Mr.
Browne: I am listening to the hon. Gentleman with interest
and a lot of sympathy. Would he consider another valid point? To give
people who hold saving gateway accounts a sense of what it is like to
be a saver beyond the two-year period, it would be a good idea if the
accounts bore some resemblance to a conventional savings account.
People could see the little increments. Even the fact that the pounds
do not round up, that there are a few pennies here and there and that
it all looks like the money is growing in that incremental way will
give the holders of these accounts, if they have no previous experience
of saving, a sense of what it is like to have a conventional savings
account. That may be beneficial as
well.
Dr.
Ladyman: The hon. Gentleman is absolutely right. This is
about teaching people how savings work and how beneficial to them
holding these accounts can be in the long term. I hope that they will
take that message very seriously.
I return to my
core point: I do not want my hon. Friend the Economic Secretary to
think that the banks are not getting anything out of this. They are
getting something very considerable. They are getting free money to
help them to expand their customer base. Any other industry in this
country that could make a claim for getting free money to expand its
customer base would be falling over itself to get it. We have just had
a debate about the car industry, and we are essentially helping the car
industry to expand its customer base. I do not see how this is any
different. The banks should be doing their bit by making money
available. To
come back to the point made by the hon. Member for Taunton, perhaps the
banks will want to structure their interest differently, so that
someone who puts in their money regularly each month and does not
withdraw it in the meantime will get more interest than someone who
operates an account by putting in money and taking out money all the
time in a way that is difficult to administer. Perhaps someone who puts
in a lump sum at the start and keeps it there until the maturity period
will get a bigger rate of interest than someone who puts in money
differently. There are different ways of structuring the account, but I
encourage my hon. Friend to remember, as I am sure that he does, that
these accounts are about teaching people the benefits of saving. If we
are to do that, the banks, building societies and others should be
encouraged to pay interest on the
accounts.
Ian
Pearson: It is fair to say that there has been a healthy
debate on whether there should be a mandated rate of interest on saving
gateway accounts or whether, as in the Government’s view, it
should be left to the banks, building societies and other potential
account providers to decide whether they wish to pay
interest.
Let me
explain how we have reached the judgment that we have made. I note in
passing that my hon. Friend the Member for South Thanet seems to have
made common cause with the right hon. Member for Wokingham, although
perhaps for different reasons, in wanting the compulsory approach. I
seem to remember his arguing on Second Reading that the payment of
interest should be compulsory, but I share the view expressed by the
hon. Member for Fareham: we should be permissive in this
area. 10
am Let
me be clear that, in principle, the Government want to see account
providers offering rates on saving gateway accounts. We also want them
to offer good defaults for when accounts roll over after the two-year
period. We want to engender a market with a number of account providers
wanting to compete in offering saving gateway accounts. In those
circumstances, relatively few people will want to take out a saving
gateway account with no interest if an alternative product on the
market offered a good level of interest and a good default option after
the end of two years. At the moment we do not think that it is
appropriate to specify and mandate a rate of
interest. It
is clear that the match rate is by far the most important feature of
saving gateway accounts and is the biggest incentive to encouraging
individuals to open such accounts. That rate would dwarf any interest
that is likely to be awarded during a two-year period. That is the real
driver for the programme. However, I take
closely into account the comments made by Teresa Perchard of Citizens
Advice, and those of my hon. Friend the Member for South Thanet and
others, which were that getting into the saving habit is about learning
about savings products. Having a savings product that is a gateway
account, which looks like an ordinary savings product, can have
benefits in that
regard. Dr.
Ladyman: I fear that some banks will rely on the generous
bonus as a way of attracting people into these accounts and that they
will take the same view as the bankers who gave evidence, which is that
any rate of interest that they could possibly offer will be dwarfed by
the bonus, so it is not worth paying it. They may then say,
“Okay, we won’t give you any interest, but we’ll
transfer your money at the end of this account into a savings account
that gives a generous rate of interest.” They might take that
approach, but we should not be encouraging them to rely on that big
bonus. We should be trying to put as much pressure on them as possible
at least to pay a low level of interest during the maturity
period.
Ian
Pearson: I understand how my hon. Friend gets to that
point of view. As I have explained, the Government’s preferred
position is to engender competition so that a wide range of
institutions participate and offer saving gateway accounts. We hope
that a number of those institutions will want to offer interest on
those accounts, as well as good default options, so that people wanting
to open a saving gateway account will have a choice of places to
go. The
advice that I have received and the detailed work that we have done on
the cost of operating saving gateway accounts clearly shows that there
are costs involved in opening accounts for significant numbers of
people who will be saving relatively small amounts of money. I ask my
hon. Friend to take that into account. It is not as simple as he
suggests. He says that banks are being given free money to expand their
customer base, but it is not like
that.
Dr.
Ladyman: These will be my last words on this matter. The
banks seem to want to invest in children; their websites are currently
offering quite generous rates of interest by today’s standards
for young people, who do put small amounts of money in and out, to
inculcate the saving habit in them. However, I do not see why their
attitude should be any different when they are operating the saving
gateway accounts. Banks invest in children because they are their
business of the future. Why should they not be encouraged to invest in
people who are eligible to open a saving gateway
account?
Ian
Pearson: I certainly do want to encourage banks to offer
saving gateway accounts. I do not want to put them off; I want to
continue to listen to them when they say that significant business
issues will determine their decision whether to offer the accounts. The
Government are not credulous about that, and we will hold a detailed
dialogue with the banks to come to an understanding on their offering
of saving gateway accounts. Having talked to them, we remain of the
view that it is not the right approach to prescribe that interest must
be offered
on saving gateway accounts. It is far better to create a market to
encourage a variety of providers. Our approach is the right
one.
I appreciate
the comments made by the hon. Member for Fareham and the reason for his
new clause, which he correctly said does not add anything to the Bill.
I am happy to assure him that account providers will not find that the
regulations suddenly change, imposing on them a new requirement to pay
interest to account holders. That is the decision that we have
reached—it is the settled view of the Government. However, that
does not mean that it would not be wise to provide flexibility in case
we change our minds in the future—perhaps we will be persuaded
by the right hon. Member for Wokingham or my hon. Friend the Member for
South Thanet. That is why the legislation, and secondary legislation,
is so framed. However, were we to go down that road, we would want to
conduct a full consultation. We think that the Bill is far better as it
stands now, with its voluntary approach. Let us get these accounts up
and running and get people saving. We need to encourage that saving
habit. Let us try to create a market so that account providers will
want to offer attractive rates of interests as default positions. We
ought to proceed on that basis; that is the Government’s
intention.
Mr.
Hoban: We have had a very useful debate about the role
that interest plays in such accounts and the economics of providing
them. I am keen to ensure that we have as many providers of such
accounts as possible. The cost issue weighed on the minds not only of
banks but of the Building Societies Association and the credit unions.
If we want financial mutuals to participate, they need to be confident
about the financial return. Often they are thinly capitalised compared
with banks. They do not necessarily have the wherewithal to open some
of these things. It is important to ensure that the provision is
attractive to a range of providers. However, I take on board the
comments of Teresa Perchard and Brian Pomeroy about education and
ensuring that people understand what a savings account will be like in
the future. That is an important part of the process. Given that, as I
said earlier, the new clause adds little, if not nothing, to the Bill,
I beg to ask leave to withdraw the
clause. Clause,
by leave,
withdrawn. Ordered, That
certain written evidence already reported to the House be appended to
the proceedings of the Committee—(Ian
Pearson.) Question
proposed, That the Chairman do report the Bill, as amended, to the
House.
Ian
Pearson: I was going to do this on a point of order, but I
am happy to speak to the question formally. We believe that the Saving
Gateway Accounts Bill offers an important opportunity to encourage
people of working age or on low incomes to acquire the saving habit. We
think that there are strong advantages in promoting this policy. It
only remains for me to thank you, Mr. Taylor, and
Mr. Bercow for the efficient way in which you chaired the
proceedings. I thank the Clerks for faithfully dealing with our
debates. I thank my Bill team for the sterling work that they have
done. I thank the hon. Members for Fareham and for Taunton for the
good-natured manner in which they have probed us on the
proposed legislation during Committee stage and I thank my hon. Friends
for their contributions to the debate. Our proceedings have not been
conducted through the best of weather, but we have had a good
turnout. There
is a high level of interest in saving gateway accounts and wide
cross-party support for them. That is to be welcomed. I am sure that on
Report and in the other place, the Bill will continue to progress in
good shape. I am sure that it will get on to the statute book and will
kick-start the saving habit for the
future.
Mr.
Hoban: I add my thanks to you, Mr. Taylor and
your co-Chairman, Mr. Bercow. I also thank the Clerks and
the Hansard reporters for their
assistance. The
Minister commented that only two Government amendments had been tabled
to the Bill. That is a tribute to the Bill team. Saving gateway
accounts were possibly easier to cast into legislation than the
proposals in the Banking Bill, which will come back to us on Tuesday
having been heavily amended in the Lords and the Commons. There has
been a great deal of consensus on this Bill. I wonder whether this is
the political equivalent to Stockholm syndrome for Opposition Members.
I am grateful for the way in which the Minister has engaged in the
debate. In contrast to many Public
Bill Committees, Labour Back Benchers have seen fit to take part. They
are always very loyal in attending and usually in being very quiet. It
has been helpful to have participation from both
sides. Dr.
Ladyman: I was working on the basis that if I interrupted
enough, I would not be invited on to too many more Public Bill
Committees.
Mr.
Hoban: I hope that the hon. Gentleman has impressed the
Whip sufficiently that he will not be called on to participate in the
Finance Bill Committee. He should be careful what he wishes
for. There
is widespread agreement on the Bill and we all share the aims of
encouraging a saving culture among those who feel excluded from saving.
We hope that it is successful in encouraging more people to enjoy the
benefits that most other people enjoy from having savings, such as
protection against uncertainty and the opportunity to provide for their
future. Question
put and agreed
to. Bill,
as amended, accordingly to be
reported. 10.13
am Committee
rose.
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