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Baroness Noakes: That may well be useful, but the fact remains that HMRC is not good at doing this kind of thing, and that is what is causing the problem in the drafting. Inevitably there will be data transfer periodically rather than in real time, and that will lead to delays. That is the fundamental burden, and it would take a lot to convince me that HMRC will be efficient once it has this to deal with. Structurally, there is a problem in the scheme. The Minister says that it is not right to exclude someone because they have come out of eligibility before the notice is issued. I have no problem with that because it implies that there is no genuine entitlement in the same sense that there is an ongoing entitlement to benefits. For example, a very rich person could register, get his entitlement and move out of benefit simply to get the saving

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gateway account. The Minister again quoted the small number expected to be in this category, but that does not take account of behavioural changes.

The Government are creating a problem for themselves. The Minister said that having the issue dealt with by declaration was not desirable because it would mean that the person would have to declare to the provider, although the provider would not have to do anything by way of validation. But the rules already provide that the applicant for a saving gateway account should make a declaration that he is entitled to it, and I do not see how anything additional could come from that. I appreciate that the Government want to do it this way, but I do not think that offering people who have a passing acquaintance with the benefits system a three-month entitlement to open an account is the most just way of spending public money. Indeed, to me it seems to be a waste of public money.

I shall think about what the Minister has said and contemplate the possibility of a meeting with HMRC before we reach the Report stage. I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

Clause 1 agreed.

Clause 2 : Notices of eligibility

Amendment 3

Moved by Baroness Noakes

3: Clause 2, page 2, line 2, after “issue” insert “or cause to be issued”

Baroness Noakes: This amendment adds a few words to Clause 2(1). Under this subsection the commissioners must issue notices of eligibility. My amendment provides that they may either issue the notices of eligibility or cause them to be issued. In part this picks up the theme I have been developing in the previous amendments because, as I have said, it is not entirely clear why HMRC should be the lead department. Even if it is, it is not clear that it should be the sole body handling the paperwork for saving gateway accounts. The amendment would allow HMRC to arrange with another body, perhaps DWP, the issue of notices of eligibility—in the case of DWP, it would be at the point when the benefits are actually set up. It would then only be necessary for DWP to tell HMRC which notices have been issued. The amendment would also allow HMRC to subcontract the operation of saving gateway accounts to a private sector operator, if that was thought desirable.

My amendment is entirely permissive. I would argue that it is desirable because it would give flexibility in the event that the saving gateway account processes have to be changed if we find, as we have found in other areas, that HMRC does not handle these accounts well. As I have said, it is naturally a gatherer of taxes and not a payer of benefits. Tax credits have not really changed that.



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If the Government’s experiment with using HMRC fails, my amendment would give the Government an easy way to rectify the scheme without needing primary legislation to change the scheme or having to do something inappropriate, as they had to do with the tax credit system, which produced a massive £25,000 income disregard simply to save the scheme. I would have thought that the Government would welcome having more flexibility built into this Bill to take account of what might go wrong and what might even be reasonably predicted to go wrong. I beg to move.

The Deputy Chairman of Committees (Viscount Ullswater): There is a mistake in the Marshalled List. The proposed amendment should read, “Page 2, line 3, after “issue” insert “or cause to be issued”.

Lord Myners: This amendment seeks to allow one of HMRC’s duties under the Bill—that of issuing notes of eligibility to all eligible persons—to be performed by a third party on behalf of the commissioners. I am pleased to reassure the noble Baroness that such an amendment is not necessary. Existing legislation in the Commissioners for Revenue and Customs Act 2005 allows the commissioners to delegate certain functions to a third party. The Act gives powers to the commissioners, under Section 12, to make arrangements for the conduct of their proceedings; under Section 14, to delegate their functions to any other persons; and, under Section 9, to do anything, including entering into a contract, that is necessary, expedient, incidental or conducive to the exercise of their functions. This power to delegate would apply to any of the duties conferred on the commissioners by this Bill once it is passed, including the duty to issue notices of eligibility. So the flexibility which the noble Baroness seeks already exists under separate legislation. I hope that in the light of this the noble Baroness will seek leave to withdraw the amendment.

Baroness Noakes: I am grateful for that explanation and I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

Amendment 4

Moved by Baroness Noakes

4: Clause 2, page 2, line 4, at end insert “no later than one month after that person becomes an eligible person”

Baroness Noakes: Amendment 4, like the previous amendment, adds words to Clause 2(1). This would require HMRC to issue a notice of eligibility within one month of becoming eligible. A person who is entitled to open a saving gateway account should be entitled to receive that privilege at the earliest possible time. Ideally, that would be at the point that eligibility was established either to a tax credit or to a relevant benefit. My amendment would mean that the individual would have to wait no more than one month to gain access to a saving gateway account.

This amendment would link to the desirability of creating a saving habit. The Bill is aimed at those whose income qualifies them for benefits or tax credits

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and, therefore, is of modest levels. It is in that target group that we are seeking to create the habit of saving. Saving requires forms of weekly or monthly budgeting, so that saving is effectively put on one side. The point at which someone become entitled to a tax credit or a benefit is a natural point at which to identify the possible level of regular savings. If there is too big a gap between the start of the benefit or the tax credit and the opportunity to start saving, the income that has already been received by the individual may already be swallowed up or accounted for as part of regular expenditure. It may be more difficult to carve out saving at a later stage. That is why I believe there needs to be a positive duty on HMRC to get notices out promptly.

The Minister will probably say that my amendment goes too far, because if the reasons have nothing to do with the eligible person and HMRC fails to get notice out, there may be doubt about the validity of a notice issued late—for example, if the computer system breaks down completely and has to be rerun and the letters go out late, one would not want that to prevent someone having the saving gateway account. That is certainly not my intention, but there is a lot of scope for HMRC to get notices out very late. A glance at the recent Public Accounts Committee report on HMRC, or previous Treasury Select Committee reports, will show that HMRC often—not deliberately, but as a matter of fact—builds up backlogs in certain areas. A backlog will be harmful to the success of the saving gateway scheme. With that, I hope that the Minister can explain not only what HMRC is expected to do but what will happen if it does not. I beg to move.

Lord Davies of Oldham: I am grateful to the noble Baroness for the terms in which she has moved the amendment, as she is seeking to ensure that the scheme should be as effective and efficient as possible. The amendment is constructive.

HMRC’s saving gateway system will receive periodic updates from the DWP and from the Department for Social Development in Northern Ireland about people who are entitled to the qualifying benefits for the saving gateway. There will be a similar process to transfer information from HMRC’s tax code system. Based on that information, HMRC will issue the notices of eligibility. The amendment would ensure that that is done within one month. We expect that that would largely be the case. The exact frequency of the date of transfer from DWP systems has not yet been determined, as the IT system is still being developed, but it is very likely to be more frequent than once a month, so it should be able to effect exactly what the amendment suggests.

Once the data have been transferred from DWP to HMRC, it will of course need to be matched to the data already held on the saving gateway system to prevent duplicate notices being sent, but there should not be significant delays in the notices of eligibility being issued, because that will be an automated process. I hope that the noble Baroness and the Committee will appreciate that there may be circumstances in which it will just not be possible to issue notices of eligibility within one month of the person becoming eligible. For

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example, if there is a problem with someone's claim for one of the qualifying benefits, there can be a delay in the benefit being awarded, and, therefore, and inevitable delay in HMRC being advised of their eligibility. Their entitlement to the benefit will generally be backdated to the date of their claim, which will therefore be the date on which they were eligible for the saving gateway. A month may have already elapsed. In that situation, it is just impossible for HMRC to meet the requirement that it must issue notices of eligibility within one month of the person becoming eligible.

Although HMRC will certainly aim to issue notices as promptly as possible—we anticipate that we will largely be able to meet the point that the noble Baroness is driving at in her amendment of a limit of one month—it must carry out the necessary checks to confirm eligibility. It may be that for other reasons time has elapsed from the date on which the person is defined as being eligible and HMRC having the information to issue the notice.

There is not a great deal of difference between us on how we want the scheme to work, and I certainly agree with the noble Baroness that it is important to make the proposal early. We want the scheme to be as efficient as possible, but the amendment would introduce a rigidity which we could not guarantee that HMRC would be able to deliver. Therefore, I hope that she will feel able to withdraw the amendment.

12.45 pm

Baroness Noakes: I thank the Minister for that. Does the Treasury expect HMRC to be given specific targets in respect of the turnaround of saving gateway notices?

Lord Davies of Oldham: I do not have a definitive answer to that question but it seems like a constructive proposal. I am pleased to see that the noble Baroness is in favour of targets.

Baroness Noakes: I am in favour of targets when they make government departments deliver things that they might not otherwise deliver. I, of course, understand the points that the noble Lord made. The whole purpose of tabling the amendment was to flush out the need to get these notices out relatively quickly in order to reinforce the beneficial effect of having a saving gateway account. I urge the noble Lord to take back to the Treasury the possibility that targets should be set in discussion between the Treasury and HMRC because if this is allowed to go the way of other HMRC matters, the Government might not achieve the result that they want. I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

Amendment 5 not moved.

Amendment 6

Moved by Lord Newby

6: Clause 2, page 2, line 11, after “person,” insert—

“(aa) the eligible person after a prescribed period has not opened a Saving Gateway account,”



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Lord Newby: This is a probing amendment designed to flush out from the Government how they will attempt to ensure that the take-up of the saving gateway accounts is as high as possible. The amendment proposes that a further notice of eligibility should be issued if, after a set period, a person to whom one was initially sent has not opened the saving gateway account. I have tabled the amendment because I believe that simply sending a single notice of eligibility, particularly one with a set deadline comprising an eligibility period of three months, will result in a low take-up. At Second Reading I gave the example of the child trust funds where take-up is little over 50 per cent in the poorer constituencies, even though in effect the parent is sent a cheque from the Government and told to, “Put this cheque into whichever child trust fund account you wish”. In this case there is far less incentive to open an account because you have nothing in your hand of any value. You trigger a benefit only when you start putting your own money into an account. I believe that if the only communication that eligible people receive is a single, no doubt very formal, letter from HMRC, a lot of them will barely read it, far less act on it. Do the Government have any plans to do anything beyond sending out a single notification of eligibility as a matter of course?

Our earlier discussion raises a second point, particularly in respect of people who will be eligible to open a saving gateway account over a long period and who, for one reason or another, might not be in a position to do so as soon as they get a notice of eligibility. I have in mind particularly recipients of carer’s allowance, who might be in receipt of such an allowance for a number of years. When they receive their notice of eligibility, they may be facing a personal crisis within the family or a financial difficulty, which means that they cannot immediately open an account. As I understand it, three months down the line, even though they will still be eligible in theory to open an account, their notice of eligibility will have expired. Therefore, three months and one day after receiving the notice, they will not be able to open an account. Have the Government any plans to deal with this ancillary or secondary problem of people who are eligible over a long period and who may for a variety of good reasons want to open an account, but not be able to do so within the relatively short period of initially receiving a notice of eligibility? Could that period of eligibility be reopened after a set period—for example, a year—if people are still eligible to open an account? I beg to move.

Baroness Noakes: I rise briefly to support the noble Lord, Lord Newby. The Government would do better to focus attention on those who are in the benefits or tax credits system in the long term and whose eligibility ought to continue over a longer period of time. Their circumstances in terms of savings may change compared with the current position, which is making sure that people who will not rely on tax credits or benefits over the long term are given the maximum opportunity to take part in the savings gateway scheme. The Government’s emphasis ought to be the other way around, focusing on long-term tax credit and benefits recipients rather than those who are in the system for only a short period.



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Lord Morgan: I support this amendment simply in terms of the general purposes of this excellent Bill. We are trying to change people’s habits and deal with those who, first, do not have the habit of saving because perhaps they feel that they are not able to save, and, secondly, are ill equipped with the technicalities of financial administration in terms of managing their own affairs. There is a point in trying to be as helpful as possible to those who may not open a gateway saving account because it is not the way they have done things before. The Bill might be assisted if we took account of this proposal.

Lord Davies of Oldham: I am grateful to all noble Lords who have spoken in this short debate. The noble Lord, Lord Newby, indicated at Second Reading that he was concerned about these issues, so I am not surprised that he has raised them in Committee. Once someone’s notice has expired, they will be able to request a repeat notice if at that point they are still eligible to open a saving gateway account, and they need only phone HMRC to arrange it. We are not creating a complicated process for those who signal their intent. The new notice of eligibility would again last for three months, so that people do not have to open an account within three months of receiving the first notice; they can make their own decision about when to open the account.

The noble Lord has been a little unfair about the child trust fund. We are rather delighted that around three out of four families are opening child trust fund accounts for their children, which indicates a strong engagement with the policy. I hear what he says about child trust funds having added and different advantages over this proposal and therefore proving to be more attractive, but I noticed his criticisms and wanted to put him in the picture on the facts. Indeed, even in households with low incomes where fewer child trust fund accounts are being opened, around 65 per cent are nevertheless taking up the entitlement. I wanted to put the record straight on the issue, but I realise that the noble Lord may contend that those figures apply to a scheme with features which are even more attractive than this one, a point we all appreciate.

The question is whether the repeat notices should be sent out automatically or whether the person should have to request one. Our concern, which we expressed when this issue was considered at reasonable length in the other place, is that automatically sending notices to people could mean them receiving notices that they do not want. They could be getting them every three months, which would make the scheme an annoyance, not make it more attractive. We all know the enormous frustration everyone feels about unwanted letters inviting them to get involved in things that they have clearly made their decisions about.

I understand the point about that automatic repeat notices might help to encourage take-up, as the noble Lord said clearly at Second Reading, but as my noble friend Lord Myners said in his letter, we are thinking carefully about how to raise awareness of the saving gateway among the eligible population. There can be no doubt about the challenge that presents. We are currently developing a detailed marketing strategy that will draw on lessons learnt from the pilots and

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other financial inclusion initiatives. We will discuss the important role to be played by organisations that work with the eligible population in providing advice and promoting financial inclusion. The Committee will be aware of the efforts the Government are making in that respect.

At the moment and for the reasons I have set out, we do not intend that notices of eligibility should be automatically reissued, but the Bill and the draft regulations give us the flexibility to do so in the future. The Bill defines what must be done, but it does not prohibit the possibility of the strategy identified by the noble Lord being followed. We are not persuaded that it is the best marketing tool at present. I hope that he will recognise that he has provoked a debate about how the Government can increase awareness, and that we are concerned about that matter. However, we do not think that this stratagem should be in the Bill.

Lord Newby: I am grateful to the Minister for that reply. The idea is that the answer to the problem of someone who does not take this up after three months is that they request a repeat notice by phoning HMRC. The thought of phoning HMRC, frankly, fills me with dread because I am a busy man. The idea that the majority of people on these allowances would take the opportunity to phone HMRC is absolutely fanciful.

Lord Morgan: They would not speak to a human being.

Lord Newby: They may or may not speak to a human being, but even if they did, it is at odds with the reality of the way people view HMRC and the willingness with which they take the opportunity to speak to it. The concept that it is alien to HMRC to send out notices that people do not want is curious. Most of the notices HMRC sends out are not particularly well received by the person who receives them, but that is not the point. The notices are sent out because HMRC and the Government think that is in the public interest. I do not find the argument particularly compelling.

The Government say that they are not sure that having an automatic notice is the best way to increase awareness, but they have not set out any convincing arguments about what better ways there are, other than talking in vague terms about marketing tools. My experience of many marketing campaigns by the Government is that they are almost all total failures, even when a huge amount of money is spent, advertising agencies engaged, posters drafted and so on.

Lord Davies of Oldham: The noble Lord will know that with regard to financial inclusion, we are concerned about how to reach certain groups. For example, we have already been talking to carers’ associations and those involved with carers to look at ways in which they can be informed about these opportunities and spread the word. Financial inclusion—making sure that people become aware of opportunities of which they have not availed themselves in the past and which they might not pick up through formal notices and so on—often requires using organisations that are helpful

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to people and can help to spread the word. We are doing that side of the work, as well as offering a telephone line, which I hope will be operated with rather greater efficiency than has been said; I know the foreboding that the noble Lord has about certain lines.

1 pm

Lord Newby: I am grateful for that comment. My concern about financial literacy and the effort that the Government are making is that the sensible proposals in the Thoreson report, for example, which are being implemented by pathfinder, are being implemented very slowly. It is yet to be ascertained how successful that pathfinder will be. While I am grateful to the Minister for what he says, I am not absolutely persuaded that the argument for the automatic reissue of a notice of eligibility is a poor one, and I may want to return to it on Report. For today, however, I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

Clause 2 agreed.

Clause 3 : Eligible persons

Amendment 7

Moved by Baroness Noakes

7: Clause 3, page 2, line 15, after “to” insert “claim”

Baroness Noakes: Amendment 7 amends Clause 3(1) which deals with the definition of eligible persons. Under the subsection, a person is eligible if he is entitled to the benefits or tax credits listed in subsection (2). The Government have consistently said that they wish to use passporting as the basis for eligibility for a saving gateway account. I assume, therefore, that the word “entitled” in subsection (1)(a) means that a person has made a successful claim for the benefit concerned.


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