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I greatly applaud the indefatigable energy and commitment of my noble friend in support of many groups whose case is not always advocated as well as it should be. My noble friend has worked with great energy and distinction to understand the complexities of life for many in the community who are less fortunate—in particular, carers and the elderly. I am much moved by the arguments that she advances, but I fear that I am not persuaded that it is appropriate for the Government to accept the amendment, so I beg her indulgence to withdraw it.

Baroness Hollis of Heigham: I shall be withdrawing the amendment, but I thank noble Lords for taking part in this short debate, even if their support has been qualified in various and, in some respects, conflicting ways. As always, I am grateful for my noble friend’s courtesy and consideration. I am reassured by the point that both he and the noble Baroness, Lady Noakes, made about the reserve power, should that be regarded as desirable in future. I return to the simple point that a savings habit is not about moral fibre; in the end, it is to help people acquire savings. The question is: what happens if you are someone who struggles through their working life—for example, a woman who has been a lone parent and been bumping along on various forms of income support and all the rest—and enter retirement with no savings at all? It is too late to revisit choices that you might have made previously, but your need for that modest financial buffer remains.

My noble friend is right to say that we hope that will be a diminishing group, given the initiatives that the Government are proceeding with, but currently the Government have no offer available to pensioners who enter retirement or to current pensioners who have no savings. That is, unless they use an offer like the winter fuel payment and do not spend it on keeping themselves warm but save it—hoard it—in ways that we would not want them to do, given all the evidence about hypothermia. There is evidence that there are 30,000 winter deaths a year from hypothermia beyond the standardised mortality figures. Instead of using it to keep themselves warm and avoid hypothermia, they save it to replace the cooker or the washing machine. That is not a choice that is decent to ask them to make.

I take my noble friend’s point. I understand where he is coming from: that this was designed as a benefit for those of working age. However, to some degree it shows a failure to understand the situation of someone who has had a rough life and is entering a difficult retirement without any reserves. In that case, something such as this would give them a desirable cushion. However, given that we can revisit this in future—some of us may well do so—I beg leave to withdraw the amendment.

Amendment 11 withdrawn.

Amendment 12 not moved.

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Amendment 13

Moved by Lord Myners

13: Clause 3, page 2, line 31, at end insert—

“(3A) A person is not an eligible person by reason of entitlement to a carer’s allowance unless—

(a) such an allowance is payable to the person; and

(b) the amount payable has not, by reason of the person’s receipt of other benefits, been reduced to nil under regulations made under section 73 of the Social Security Administration Act 1992 (c. 5).”

Amendment 13 agreed.

Amendment 14

Moved by Baroness Noakes

14: Clause 3, page 2, line 32, leave out “may” and insert “shall”

Baroness Noakes: In moving this amendment, I will speak also to Amendments A16 and A17 in the group. They amend subsections (4) and (5) of Clause 3 and deal with restrictions on the passporting of child tax credit recipients. Again, I do not think that there is much in substance between us and the Government since the draft regulations give effect to the already stated intention of restricting child tax credit recipients to those on no more than the income threshold for child tax credit. That will rule out those who have considerably higher incomes because child tax credit goes up to around £60,000 of income or even higher if the £25,000 disregard comes into play. We have absolutely no problem with that policy.

What we do have a problem with is that the legislation makes it optional for the Government to issue regulations restricting the right of a child tax credit recipient to gain access to the saving gateway scheme as set out in subsection (4). The effect of subsections (4) and (5) is that even if regulations are made under subsection (4), they need not contain income or similar restrictions to narrow the scope of those eligible for child tax credit also to have access to the saving gateway. We believe that the construction of child tax credit, with its extraordinarily long income taper, means that if eligibility is the passport to the saving gateway scheme, it must be accompanied by restrictions. We agree that restrictions are best set out in secondary legislation, but we are clear that there must be such secondary legislation, which is why I have tabled the three amendments in this group. I beg to move.

Lord Davies of Oldham: I agree with the noble Baroness that there is not much between the position she has adumbrated and that of the Government so far as the Bill is concerned. It is our intention to apply the conditions set out in the draft regulations. We propose that people can be eligible for the saving gateway only by virtue of entitlement to tax credits where their income does not exceed a specified threshold or where they are entitled to one of the social security benefits specified in Section 7(2) of the Tax Credits Act. The amendments would require that such conditions

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must be applied in regulations, whereas the current subsections provide the flexibility for this and future governments not to do so.

I have set out our intentions with regard to the legislation, but we think it right that the Bill should allow some flexibility for the future. I should say to the noble Baroness that if I had £5 for every time I have replied to an Opposition amendment which would replace “may” with “shall”, I would be very wealthy indeed. This is another clear case where it looks desirable that there should be some determination because we agree about the intention of how the scheme will work. We have “may” rather than “shall” so often in legislation, and we are not the first Administration to do so. Gladstone’s Administration probably set up the practice, if not even earlier than that. I use Gladstone as an illustration to try to get the noble Lord, Lord Newby, on board.

The obvious fact is that governments have an intent. They have a Bill that they intend to turn into law which should work according to the parameters of the time. “May” comes into legislation instead of “shall” because legislation is primary and cannot easily be amended. Replacement by primary legislation is a fearsome task and governments want to preserve a degree of flexibility for the future, if only to have regard to the trials and tribulations of those who come after them. I speak almost in hereditary terms about Labour, of course, but I have to expect that at some time in the future we might have to contemplate a Liberal Administration—I know that the noble Baroness was rising to that possibility with enthusiasm—or even a Conservative one. Within that framework, I want to defend the necessary flexibility. As time evolves and circumstances change, this legislation will still hold good for the concept of the saving gateway. We are at one with the noble Baroness, which is why we built in the requirements. We will operate it and we have already indicated in our draft regulations that that is how we intend to apply it. We have some regard for flexibility in legislation. I hope that I have succeeded in persuading the noble Baroness of the virtues of that approach.

Baroness Noakes: The Minister says that he should have had £5 each time he had been in a “may” or “shall” debate and that he would be a rich man. That may be the case, but I have to tell him that it is not the last such debate—not even the last in this Bill. He will have to deal with some more. As he knows, we table amendments in areas in which we think there should be no discretion or flexibility for the Government over time. I am aware that parliamentary draftsmen normally default to “may”, but we have occasionally won an amendment on “shall”. I shall remind him of that when it is clear that the regulations must be passed. I could cite a recent example from the Pensions Bill from last year, but I shall not taunt him with it. This is probably not one of those instances that I regard as most important, and I accept the Minister’s clear assertion, as is laid out in the draft regulations, that the Government intend to restrict the availability of child tax credit recipients to the saving gateway account. I am sure that the Minister knows that the conditions of the saving gateway account are far too generous for

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the context of that account. But I accept his undertakings on that, without necessarily buying in to the whole need for flexibility for the Government in regulation-making powers. I beg leave to withdraw the amendment.

Amendment 14 withdrawn.

Amendments 15 to 18 not moved.

Clause 3 agreed.

Clause 4 : Requirements relating to accounts

Amendment 19

Moved by Baroness Noakes

19: Clause 4, page 3, line 8, at end insert—

“( ) In approving account providers, the Commissioners shall have regard to the desirability of choice being available to persons who wish to open a Saving Gateway account.”

Baroness Noakes: Amendment 19 would add a new subsection to Clause 4, which deals with requirements relating to accounts. Subsection (1) sets out the basic rule that HMRC will approve account providers in accordance with the ever-present regulations. My amendment says that when HMRC does this, it must have regard to the desirability of choice being available to persons who wish to open a saving gateway account. This is not a mere doctrinal issue about choice, although that is important; my amendment speaks to the difficulties that the Government may have in getting account providers to put themselves forward for inclusion in the saving gateway scheme. We debated that at Second Reading, when the noble Lord, Lord Newby, and I both drew attention to the evidence given in the Public Bill Committee in another place about the willingness and enthusiasm to take part in the scheme from potential account providers.

The banks’ view, as expressed in another place and in subsequent briefing to noble Lords taking part in this Bill is based on commercial viability. They believe that the accounts may be too costly to be worth taking on, and we shall return to some of the issues that lie at the heart of their concerns in later amendments. The noble Lord, Lord Myners, seemed not to recognise this; he told us at Second Reading that banks, together with building societies,

I believe that the Minister chose not to understand that banks and others will welcome a depositor base only if it can be operated profitably. There is no point in attracting deposits if it costs money to maintain the accounts. A saving gateway account will not amount to more than £600 before a maturity payment, and let us say that the average is half that. I do not think that the Minister can seriously claim that accounts at that level are likely to be attractive to banks as they will face costly record-keeping and potentially face transfer requirements and the like. The record-keeping is

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exacerbated by the fact that this is designed to encourage regular saving and not lump-sum saving, which means a lot of transactions.

2.15 pm

The Post Office, which also gave evidence in another place, was extremely keen on the saving gateway scheme and would very much like to offer it. However, Mr Alan Cook, the managing director, made it clear that the Post Office could participate only with a partner to do the administrative work, and doubtless also to invest in the basic infrastructure. He also referred to the need for an unspecified market share being necessary to make the scheme work economically. It is far from clear that the Post Office’s clear enthusiasm about the saving gateway scheme will convert to actual participation in the scheme. That is all down to economics.

Against this background, I have a concern that HMRC may well end up grasping whatever willing provider comes its way. I think that it could be undesirable if HMRC went with one provider of saving gateway accounts because the service levels provided to saving gateway account holders will, in effect, be set by that one provider on a monopolist basis. That one provider will call the long-term shots on how the scheme operates because the barriers to entry by other participants may well be erected on a de facto basis.

Keeping HMRC focused on choice, which is all that my amendment does, will keep it focused on the uneconomic aspects of the saving gateway scheme in its detailed application of the regulations. It may also force HMRC to come back to the Treasury if some of the draft regulations prove to be a barrier to getting account providers to sign up or, more specifically, to get more than one account provider to sign up.

On Second Reading, the noble Lord, Lord Myners, was somewhat complacent about the willingness of financial services providers to take part in the scheme. Our understanding continues to be that the banks are far from comfortable with it. On Second Reading we also debated the role of the nationalised banks. The Minister did not like our using the term “nationalised banks”. We could call them “public sector banks” if there is sensitivity around the other term, but they mean much the same. Whatever we call them, it is clearly possible that the Government could lean on them to provide saving gateway accounts—it is like kicking a man when he is down. I believe that it would be undesirable for that to happen, as genuine choice would not be available if the choice were only between nationalised or public sector banks.

I have raised this issue because having more than one provider is important if the saving gateway scheme is to be counted as anything like a success, not only in the short term but in the longer term, for the reasons I have given. When the Minister replies, I hope that he can update the Committee on whether there is any realistic possibility that there will be a choice of providers for saving gateway accounts and whether that will result in real choice for consumers. I beg to move.

Lord Newby: This amendment raises an issue that I addressed at length at Second Reading, which is whether any national organisation at all will be likely to offer

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saving gateway accounts. It is absolutely clear that the Post Office is very keen on them, but when its representative gave evidence to the Bill Committee in another place, he said in terms that it did not have a financial model which enabled him to have any confidence that it could make them work financially.

As for the other banks, the BBA made it clear that none was committed to the scheme, and none was looking at it with any enthusiasm whatever. Although the noble Baroness talks about the desirability of choice, I do not think that we are in that luxurious position. My concern is that, as things stand, there will not be a single national provider at all.

The noble Lord, Lord Myners, mentioned earlier that he thought that the banks had a commitment to promoting financial inclusion. Well, they do as long as it does not harm the bottom line. I do not believe that this scheme can work on a straightforward commercial basis; the amount going into the accounts is just too low compared with the inevitable costs, however minimal, surrounding them. The noble Baroness says she thinks that the choice would be inadequate if it was only between the nationalised banks. If the choice is only between nationalised banks, it will be a far greater choice than we will get otherwise. That may be the only option for having any choice at all.

I therefore urge the Government to have discussions with the nationalised banks about their doing this. I am sure that they will say that they cannot do it on a commercial basis. If they cannot do it commercially—I have no idea how much subsidy will be required—and if, as the Government believe, it is a matter of great significance, perhaps they could take it out of some of the other funds that they are devoting to community investment. The banks spend considerable sums in community investment, and it is a question of priorities. If it will cost them, say £2 million or £5 million to subsidise a scheme like this, perhaps they could take it from that budget or from a marketing budget. We know, for example, that RBS is reducing the amount it is giving to Andy Murray, Sachin Tendulkar and various others in sponsorship. But it is still spending a huge amount on sponsorships. Perhaps it could take it out of that and be absolutely up-front about the subsidy.

As I said, I very much doubt whether a straightforward commercial bank can run this scheme at anything other than a loss. If the Government want the scheme to provide choice, they will have to explain to the banks that they control how they can do it. The way that I have just described is probably the only way they will be able to justify it.

Lord Davies of Oldham: I understand the concern behind these amendments; the noble Baroness voiced them in moving the amendment and the noble Lord, Lord Newby, did so in returning to a theme that he strongly expressed on Second Reading. The scheme has been designed with the aim of securing exactly what the noble Lord said—national provision, but provision over a broad range of appropriately authorised providers. The saving gateway pilots showed that distance from a branch was a key issue. That means that we have to engage the concept of national providers, as

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has been demonstrated by the two representations made in this short debate. Ease of access is a very important dimension.

The Government have therefore sought to make the scheme as simple as possible for providers to operate. I recognise that simplicity reduces costs, but it does not remove them. The noble Baroness identified the obvious fact that relatively low sums will accumulate and there will probably be a significant number of transactions. However, the intention is that all providers which have the appropriate regulatory permission and are able to offer accounts that meet the requirements set out in the Bill and in regulations will be approved as account providers.

The gentle charge was made that my noble friend Lord Myners was complacent—I think that that was the word used. My noble friend is of a cheery disposition, so I think that it was optimism rather than complacency. It is not a question of being complacent about a scheme that is being set up. There is a great deal of work to be done and the Government are involved in a considerable amount of work. My noble friend was reflecting confidence. We expect saving gateway accounts to be offered by a range of providers—not just banks and building societies, but also credit unions. We are discussing this with potential providers and their representative bodies and are getting a positive response.

Reference was made in the other place to the views of representatives of the banks, building societies and credit unions, which indicate that broadly they want to be involved. We consider our discussions thus far to be making considerable progress. I am not in a position to name names because discussions are still continuing. As the noble Lord, Lord Newby, hinted when he talked about banks having community responsibilities, the banks have social responsibility agendas to which they subscribe and this scheme fits into that general prospectus. In the past, they have committed themselves to issues of social responsibility and an inclusion agenda.

After all, we have seen the banks involved in other areas. Only a year or so ago we discussed dormant accounts legislation, which also showed the banks in a constructive light on the work that needed to be done to release resources into the community. If it is thought that perhaps I am stressing too much the marginal commitments of the banks against the large problems that they currently face, it is also the case that providers will be able to capitalise on the saving gateway account holders who continue to save and will build up rather significant balances. Some will make progress and the banks will have the advantage of being responsible for their accounts, which is of potential advantage to them. The person in the category of obtaining this level of opportunity at one stage may, a decade on, be in a very different financial position. We all know the extent of loyalty of customers to banks, even when they are not treated particularly well, which is legendary. If banks set out to provide a service that is not necessarily profitable in the first instance they must have greater expectations among those of their customers who move into more prosperous circumstances. It is not as if we are asking them to take on a total loss leader.

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Reference has also been made to the Post Office, which also has issues to discuss. It has a great advantage in terms of its range of branches. I cannot give a categorical response at this stage on how far on we are, but we are confident that these accounts will be serviced. The Government will be very active to ensure that the legislation is effective, and the Committee will recognise that it can only become effective on the basis of the co-operation of those that can provide such services as have been identified in the amendments.

It is not an issue of complacency; it is a reflection of the fact that considerable work still needs to be done. We are making very considerable progress and we have confidence in the fact that we will have providers that meet the criteria, identified by both noble Lords in speaking to the amendment, to make the scheme successful. I hope, with those reassurances, that the noble Baroness will feel able to withdraw her amendment.

2.30 pm

Baroness Noakes: I thank the Minister for that reply and the noble Lord, Lord Newby, for taking part in this short but important debate. This scheme will not get off the ground unless there are account providers. The noble Lord, Lord Newby, would be happy to default to the nationalised banks—as the noble Lord, Lord Myners, is here I should say the public sector banks. I am not clear about that. It seems to me that we are simply leaning on those banks because of the nature of our shareholding and our other dealings with the banks, but if we cannot get the non-public sector banks or other providers involved that would be a problem.

Lord Myners: With all due respect, the noble Baroness has still not got it quite right. They are the banks temporarily in public ownership.

Baroness Noakes: There is nothing wrong with public sector banks. As a matter of fact, they have been classified by National Statistics to the public sector. That is why I am entitled to say and why it is proper for me to refer to them as the public sector banks, as I shall continue to do whenever the noble Lord, Lord Myners, is present. When he is not here, I shall continue to refer to them as the nationalised banks.

Lord Davies of Oldham: I hope that the noble Baroness is not suggesting that there is some kind of ideological division in Government between those who can cope with the word “nationalisation” and those who cannot. The noble Baroness must not play games with us.

Baroness Noakes: I know the particular sensitivities of the noble Lord, Lord Myners, on the subject of nationalised banks.

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