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Baroness Noakes: It is a pleasure to start our Committee consideration of the Saving Gateway Accounts Bill. As I said at Second Reading, fundamentally, this is not a contentious Bill, but one which we must scrutinise in the customary way before we return it to the other place. I thank the Minister for writing promptly after Second Reading dealing with the points that arose during that debate. It is generally a welcome feature of his modus operandi that we receive letters in good time, but his letter in respect of the government amendments tabled last week, while dated 30 March, arrived only this morning. While I was in the Chamber, a further letter, dated yesterday, arrived. I was going to give him full marks, but I am afraid that I will have to dock a few penalty points in this regard.
Amendment 1 would, on a probing basis, delete Clause 1(2). This subsection requires saving gateway accounts to be managed by the HMRC. I have deleted this subsection in order to find out why the Government consider the HMRC is best qualified to carry out the management of the scheme. The other obvious contender is the Department for Work and Pensions, since that department manages five of the seven benefits listed in Clause 3 as creating eligibility for a saving gateway account.
I have searched the background documents for the saving gateway scheme, starting with the 2001 White Paper and ending with the 2008 summary of responses. The scheme seems to have evolved from one which was jointly in the care of the Treasury and, for no reason I can really discern, the Department for Education and Skills, as it then was, to one which is now led by the Treasury and the HMRC, without any discussion, as far as I can see, en route about the best way for the project to be led. The DWP was involved in the pilots, but it seems to have been allowed to play only a supporting role.
The HMRC is not everyones idea of an ideal body to lead a new project. It is the organisation which lost the data relating to around 25 million people and the report carried out by Mr Poynter was damning about the management and organisation skills within the HMRC. Subsequently, it has had to have a major change of personnel at the top. I would be surprised if anyone could claim that the internal failings which were highlighted have yet been solved. The HMRC is also the body which has introduced the disastrous tax
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A much more logical case could be made for DWP based on the number of benefits and likely number of people qualifying for a saving gateway account. The main reason for saying that the DWP would be more appropriate is that the benefits system works in real time and the tax credits system is still struggling to graft a real-time focus on to a tax system that is fundamentally based on a retrospective look at fiscal years. Put simply, the DWP is used to dealing with individuals changing circumstances while the HMRC is not. I look forward to hearing the Governments rationale for using the HMRC. I beg to move.
Lord Williamson of Horton: I agree with the GovernmentI do not support the amendmentbut I want to make a couple of points. I declare an interest: I am the father of an eligible person and my wife and I are both carers, although we do not fall under the Ministers definition. I am 100 per cent in favour of the Ministers amendment although I am not personally covered by it.
I am content with the proposed approach to management. Amendment 40, which we will come to later, would involve looking back and seeing how things were provided and how far the system had worked to achieve its objectives. I am in favour of that amendment.
Following the principle that when you want to make a point and there are an awful lot of amendments, it is easiest to make it on Amendment 1, I want to put one point to the Ministerit is not a critical point but it is of real interest. I want the Minister to comment on the provision in the Explanatory Notes on the way in which the system will work; that is, the third example. That involves someone who saves money for, say, the first year and gets up to £300 and then he or she draws out some money; at the end of the year, there would be substantially less in the account. None the less, the payment from the taxpayer would relate to the highest figure; it would relate not to the amount of money in the account at the end but to the amount of money that was in the account before some of it was withdrawn. In a sense, I do not object to that because the arrangement is very favourable to the saver, but it involves a rather odd proposition. The reality is that many people will put money in for a short periodI know quite a lot of the type of people who are eligible herebut, unfortunately, there will be something that they really
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I invite the Minister to comment on this point, although its relevance to Amendment 1 is a little marginal. However, it is important, and I really do believe that that is what will happen under this scheme: people will put money in and, even if they draw some out, they will get benefit on a much reduced account.
The Financial Services Secretary to the Treasury (Lord Myners): I begin by saying how much I have looked forward to this Committee stage. I know from my experience of the Banking Bill with noble Lords, including in particular the noble Baroness and the noble Lord, Lord Newby, that work in Committee will almost certainly be a challenge, that there will be good scrutiny and, conceivably, improvement. I look forward to working with noble Lords to achieve that. I also welcome the noble Baronesss statement of the Oppositions support in principle for the Bill and this new product.
I will endeavour to do better with the speed of communication. Indeed, if it continues to fall short of the noble Baronesss expectations, I may take it upon myself to hand-deliver the letters if they take as long as they appear to have done. I apologise for that. I have always believed that being granted the facility by Members of the House or Committee to respond to technical matters by correspondence is a privilege that colleagues should not abuse; that is to say, we should respond promptly and in detail to anything where we beg the indulgence of the House or Committee to respond in writing rather than during the debate.
Lord Newby: I am sorry to interrupt. I do not know whether the Ministers letters to the noble Baroness were private billets doux but, if they were slightly more generally distributed, I have not got mine yet.
Lord Myners: Even at this very moment, a copy is winging its way towards the noble Lord, Lord Newby. I suspect that the G20 summit has rather slowed the performance of my office; I apologise for that.
Amendment 1, by removing the provision in the Bill that places the saving gateway under the management of the commissioners for Revenue and Customs, would make it more difficult for the commissioners to exercise general managerial discretion in carrying out the functions conferred upon them by the Bill. At the heart of my answer to the noble Baroness is the observation that this is not a social security benefit. The saving gateway is a savings scheme and therefore, constitutionally, properly and correctly falls under the Treasury. The HMRC administers both the individual savings accounts and child trust funds and, consequently, is best placed to administer the saving gateway, building upon its experience and established links with savings providers. The HMRC is of course working closely with DWP as it develops the scheme.
The noble Baroness, Lady Noakes, refers to performance shortcomings at the HMRC, particularly the loss of data and the administration of certain benefits. The HMRC is committed to enhanced data security programmes, and is investing over £150 million over the next three years. There are new physical and technical controls on access to and movement of bulk data, on paper and electronically, using removable data. My colleagues have, no doubt, previously expressed disappointment at the performance of the HMRC on the loss of data to which the noble Baroness refers. There is a salutary warning there on the importance of achieving confidence in the customer community by not repeating those shortcomings.
The noble Lord, Lord Williamson of Horton, raises a question that even he acknowledges is somewhat tenuous in its linkage to the amendment. However, in the spirit in which we are going to work together to achieve a good outcome here, I am more than happy to answer to the best of my ability his question on whether the match payments should be calculated on the final balance of the account. Our view is that this would unfairly penalise those who, possibly for reasons beyond their control, make a withdrawal from the saving gateway account before the end of the accounts life. That could mean that someone who has saved for 23 months and then had to withdraw the money because of an emergency at home, for example, would get no return at all on their savings if no interest were paid on the account. That would clearly be unfair. The final balance will never be higher than the highest balance, meaning that many account holders could receive a lower return on their savings.
The system that we have chosen means that people will not be penalised for making withdrawals. However, such withdrawals will nevertheless be disincentivised as savers will have to put the money they withdrew back into their account before they can earn the additional match. I remember, at Second Reading, the noble Lord, Lord Newby, used the phrase rough justice, or rough and ready, or something of that sort. The truth is that the noble Lord was correct in that respect. We have a wish to be as simple and straightforward as possible, so arguments of the sort advanced by the noble Lord, Lord Williamson, which have validity, are nevertheless subservient to the better interest of keeping this simple and straightforward. On that basis, I ask the noble Baroness if she will be kind enough to withdraw her amendment.
The Minister said that the reason why it was constitutionally proper for this to be in the Treasury and the HMRC is because it is not a social security benefit. I was trying to make the point that the DWP was just a better organisation and I would have hoped that the Treasury would have chosen the best organisation in Whitehall to carry out this project. The Minister referred to the
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I regret that the Minister has not given anything more than a constitutional nicety as an argument for the HMRC. If it were objectively tested by having a market test around Whitehall, it would be difficult to find the HMRC at the top of the list as being the most appropriate organisation, especially given the number of criticisms that are not simply confined to data security. There are backlogs on PAYE, self-assessment and all kinds of other things that are not conducive to being handled in real time. I shall not press this further, although I do not think that the Minister has justified the case. I predict that leaving this to the HMRC could leave the scheme struggling as its workload starts to involve large amounts of paper and processes that have to be dealt with in real time. That is on the Governments head. I beg leave to withdraw the amendment.
Baroness Noakes: I shall also speak to Amendment 5. The amendments refer to eligibility for a saving gateway account. Amendment 2 would delete Clause 1(3)(b) which states that the relevant date for a notice of eligibility can be earlier than the date that the notice is issued if the person concerned has already ceased to be eligible. If the person was eligible for, say, jobseekers allowance but then got a job and came off JSA without going on to any other benefit or tax credit, the HMRC could nevertheless issue a notice of eligibility allowing that person to open a saving gateway account.
In Committee in another place, the Minister said that that was indeed the Governments intention and that even a fleeting encounter with the benefits system would create eligibility for a saving gateway account. The noble Lord, Lord Newby, spoke on Second Reading about the opportunities available to young people from wealthy backgrounds. They could register for JSA, get their saving gateway entitlement which their parents might fund and then leave JSA either because they got a job or because it really was too boring to do all those job interviews.
Stakeholder pensions were a policy failure in providing pensions for those without workplace pensions, but they became a very big hit with the middle classes,
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Amendment 2 would not allow the HMRC to issue a notice of eligibility if the person concerned had already moved out of eligible benefit or tax credit. Amendment 5 has a similar purpose. It modifies Clause 2 so that the expiry date of a notice of eligibility must be no later than the cessation of eligibility. Even if a notice had been issued to someone who was receiving one of the benefits, it could not be used after the person came off benefits or tax credits. That would further restrict the possibility that people who are not really on benefits would qualify.
In Committee in another place, the Minister said that allowing a saving gateway account to those who no longer qualified affected only around 4 per cent of the eligible population. I suspect that that makes no allowance for the behavioural effect of encouraging people to register for a benefit only for the purpose of gaining access to the tax-free return that the saving gateway account will allow. I can see no possible reason for the saving gateway account scheme to encourage that sort of behaviour, and the scheme should not allow it to occur. The Minister may say that it is very difficult, because DWP will be transferring information to the HMRC only once or twice a month, so the system cannot cope with short-term shifts in eligibility. That has to be a weakness of either systems or processes that are being set up to cope with the new scheme or, to return to the theme of my earlier amendment, with placing responsibility with the HMRC rather than DWP, which is very used to handling short-term changes in the circumstances of individuals. I have already argued it is the more logical place for administration to be located. I beg to move.
Clause 1(3)(b), which Amendment 2 would remove from the Bill, is necessary to ensure that a notice of eligibility can be issued to every person who becomes eligible for a saving gateway account. It may be helpful if I explain the background to, and purpose of, this provision.
As noble Lords will be aware, Clause 1(3) defines the relevant datethat is the date on which a person must be entitled to a qualifying benefit or tax credit in order for their account to be a saving gateway account. In most cases, this relevant date will be the date on which the notice of eligibility is issued. However, as I will explain, it will be necessary for there to be exceptions to this rule, and Clause 1(3)(b) would allow for these exceptions.
Eligibility for the saving gateway will be passported from entitlement to certain benefits or tax credits. The HMRC systems will be updated with periodic transfers of information from DWP and the DSD in Northern Ireland. By the time that the HMRC receives these periodic transfers and issues notices of eligibility, some people whose details it has received from DWP or DSD may no longer be entitled to a qualifying benefit
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I am sure that noble Lords will agree that it would not be right for people in these circumstances to be excluded from an opportunity to have a saving gateway account, just because their benefit status has changed by the date on which the HMRC receives information from DWP or DSD.
Clause 1(3)(b) allows the HMRC to consider that a date earlier than that on which the notice of eligibility is issued should be the relevant date, ensuring that every person who becomes eligible for the saving gateway can be issued with a notice of eligibility.
Amendment 5 would require the notices that the HMRC issue to eligible people to contain an expiry date not later than the date when a person ceases to be eligible under Clause 3, which will generally be when they move off the qualifying benefits or tax credits. This would obviously be rather challenging since the HMRC will not be able to anticipate any future changes in a person's circumstances. However, I appreciate that the intention behind the amendment is to ensure that notices of eligibility issued by the HMRC will not be valid once a persons claim to the qualifying benefit or tax credit ceases.
I agree that it is important for eligibility to the saving gateway to be appropriately targeted, and we have considered this point carefully, but we have decided to take a different approach so that notices of eligibility will be valid for a set period of time, regardless of changes in peoples circumstances. Let me explain why we have taken this approach. We want people to be clear, when they receive a properly issued notice of eligibility, that they are entitled to open up an account until the point when that notice expires, provided they have the necessary connection with the United Kingdom. That makes the scheme simple for potential account holders to understand and simple for providers to operate.
As I have said, it would be impossible for the HMRC to anticipate when a persons eligibility might cease and print that date on the notice. To operate the scheme in the way that is envisaged in this amendment would therefore require individuals to declare their benefit or tax credit entitlement to the provider at the point of account opening. That is likely to deter people from opening an account and we do not think that providers would welcome having to ask about, record and report information on benefit entitlement to the HMRC. Where the HMRC later found out that a person had wrongly reported their eligibility status, this would lead to more accounts having to be closed, which we know would be burdensome for account providers and a deterrent to their offering a saving gateway account. Allowing notices of eligibility to remain valid up to their expiry date avoids these problems. It gives providers certainty and it makes it easier for people opening accounts to know where they stand.
However, as I said earlier, we recognise the importance of properly targeting eligibility for the saving gateway and I understand the noble Baronesss concerns in this area. We anticipate, though, that only in a minority of cases will a person move out of entitlement to the qualifying benefits and tax credits between being issued with a notice of eligibility and opening an account. We estimate that this will apply to only around 4 per cent of accounts that are opened.
As I have said, there is a balance to be struck between achieving marginally more precise targeting of the scheme on the one hand and ensuring that the scheme is simple to use and to operate on the other. We feel we have struck the right balance and that this amendment would introduce unwelcome complexity and may well inhibit take-up of the scheme by either account holders or providers. I hope that the noble Baroness will seek leave to withdraw the amendment.
Baroness Noakes: What would Ministers do without officials? I thank the Minister for that. The issue is whether a passing acquaintance with the benefits system should be allowed to generate access to a very privileged little savings scheme. I understand the problem that is caused by the HMRC not necessarily having access to the information, and indeed I highlighted that earlier when I said that the HMRC is not good at handling things in real time; it is always behind the pace. It is the use of the HMRC that in part is causing the problem. If the Government had chosen to use DWP, they probably could have used a simpler mechanism with the arrangements set up so that a voucher is issued.
Lord Myners: Would the noble Baroness and the noble Lord, Lord Newby, find it helpful to have a meeting with representatives from HMRC to better understand how it will address the very practical issues of implementation? They might be best handled in a meeting across a table. I would be all too pleased to facilitate and attend such a meeting.
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