Clause
27Orders
and
regulations
Mr.
Browne: I beg to move amendment 15, in
clause 27, page 13, line 1, leave
out ‘The
first’.
The
Chairman: With this, it will be convenient to discuss the
following: amendment 16, in clause 27, page 13,
line 4, leave out subsection
(6). Amendment
17, in
clause 27, page 13, line 7, leave
out ‘The
first’. Amendment
18, in
clause 27, page 13, line 11, leave
out subsection
(8).
Mr.
Browne: There is a somewhat ritualistic quality to these
amendments, in that they require subsequent changes to the Bill,
subject to the positive procedure. In a way, therefore, we are making a
more general point about the right of this House to scrutinise
legislation—a point that parties in opposition tend to make with
greater zeal than those in government
do. Having
said that, on this occasion the amendments are slightly more than just
ritualistic, because the Committee will see that there are some
particularly high-profile provisions such as the 50p rate of Government
contribution—we touched on that in our previous
discussions—that will come back to this House for any changes
that the Government envisage ought to be made at a future date.
However, there are endless provisions for which that is not the case.
In fact, I think that I said on Second Reading that there are 32
clauses in the Bill and 29 delegated powers, so we are almost at the
point where what the Government get to decide on is greater than what
we are passing into law in this Committee and in the Commons
Chamber.
As we have
discussed in our deliberations on previous clauses, some of the powers
that the Government have taken upon themselves, without our having the
opportunity
to consider them with any great certainty in this Committee, are quite
substantial and would affect the workings of the provision of the
saving gateway accounts and thereby affect our constituents. If the
Government are going to go down the path of allowing a huge amount of
flexibility, which is clearly the preferred option, when they come back
with changes in practice to the Bill, we, as Members of the House of
Commons, should have the opportunity to scrutinise those changes as
fully as we think appropriate. Mr.
Hoban: I partly support the hon. Member for Taunton in his
amendments. On the first two, it is right that any changes to the tax
status of these accounts should be dealt with by affirmative resolution
not just in the first use of these powers but subsequently. We could
end up with a situation in which a future Government decided to tax the
income or the matching payment on these accounts without the
requirement to debate that measure in Parliament unless someone prays
against it. So, the key features of this Bill should be subject to
affirmative resolution when there are subsequent amendments.
I am very
sceptical about the requirement for every subsequent adjustment to be
covered by affirmative resolution. We need to be pragmatic in deciding
where the use of affirmative resolution is appropriate and where it is
not. I am also minded to say that it is all very well for the hon.
Gentleman to propose these measures, but in the end, he or his
colleagues are required to turn up to the relevant debates. I found
that out in a debate on Monday afternoon, when it was just the Economic
Secretary and myself on the Front Benches, with no representative on
the Liberal Front Bench. So the hon. Gentleman should be very wary
about what he calls for in these
amendments.
Ian
Pearson: As hon. Members appreciate, clause 27 relates to
the delegated powers in the Bill. We have debated these issues at
several points in this Committee already. It is clear that the Bill
contains a number of delegated powers. These amendments would not
remove the delegated powers, but they would affect the procedure to be
followed when they are used. It might therefore be helpful if I set out
the position as the Bill stands and the rationale behind it. As the
hon. Member for Fareham said regarding the amendments tabled by the
hon. Member for Taunton, it simply would not be appropriate to deal
with every such proposal through the affirmative procedure. It would
not strike the appropriate balance, and we think that we have struck
the right balance.
Generally,
the first use of the delegated powers in the Bill will be subject to
the affirmative procedure, but subsequent uses will be subject to the
negative procedure, and hon. Members will be familiar with the process
by which they can pray against statutory instruments and debate them.
This approach is intended to allow appropriate parliamentary scrutiny
of the details of the saving gateway when it is introduced, and to
provide the subsequent flexibility to make minor or technical changes
to the scheme.
There are
five exceptions to the rule, however. The use of the order-making power
in subsection (5) will be subject to the negative procedure on each
use. The power allows an order to amend the list of enactments in
subsection (4), which may, by the regulations under subsection (3) be
applied to saving gateway appeals.
This may be necessary to ensure that the appeals procedure for the
saving gateway remains consistent with other appeals regimes. Any
enactments that are added to the list in subsection (4) would have been
subject to full parliamentary scrutiny already, and that is a narrower
power, so the negative procedure is appropriate. Four
delegated powers will be subject to the affirmative procedure on each
use. These include all three delegated powers on eligibility to the
saving gateway: the power in clause 3(1)(b) for regulations to set out
the UK connection that is required of a person to be eligible to open a
saving gateway account; the power in clause 3(4) for regulations to
prescribe the conditions that must be met for a person to be eligible
through entitlement to tax credits; and the power in clause 3(6) for an
order to amend the list of qualifying benefits and tax credits.
Eligibility is a central feature of the saving gateway, so it is right
that any change be subject to full parliamentary scrutiny. The same is
true of the match rate—the maturity payment amount that will be
earned for each pound saved. The power to set the amount under
regulations under clause 8(1) is, therefore, the fourth delegated power
that will be subject to the affirmative procedure on each
use.
The
amendments would mean that the use of all the Bill’s
regulation-making powers—not just those four—would be
subject to the affirmative procedure on each use, and, as I hope I have
explained, we do not believe that that would be appropriate. On the
point that the hon. Member for Fareham made about tax relief and
whether the affirmative procedure should be used every time, we have no
intention of changing the fact that saving gateway accounts will be tax
free. The powers might be used to reflect changes in tax legislation
and they are likely to be technical. On our general position, however,
we want the accounts to be tax free, and that is why the Bill is
structured as it is.
The general
rule of following the affirmative procedure for the powers’
first use and the negative procedure on subsequent uses strikes the
right balance between ensuring that Parliament can fully scrutinise the
details—we all appreciate that much of the Bill is left to the
details—and, once scrutiny has taken place, having the
flexibility to make minor or technical subsequent changes to the scheme
through the negative procedure, which can be prayed against. We have
reached our position based on those reasons, so I hope that the hon.
Member for Taunton will withdraw his
amendment.
9.45
am
Mr.
Browne: Without wishing to be disloyal to my colleagues, I
should clarify for the record that I was not due to serve on the
Committee. In centuries to come, when people read the account, they may
not appreciate how bad the weather was on Monday. It meant that quite a
few Members missed the proceedings in the House, although I was not one
of them; I was busy elsewhere in the
building. On
the substantive point, I appreciate that the Economic Secretary has
sought to try to find a sensible position from which to pitch the
Government’s stance on the matter, and I understand the logic of
his position. The hon. Member for Fareham made a reasonable point about
tax exemption, and although the Economic Secretary is entirely
trustworthy, it is a good idea in general to
make the assumption that future Ministers might not always have the best
will of the House at heart. Nevertheless, I understand the Economic
Secretary’s point, and having made my argument through my
amendments, I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Question
proposed, That the clause stand part of the
Bill.
Dr.
Ladyman: I have a quick question for my hon. Friend the
Economic Secretary that I am happy for him to answer in writing if he
cannot answer it immediately. Under subsection (2), the Government seem
to have a wide power to exercise discretion by regulation. How far can
that discretion extend? If I were to fail to convince my hon. Friend to
include recipients of carer’s allowance in the Bill when we come
back to the matter on Report, would that discretion allow him to
include those recipients at a later date, without having to introduce
primary
legislation?
Ian
Pearson: Very briefly, I shall explain subsection (2). It
provides that any order or regulation made under the delegated powers
given by the Bill may allow a person to exercise discretion in relation
to any matter, including residential, supplementary, consequential or
transitional provision or savings. It also provides for a person to
exercise discretion in relation to making different provision for
different cases. That is necessary to allow regulations or orders to
contain some flexibility. The power in clause 3(6) allows qualifying
benefits to be amended under the affirmative procedure. I think that my
hon. Friend will be looking to that clause, rather than clause 27, if
he wants to seek the remedy that he is
proposing. Clause
27 ordered to stand part of the
Bill. Clauses
28 to 32 ordered to stand part of the
Bill.
New
Clause
2Payment
of interest ‘There shall be
no requirement for providers of Saving Gateway accounts to pay
interest’.—(Mr.
Hoban.) Brought
up, and read the First
time.
Mr.
Hoban: I beg to move, That the clause be read a Second
time. I
am not sure whether new clause 2 would add anything to the Bill.
However, it would make it explicit that it is permissible for interest
to be paid on saving gateway accounts, but that it is not a requirement
to do so. In part, the permissive nature relates to a comment that I
made in the debate on clause 15: if interest was required to be paid on
the accounts, they would not be sharia compliant. That would close off
the accounts to a significant part of the population with whom we want
to engage in terms of financial
inclusion. We
had a debate with the various witnesses who gave evidence to us on that
point. There were two extremes—perhaps that is not the right
word, because I do not think that I would ever accuse Teresa Perchard
of being extreme. Teresa took the view that interest should be
paid on the accounts. Her perspective was that it would educate people
on the sort of terms that they could expect an account to have in the
future. I put a question to her about the requirement to pay interest
and she
said: “I
have strong views on this. If this product is designed to get people
who have not been saving into the savings habit and it does not include
the key feature that you would find in a standard savings account, you
are losing the opportunity to engage people with the idea that they
earn interest on the money that they put
aside.” So,
notwithstanding the fact that, with today’s interest rates, the
amounts involved might be relatively small, the educational benefit
that comes with seeing how much interest is payable on one of these
accounts is important. People would also see that the matched amounts
were much more generous than the interest, and when they came to the
end of the two-year period, they would understand that they were moving
on to lower rates. That is what they should expect. They should not
expect another 50p-in-the-pound match in other, standard savings
products. Teresa saw this issue very much from the educational
aspect. Brian
Pomeroy, who chairs the Government’s Financial Inclusion
Taskforce said that he agreed in principle with the idea that interest
should be paid. However, he also made an important point when he
said: “It
would be unfortunate if the Treasury were to mandate a rate of interest
and as a result killed off interest in being a
provider.”——[Official Report, Saving
Gateway Accounts Public Bill Committee, 27 January 2009; c. 20,
Q40.] We
touched on this dilemma on Tuesday. Do we encourage as many people as
possible to provide this product by making the cost of provision as low
as possible, or do we set high standards—whether on savings,
transferability or, in this case, the payment of interest—that
force up the cost of the product, thereby restricting the number of
providers? The question is whether we want a monopoly on provision by
default or
design. In
the afternoon sitting, it was interesting that one of the people who
expressed the need for a permissive Bill was Mark Lyonette, from the
Association of British Credit Unions. He understood the points about
the financial education benefit, but he said that, for this
marketplace, the motive was not necessarily the matching contribution
or the interest. Mark’s experience of working with credit unions
suggested that many people save to provide a buffer for a rainy day. I
know from my discussions with the credit union to which I belong that
many people put aside relatively small amounts to provide that buffer.
They are not looking to earn interest, but simply want to put money
aside.
Adrian Coles,
from the Building Societies Association, felt that the interest rate
would not be relevant to a saver’s decision on where to save or,
indeed, whether to save. A variety of views have been put forward, and
although I argued in favour of compulsion in the context of the product
defaulting to an ISA when it matures, I favour a more permissive
regime. I am mindful, however, of Teresa Perchard’s point about
education, as that is part of the overall package.
We have
talked about this being a stand-alone product, but we need to ensure
that people will understand what the saving gateway product entails and
what they will move on to afterwards. One lesson that was learned from
the second pilot was the importance of having
financial education alongside these products and the value of using
third sector groups and others to help to encourage people to
save. I am content
with the permissive nature of the Bill, but I thought that the new
clause would give the Committee an opportunity to debate this issue, as
there is no other opportunity to do
so.
Dr.
Ladyman: I have already made my key points, and I remind
my hon. Friend the Economic Secretary of them, so that he can address
them. An important point was made to us in evidence: if we are to
encourage people to get the saving habit, which is what these accounts
are for, it is necessary to pay some interest on them, so that people
understand that, once the Government have paid the bonus on maturity,
there is still a good reason for keeping money in a savings account and
adding to it from time to time, because interest will be
added. I
confess that I did not find the people from the banking industry who
gave evidence particularly sympathetic characters. Their cries of
poverty stretched credulity a little. By their own figures, this market
will be worth about £250 million a year. Even at today’s
rates of interest, a back-of-the-envelope calculation based on the
typical annual percentage rate offered on personal loans gives them a
profit of £20 million on the money that they will get free from
these savers and the Government.
The
£20 million of profit has to go to administering these accounts,
but that is not an insignificant amount of money for the banks to use
for that, given that the Bill is about building their future customer
base and encouraging people into the saving habit, which will stay with
them in the long term. Having done the paperwork involved in getting
people to open these accounts, the banks will not have to do it again
when they transfer the matured funds either into ISAs or some other
sort of savings account. That is another area of savings for
them.
Even if the
banks paid interest set at the current low rate, I estimate that they
would still make about £14 million out of that
£20 million, and they could use it to administer these accounts.
I appeal to my hon. Friend not to take the banks’ cry of poverty
and hardship too seriously when he is discussing whether interest
should be paid on these
accounts.
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