Clause
4Requirements
relating to
accounts
Mr.
Hoban: I beg to move amendment 28, in clause 4,
page 3, line 20, at end
insert— ‘(d) The Maturity
Period shall not be less than 2
years.’. Clause
4 contains two key parameters in determining how the account will
operate. One is the maturity period—the period over which the
matching contribution will be calculated—and the other is the
maximum monthly contribution. In keeping with the general spirit of the
way in which this Bill has been put together, these important details
have been relegated to secondary legislation. My amendment
probes—at this stage, rather than waiting for the discussion of
secondary legislation—the rationale the Government have used to
justify a maturity period of, say, two years. In considering the next
amendment, I will talk about why the figure of £25 a month has
been suggested.
The argument
about the maturity period made in the evidence session last week by
people such as Teresa Perchard and Sharon Collard was that if someone
had not learnt the saving habit in two years, it was very unlikely that
they ever would and that two years was reasonable. I wonder whether the
Economic Secretary gave consideration to a period longer than two years
to enable people to learn the saving culture—say, three
years—to get it embedded. One point discussed last week was the
likelihood that people would continue to save after the two-year period
expired. There was evidence that a significant minority of people did
continue to save, but not the majority.
There are
reasons why people would want to take money out of their
account—perhaps they had saved with a particular purpose in
mind, perhaps there was an urgent need to meet an unexpected
expense—so there may have been good reasons why the
participation did not continue beyond two years. However, it does raise
the question—given that it was only a significant minority,
rather than majority—whether a longer period would be needed to
encourage more people to save, to ensure that the saving habit is fully
inculcated. That is the thrust behind my amendment as, other than that,
there is not much to say about inserting two years as a maturity
period.
Ian
Pearson: These are obviously matters of judgment. From the
experience of the pilots and the interviews conducted, and discussions
with interested parties, we concluded that two years was the most
appropriate time period. That account duration will best help potential
account holders to open an account and kick-start a saving habit. It
strikes the right balance between giving people sufficient time to
develop a saving habit and build up a reasonable match, and allowing
them access within a sensible time scale.
Clearly, the
participants on the 18-month trial had a range of views about the
appropriate length: some were in favour of extending the period beyond
18 months and some thought that it should be less. Annuality makes
sense because people generally understand the date when they open
something and the date when it is likely to mature. Of course, we want
to evaluate the policy when it is implemented, but at the moment we
think that two years is appropriate and that it strikes the balance we
are trying to
achieve. We
do not believe that the amendment, which says that the maturity period
should never be shorter than two years, is appropriate, because we
might find that, for a significant group of people, that saving habit
can be kick-started in a shorter period. It should not be put in the
Bill, but I appreciate that it is a probing amendment to explore our
thought processes. I hope that my comments this morning clearly outline
to the hon. Gentleman and to the Committee why we have chosen a period
of two years.
Mr.
Hoban: The Economic Secretary says that the right period
is a matter of judgment. Given the relative generosity of the match
that the Government are offering—50p per pound saved, based on
the maximum account balance over the two years—we need to
encourage people to keep their savings in the account for as long as
possible. We have tabled other amendments that explore that issue in
more detail. I agree with him—it is not something that we
necessarily want to put in the Bill.
I am not going
to press the amendment, but it is important that we assess the
policy’s long-term effect on savings, and the Economic Secretary
was right to comment on that. Two pilots were evaluated and, in the
sprit of having an evidence-based policy, we want to ensure that there
are longitudinal surveys to see whether two years is sufficient
time—or too much, or too little—in which to encourage
people to develop a saving culture. With that flexibility in mind, I
beg to ask leave to withdraw the amendment.
Amendment,
by leave,
withdrawn.
Mr.
Hoban: I beg to move amendment 29, in
clause 4, page 3, line 21, leave
out subsection (3) and
insert— ‘(
) The limit on the amount which may be paid into the Saving Gateway
account in a month (excluding any interest or other sums paid by the
account provider under the terms of the account) shall be
£25.’. 12.45
pm This
amendment has been tabled in a similar probing spirit. There is no
reference in the Bill to the maximum monthly amount that can be saved,
which the amendment would remedy. The explanatory notes suggests that
the amount will be £25, and I suspect that that is in the
regulations that were circulated to us earlier. For many people,
£25 will sound like not very much to save, but it was
interesting that Teresa Perchard from the CAB described it
as “a
huge amount for many to find”.——[Official
Report, Saving Gateway Accounts Public Bill Committee, 27 January
2009; c. 10,
Q20.] There is
a balance to be struck. Clearly, for many people, that would be a huge
amount to find, as it might be a significant part of their family
income, and they will need to make sacrifices to save anyway near that
amount. However, there are others, as we touched on earlier, who might,
through contributions-based JSA, have a reasonable amount of money and
who would be quite happy to pay £25 a month, and perhaps
transfer money from other savings to the saving gateway account to
benefit from the 50p in the pound match. Has the Economic Secretary
given any thought to whether £25 is too generous a limit, given
the potential loss to the Exchequer from people who are more than
capable of saving that amount, who do so already, and who just want to
take advantage of the great returns that the saving gateway account
will offer them?
Mr.
Browne: I rise briefly to support the spirit of the
amendment. It is important that the amount is stated in the Bill, and
that is crucial for one’s approval of it. There is
understandable concern in some quarters that the 50p that every pound
attracts is a very generous provision—20 times more generous
than a commercial scheme would typically offer. Therefore the maximum
amount that could be put aside each month to attract that amount from
the Government is an important consideration. It is unsatisfactory for
the Bill simply to
say “Regulations
may, in particular, impose a limit on the
amount”, as
if it were some casual detail that would have to be dropped at some
point when the Government were considering these matters in the round.
If we were being
asked to approve a much higher, or even much lower, sum, it would have
an impact on the willingness of Committee members or the House in
general to support the Bill as a
whole. Ian
Pearson: Thanks to this Government’s strong
management of the economy, we have had low and stable inflation for a
considerable period. It is right to have the opportunity to update
limits on potential savings. It would not be normal to prescribe an
amount in a Bill and then to introduce future Bills to update it
regularly. For that reason, I strongly resist what the hon. Member for
Taunton says about
this. The
hon. Member for Fareham tabled the measure as a probing amendment. He
suggested that some people who were on contributions-based JSA could be
on relatively high incomes and so there might be a deadweight effect to
our policies. We discussed that earlier. As I indicated, the number of
people in such circumstances would be extremely
low. For
the target group whom we are trying to encourage to save, £25 a
month is certainly a stretching savings target. Some will be able to
achieve that, while others will not. Both pilots certainly showed that
the participants thought that £25 was about the right sort of
figure. It was potentially an achievable target, but very difficult for
many. Obviously, we would want to keep these matters under review. That
is why it is appropriate not to put a figure in the Bill, but to set it
out in secondary
legislation. I
can confirm that the draft regulations set out savings of £25 a
month. That is our best view on an appropriate figure. In all such
cases, there is a matter of judgment, but I think that our judgment is
widely supported by the range of agencies that look into these matters,
with which we have worked
closely.
Mr.
Hoban: I am grateful to the Economic Secretary for his
comments. The
£25 limit is a target that will stretch people. It will be good
to encourage people to save as much as they can. One of the advantages
of the scheme is that it will enable people to withdraw, so if they
have stretched themselves too far by trying to achieve that £25,
there will be flexibility to enable them to withdraw some of that money
and to rebalance their expenses and
savings. People
might need to look at this. If the scheme proves to be a success, it
might be decided in 10 years’ time that £25 is not
enough. It would be very tedious to have to introduce primary
legislation to lift the limit from £25 to an inflation-linked
figure. With that in mind, I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Clause
4 ordered to stand part of the
Bill.
Clause
5Approvals
Dr.
Ladyman: I beg to move amendment 19, in
clause 5, page 3, line 36, at
end add— ‘(3) Approved
account providers must be persons who are regulated by the Financial
Services Authority under the Financial Services and Markets Act
2000. (4) Regulations may limit
approved account providers to persons from any or all of the
following—
(a)
Banks; (b) Building
Societies; (c) Friendly
Societies; (d) Credit
Unions; (e) Industrial and
Provident Societies; (f) Post
Office
Ltd.’. I
tabled this probing amendment to ask a number of questions of the
Economic Secretary. The first part of it will give him the opportunity
to confirm that every body providing one of these accounts will be an
organisation regulated by the Financial Services Authority, which will
thus mean that the people holding these accounts—if they have
been wrongly advised about taking them up or using the money in them
when they mature—would have access to the Financial Ombudsman
Service to have their complaint investigated. That is more than an
academic point because industrial and provident societies are not
regulated by the FSA, so people invest in an industrial and provident
society—as some people might wish to do—do not have
access to the ombudsman. I am not suggesting that many IPSs are
knocking down the door of the Government to set up these accounts, but
they might want to in the future.
Mr.
Hoban: Is not one of the risks that if IPSs accept money
under saving gateway accounts, they will be not only not covered by the
FOS but—as members of the Presbyterian Mutual Society in
Northern Ireland have found out—not covered by the Financial
Services Compensation Scheme
either?
Dr.
Ladyman: The hon. Gentleman makes an extremely good point.
Again, that emphasises why I want the Economic Secretary to confirm
that the only approved providers of these accounts will be those that
are regulated in such a way that access to such protections
exists. The
second part of the amendment, in which I have broken down various
organisations that might provide these accounts, is there to give my
hon. Friend the Economic Secretary the opportunity to say whether he
intends to be permissive in allowing organisations to provide these
accounts, or whether he is intending to use the provision of these
accounts for other purposes.
One of the
things that struck me in the evidence-taking session was the apparent
reluctance of the banks and building societies to provide such
accounts. They seemed to be taking the attitude that the job of
creating new business for them is not theirs, but the
Government’s. I regard encouraging people to save and to become
prudent with their finances as the job of the people who provide
accounts. When the supermarkets wanted to encourage people into their
shops, they ran loss leaders to encourage people to use them. The banks
seem to have no such ambition to encourage people to save. Indeed, they
do the very opposite by providing the best rates of interest to the
people with the most money, while providing no additional services to
encourage people on low incomes to save. They are clearly reluctant to
get into this market. I recall the difficulty that the Government had
in making them provide basic accounts for people on low
incomes—they almost had to dragoon many banks into providing
them.
If the banks
are reluctant to provide these accounts, why do not the Government use
this scheme to encourage certain people, perhaps by restricting these
accounts to
post office counters? Why not provide an extra opportunity for local
post offices to thrive by saying that they are the only place where
people can get these
accounts? Mr.
Browne: I have some sympathy with the hon.
Gentleman’s arguments, but the concern that I expressed in last
week’s exploratory discussions remains valid. Will people who
have a bank account be more inclined to open one of these accounts if
they can open it with the bank with which they hold that account? If
they have to have two accounts at two separate institutions, it might
be a
deterrent.
Dr.
Ladyman: The hon. Gentleman is quite right, and I am not
promoting this idea as a proposition. I am simply asking whether the
Government want the power to restrict accounts to individual
organisations. I would think seriously about restricting the accounts
to post offices and friendly societies to encourage those institutions.
I am asking my hon. Friend the Economic Secretary, by
way of this amendment, whether he will have the power, through
regulation, to restrict the sort of organisation that may provide
accounts to those classes of organisation. If he says in the future,
“I don’t want banks doing this, because I don’t
trust them to do it properly and to provide the right advice; I want to
limit the people who may provide these accounts to the Post Office and
friendly societies,” will he have the power to implement that
under the
Bill? Ordered,
That the debate be now adjourned.—(Mr.
Blizzard.)
| 
