of being a depositor in a bank or having a savings account. That would be a longer lasting virtue of the Bill, because we are seeking to inculcate the savings habit in the people who take up the service. If they do not maintain that habit beyond the two years in which the Government will provide substantial financial inducements to do so, the Bill will not have succeeded to the extent that we all wish. To that extent, I hope that banks are to the fore, for altruistic reasons and because I share the view of the hon. Member for South Thanet that it will be in their commercial interests to try to widen their customer base.
Who knows whether somebody who opens a savings gateway account may end up being a prosperous customer? After all, that is the basis on which the banks push offers at students. It is not because students have very much money to deposit in the bank. Rather, the banks hope that the students will become good customers in the future. It may be that some of the people who choose to take up this option become more lucrative customers, and even those who do not become so wealthy could still be good customers in other ways, even if the total amount that they deposit with the bank is less. I hope that banks will participate. We want as wide a range of providers as possible and I hope that all those providers will be reputable. In so much as this amendment was designed to probe all those issues and stimulate a useful debate, I hope that the Minister feels that it has done so.
Mr. Walker: We are approaching a new age of financial responsibility as a result of the current downturn in the financial markets, and we will see a separation of banking services. Investment banks will become separate from retail banks, which will, in their purest form, have to get used to much smaller profit margins. So the traditional reasons for not entering the markets that are the subject of the Bill will eventually disappear.
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