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The Minister will be aware that the take-up of benefits and tax credits is far short of the total of those who are eligible. It varies between the benefits. The recent PAC report, to which I have already referred this afternoon, said that take-up of working tax credit is only 61 per cent, and that one in five families do not take up child tax credits. Jobseeker’s allowance take-up is, again, only around 60 per cent. In another place on Report, the Minister said that an additional 2.8 million people could qualify for a saving gateway account if they actually claimed the benefit for which they are eligible.

The way in which the Government are approaching the saving gateway account is to remove those persons from saving gateway eligibility because they do not, for whatever reason, wish to apply for one of these benefits. However, why should they be denied access to an opportunity for a savings incentive if they wish to apply for that alone, independent of applying for a benefit? My amendment is designed to allow a person to establish an entitlement to a saving gateway account if they otherwise satisfy the requirements for one of

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the benefits or tax credits. Thus, if the person is entitled to claim, under the terms of my amendment he could have a saving gateway account.

The amendment is probing for today’s Grand Committee because I recognise that the processes that have been designed around saving gateway accounts are predicated on the establishment of an entitlement to a payment of benefit or tax credit, and there would need to be a different approach for those who did not want to do anything but apply for a saving gateway account voucher. The Minister will doubtless say that costs would increase that way but, since the non- take-up of benefits and tax credits is very high—we are talking about millions of people being excluded from the saving gateway account—the justice of passporting looks to be very rough indeed. There is a case for allowing through those who for reasons of dignity or otherwise do not want to apply for a means-tested benefit, but take a different approach to a beneficial savings scheme. Why should they not be allowed access to the saving gateway scheme? I beg to move.

Lord Myners: I note that the noble Baroness describes this as a probing amendment. It would extend the scheme to people who could claim a qualifying benefit or tax credits but do not do so. As the noble Baroness said, these are people within our target group but who will not be eligible under a system of passporting. Unfortunately, it would not be possible for HMRC to identify this group, so I do not believe that the amendment would be workable. There is simply no way of knowing whether someone would be eligible for these benefits unless they make a claim for them. One option would be to introduce a means test alongside passporting. We will come to that in more detail when we discuss Amendments 8 and 12, also in the name of the noble Baroness, but this seems to be particularly problematic. Given that the people in this group have chosen not to claim the qualifying benefits or tax credit, it seems unlikely that many would choose to complete a means test to apply for the saving gateway.

Many people do choose to claim benefits and tax credits. For example, 82 per cent of eligible families receive child tax credit. That is the highest level of take-up for income-related support ever achieved. The take-up is even higher for households with incomes below £10,000, at 96 per cent, and for lone parents at 95 per cent. Take-up rates for out-of-work income-related benefits are also relatively high at between 49 per cent and 60 per cent for income-based jobseeker’s allowance, and between 81 per cent and 90 per cent for income support. We are also simplifying and streamlining the benefits system to make it easier to understand and to help further increase take-up rates. While I understand what the noble Baroness is trying to achieve, I hope that she will seek leave to withdraw the amendment.

Baroness Noakes: I am disappointed with the Government’s approach. It means that savings, which are a good thing and should be promoted throughout society, will be restricted to those whom the Government have within the tax credit or benefits net and are therefore dependent on the state. The Minister has quoted some higher rates of take-up, but there are also

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low rates of take-up; some groups do not want to be regarded as benefit recipients, whether it is called a tax credit or a benefit; there is no getting away from that. Because they refuse to become dependent on the state for their income, they will be denied access to the saving gateway scheme. The approach being adopted by the Government is regrettable and I shall consider it further before Report. I beg leave to withdraw the amendment.

Amendment 7 withdrawn.

Amendment 8

Moved by Baroness Noakes

8: Clause 3, page 2, line 16, after “(2)” insert “or the person satisfies the conditions set out in regulations made under subsection (2A)”

Baroness Noakes: I shall speak also to Amendment 12. The amendments would allow the Government to extend the category of individuals who are eligible for a saving gateway account beyond passporting. Amendment 8 refers to eligibility by reference to regulations to be made under proposed new subsection (2A), set out in Amendment 12. The combined effect of the amendments would allow eligibility to be set by reference to annual income rather than a successful claim for a specified benefit or tax credit. That is a wider concept than I argued for in my previous amendment. It would allow but not require the Government to extend the opportunity to save to other groups not included in the selected benefits set out in Clause 3(2).

For example, it would allow carers on limited incomes to be drawn into the scheme whether or not carer’s allowance is claimed, and would go beyond the government amendments to which we shall come shortly. It would also allow older people who are poor to come within the scheme, regardless of their pension credit status. Pension credit take-up is another of the notoriously low take-up benefits. The amendment of the noble Baroness, Lady Hollis, which is a couple of groups away, goes only so far as pensioners who fall within the pension credit net. It would also allow the Government to extend the saving gateway scheme to slightly higher income levels than those within the means-tested benefits limits if that were thought to be socially desirable in terms of the aim of increasing savings.

I am definitely not arguing that the Government should immediately extend the saving gateway scheme to all others on low incomes. Apart from the public expenditure implications, which could be very significant in view of the current economic situation, very careful consideration would need to be given to which groups would benefit most. However, I am arguing for the Bill to be more flexible so that if we return to an economic environment which allows the Government to pursue additional worthy schemes for incentivising savings, the saving gateway scheme could be extended without the need for further primary legislation.

In my keenness to draft an additional power for the Government to extend the scheme, I forgot my parliamentary manners and omitted the essential affirmative order which would be necessary for such

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an extension of the saving gateway scheme. I should have tabled an amendment to Clause 27 because I certainly would not want the scheme extended as I have described without further parliamentary scrutiny. That apart, I believe that, if circumstances allow, the Bill should be able to move outside the envelope of simply passporting this measure by way of benefits or tax credits if that were thought desirable in the longer term. I argue simply for flexibility. I beg to move.

Baroness Hollis of Heigham: This is an area where I think it would be very desirable for the Government to have reserve powers on which they could draw should the need arise. My noble friend’s response in terms of the statistics of those carried by passported benefits into the system are very persuasive. However, there are benefits which are not included here which knock out some of the income-related benefits. I take, for example—though this is, obviously, a diminishing number—somebody on a widow’s benefit, which is not listed, who, were they not on a widow’s benefit, would qualify for, say, income support if they had children, but choose not to take it up because they prefer to remain on the widow’s benefit. That is an older group of people and one that is diminishing in number, but they possibly would be eligible under means testing but not under passporting.

I have not thought about this but I suspect that if I dug around on things such as industrial injuries I might find other groups who would come within the framework of the measure but are knocked out because of this listing effect. I do not know how many people would be involved, and I do not know how widely they would be drawn. Obviously, if my noble friend were minded to accept my amendments, or to revisit my Amendments 11 and 15, it would be a very wide group indeed, but I am not confident that he will feel able to do that. It seems to me desirable for the Government to take up this power. Although I think that the Government’s passporting approach is absolutely the right one, which should bring the vast majority of people into the system very easily and straightforwardly without the hassle factor, the means testing would allow a belt-and-braces approach to be adopted towards people who we may wish to include in the scheme some time down the line but would not be able to include as we would not have the primary powers so to do. My noble friend would be wise to take up the power even if there is no intention or need to take advantage of it in the next three, four or five years.

Lord Newby: At first blush, the amendment has quite a bit to recommend it, but the more I think about it—this was exemplified by the noble Baroness’s speech—the more I feel nervous about it for two, or possibly three, reasons. First, I see complexity beginning to emerge when one starts to work out who will be eligible even under what appears to be a simple requirement. I can see all kinds of groups benefiting who we will not really have in our minds to benefit. We should think how many middle-class students will leave university this year, and who, certainly for the first six months after leaving university, will probably have virtually nil income. If there was means eligibility

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here, many of them would be eligible and, as I said at Second Reading, their parents would happily enable them to save. That might be a good thing, but it is not what we are aiming for.

I sense that this amendment, if it were put in the Bill and implemented, would leave us with a scheme that is not only more complex, but could also create a series of unintended consequences. The advantage of the scheme as it stands, with or without the proposed amendment of the noble Baroness, is that it has a clarity to it, and that goes very much in its favour.

1.15 pm

Lord Myners: These amendments relate to eligibility for the savings gateway account, and as with Amendment 7, aim to extend it to people who will not be eligible under the system of passporting. To that end I am greatly encouraged by the support of my noble friend Lady Hollis for the concept of passporting. As he so often does, the noble Lord, Lord Newby, has hit the nail squarely on the head in terms of seeing the spectre of greater complexity as a result of the good intention that lies behind this amendment, and that comes into conflict with the basic approach of keeping this scheme as simple as possible—an approach that is also consistent with the observation of the noble Baroness, Lady Noakes, that HMRC might be better at administering something simple than something terribly complicated.

As Members of the Committee will know, the focus of the saving gateway is on working-age people on lower incomes. In an ideal world we would like to include everyone in that group and no one outside it. However, there is no easy way of doing that. One option would be to introduce a means test, but that would require people to apply for eligibility for the saving gateway. The alternative, for which we have opted, is a system of passporting eligibility from certain benefits and tax credits. We believe that this is the most simple and effective method available for determining saving gateway eligibility, and in contrast with a means test, people will not be required to approach the Government or fill out detailed forms about their income. This approach will be much more effective in encouraging people to open saving gateway accounts. It would seem rather disingenuous to have a power to introduce a means test, but with no intention of using it. We also believe that the majority of our target group—working-age people on lower incomes—will be eligible for the saving gateway through the system of passporting as set out in the Bill. As we have said, we expect around 8 million people to be eligible for the scheme, which is a sizable proportion of the 40 million or so adults in the United Kingdom.

However, we have always been clear that while we think passporting is the best system for determining eligibility, we also recognise that it is not perfect. Some working people on lower incomes will not be eligible for the scheme, and there will be some rough edges. The Economic Secretary to the Treasury gave an indication of the numbers in his contribution in another place. As he said, we believe that around 4.5 million working age people on lower incomes will not be eligible through passporting, taking a definition of lower income as

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£10,000 to £11,000 for an individual and £16,000 for a household. However, it is important to remember that this is a snapshot and that people’s circumstances do change. Many in this group will therefore be eligible for the saving gateway at some point, and in any case we intend to allow people to have only one account per lifetime, so this is an important point.

Amendments 8 and 12 would introduce a second way of becoming eligible for the saving gateway in addition to passporting—by means of having an income below a certain level which would, of course, require a means test. As the noble Baroness has said, this would give some additional people a way of accessing the saving gateway, which in itself would sound a laudable and commendable outcome. It would also introduce a significant increase in complexity and cost. We do not believe that this would be proportionate.

First, it would involve extra costs for HMRC, which are estimated at around £2.5 million per year, reducing to a steady state of £1 million after introduction. Secondly, there would also be an increased compliance risk of operating a means test, as individuals would be able to open saving gateway accounts without having previously been through DWP and HMRC checks to establish their eligibility to other benefits or tax credits. Inevitably, some accounts would be opened but subsequently have to be closed; for example, accounts opened by people who had misstated or misunderstood their income. That would be very burdensome for providers. We know that opening and closing accounts will create costs for them and we are keen to minimise the costs of operating saving gateway accounts. It must be very clear to Members of the Committee that the operation of saving gateway accounts will not be a terribly profitable activity for banks to engage in, but it is one which we think banks will welcome in terms of their commitment to promoting financial inclusion. However, we must be careful that we do not deter the provision of product by making the scheme too complicated. Thirdly, having two methods of determining eligibility for the saving gateway could be confusing and would add complexity to an otherwise simple system.

It is also important to be realistic about the impact that a means test would have. As we discussed in relation to Amendment 7, of the 4.5 million working-age people on lower incomes who we believe would be missed out by passporting, we estimate that around 60 per cent—or 2.7 million—could claim the qualifying benefits and tax credits, but have not done so. While that is not a reason to exclude them from the scheme, it does seem unlikely that large numbers of them would choose to complete a means test for a saving gateway account when they have not done so for a benefit or for tax credits.

Clause 3(6) allows flexibility to add more qualifying benefits through regulation, which would potentially include those benefits mentioned by my noble friend Lady Hollis. We would need to consider this carefully, but that flexibility has been built into the Bill. While I understand the noble Baroness’s aims with these amendments—on several occasions, I expressed a good and supportive understanding—I do not believe that

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it would be sensible to introduce a system of means testing, which would add complexity and cost. Instead, I believe that we should continue with a simple, efficient system of passporting, which will allow a large majority of our target audience to be eligible at some point in their lives. I hope that the noble Baroness will therefore withdraw her amendments.

Baroness Noakes: I thank Members of the Committee for taking part in this short debate. This amendment is different from the previous amendment, which tried automatically to bring additional people within the scheme. This amendment is designed only to give the Government longer-term flexibility. I am amazed at the ingenuity of the Treasury in costing something which was not specified. I introduced my amendment, which was quite wide, to allow eligibility though an annual income of a prescribed amount, which gives a lot of scope for setting the possible alteration. Yet the Minister came back with some numbers; namely, that it would cost £2.5 million reducing to a steady state of £1 million—I am astonished by that—regardless of how any regulations might be constructed. Clearly, the powers of the Treasury are getting greater by the day.

Lord Myners: I will investigate the details of the numbers I have shared with the Committee. If it would be helpful to give more credibility to those numbers by explaining how they have been determined, I will share that information with those who have participated in this debate.

Baroness Noakes: I thank the noble Lord for that. At the heart of this is whether any extension of the scheme would be too complex, which I would not like to prejudge. I accept the points made by the noble Lord, Lord Newby, that certain types of extension of the scheme could raise the problem of unintended consequences or excessive complexity. There could be extensions that are not captured by simply adding additional benefits. The benefits that the noble Baroness referred to might be a step too far without some counterbalance. Of course, I am not normally in favour of means testing, but I recognise that it may be desirable to expand the envelope where appropriate if we are trying to encourage savings. I do not rule out including students, because one problem is that young people have not grown up with a habit of saving; they have grown up with a habit of consumption. There is a great need to re-educate a whole generation about the benefits of saving.

I was disappointed that the Government did not want to include that flexibility in the Bill. As I tried to emphasise, I do not think that it is a foregone conclusion that it would be right to extend the provision. Clearly, it would be right to weigh complexity and cost, as well as unintended consequences, in the balance if an extension were pursued. I shall consider carefully what the Minister said, and beg leave to withdraw the amendment.

Amendment 8 withdrawn.



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Amendment 9

Moved by Baroness Noakes

9: Clause 3, page 2, line 17, leave out from “person” to end of line 18 and insert “is—

(i) ordinarily resident in the United Kingdom, or

(ii) is or has been resident in the United Kingdom and is treated as ordinarily resident by regulations”

Baroness Noakes: Amendment 9 amends Clause 3(1)(b). Paragraph (b) states that the connection with the UK necessary gateway eligibility is to be prescribed in regulations in its entirety. My amendment would narrow that flexibility. I do not think that there is much of substance between us and the Government on this. The point of my amendment is to ensure that as much as possible is in the Bill, leaving only detail and genuine flexibility to be the preserve of regulations.

During Second Reading, we touched on the fact that the Bill is one long regulation-making power. The amendment is a modest attempt at rebalancing between primary and secondary legislation. The Government's draft regulations set out in Regulation 4 that the necessary connection is to be ordinary residence. We agree with that, which is why the first leg of my amendment, paragraph (i), picks that up. Regulation 4 then contains some savings for Crown servants posted overseas and some EU workers, but does not require the persons concerned ever to have been resident in the UK, which I found rather surprising. Hence paragraph (ii) states, in effect, that the minimum requirement is for actual residence at some point, which can then be coupled with regulations to deal with ordinary residence.

When he replies, I hope that the Minister can explain two things. First, why cannot the Bill contain the restriction to ordinary residence? The Government usually argue for flexibility in leaving everything to regulations, but I cannot see that it would ever be appropriate to propose regulations that were not based on the fundamental notion of ordinary residence.

Secondly, can the Minister explain why it is possible to satisfy the definition in the regulations without ever having established residence in the UK? We are all rather wearily resigned to EU workers coming here to claim all our benefits, which is what Regulation 4(3) allows. However, I am concerned about someone being deported here without ever having been resident here, which could occur under the draft regulations, but could not occur if my amendment, which would insert a requirement for residence, were passed. I beg to move.

Lord Newby: I have considerable sympathy with the spirit behind the amendment; I am not sure if the words are absolutely right, but that is not to say that they are not. The argument for having regulation-making powers is that the provision covered by regulation will change. It is very difficult to change primary legislation, whereas you can easily change secondary legislation. I cannot for the life of me see why eligibility in terms of a link with the UK will change. Whatever the definition is now will surely be the same definition in five years’ time, or for however long we expect the Bill to be in operation. Can the Minister explain why the Government

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feel that they need the flexibility, which is the only reason why regulations should be preferred to primary legislation.

1.30 pm

Lord Myners: The noble Baroness’s amendment would put more details of the residency requirements for the scheme in the Bill, and make the Bill expressly provide that, to be eligible for a saving gateway account, a person must be ordinarily resident in the United Kingdom.

In the Bill, to be eligible a person must, as well as being entitled to a qualifying benefit or tax credit, have a connection with the UK that will be prescribed by regulation. The draft regulations essentially set out that a person will have the prescribed connection with the UK if they are, or are deemed to be, ordinarily resident in the UK.


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