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The noble Lord, Lord Newby, also referred to the fact that they have community investment funds or social responsibility agendas. Yes, indeed, banks have funds devoted to that but, of course, they have been leaned on for other things in recent years; for example, the provision of cash machines. In my experience,

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banks tend to think that social responsibility is their agenda and not necessarily the Government’s agenda. Of course, there are other calls on the banks waiting in the wings: for example, the funding of financial inclusion and financial education. At the moment, the Thoresen proposals, when rolled out, will be unfunded. Let us not pretend that there is an unlimited pool. Although banks are large organisations which have money that they devote to socially worthwhile projects, we cannot assume that the Government can highjack that.

The Minister said that he had had a positive response and that he was making progress, indeed that the Government were confident. However, the Government have not given us any more confidence today that this scheme will get off the ground. I detect from those contacts that we have, for example, with those in banking, that there is still a problem in this making sense to the providers coming in. Doubtless we can return to that at a later stage. The elements of banks wanting to come in or not, which will come down to the costs imposed on banks, will be covered in later amendments. This is an important issue and if it is not resolved we may not be having a saving gateway scheme at all because you cannot have a saving gateway scheme unless there are some providers to provide the accounts. With that, I beg leave to withdraw the amendment.

Amendment 19 withdrawn.

Amendment 20

Moved by Baroness Noakes

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

“( ) In approving account holders, the Commissioners shall have regard to the desirability of eligible persons having access to financial information concerning savings.”

Baroness Noakes: Amendment 20 seeks to amend Clause 4 and, like my previous amendment, adds another matter to which HMRC must have regard in approving account providers. The amendment requires HMRC to have regard to the desirability of eligible persons having access to financial information regarding savings. This is a very modest requirement and does not require HMRC to approve account providers only where the account providers agree to provide basic financial education about savings. In the light of the discussion we have just had, that simply might not be feasible.

At Second Reading, the noble Lord, Lord Newby, asked the Minister for an update on the Thoresen review and its proposals regarding generic financial advice. The Minister’s written reply, to which the noble Lord, Lord Newby, has referred today, showed that that this has not got very far at all, which is what both the noble Lord and I suspected. There is a large-scale pilot scheme in the north of England but, as the noble Lord, Lord Newby, has already said this afternoon, there is a long way to go before there is anything meaningful on a national scale around financial advice or even information. As I said a few moments ago, there is still no clarity about how that would be financed and paid for, if it were rolled out on a national basis. I am sure that the noble Lord, Lord Newby,

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and I both wish the Thoresen proposals well, but it is not clear that they will finally end up with proposals that would ensure that the kind of target groups that we are dealing with in the Bill would have access to financial information and financial education.

Without some level of financial information to reinforce the savings habits that are supposed to be acquired through the saving gateway scheme, it is quite likely that account holders will not acquire the long-term habit of saving. At Second Reading, we referred to the fact that the results from the pilot schemes for the saving gateway were not definitive, partly because they did not extend very far beyond the maturity date. The Minister promised to provide some information on the Ipsos MORI survey, which has been carried out subsequent to the pilots.

In the Chamber this morning, I received the Minister’s letter giving a one-page summary of the Ipsos MORI findings. That was clearly encouraging, but we need to see more detail of the findings. When the Minister replies, will he say when we should expect to get the full copy of the Ipsos MORI report? I ask that in particular because the pilots had much wider groups of people involved than those simply in the target group of the Bill. The Ipsos MORI overall findings do not necessarily speak to the kind of results that we can expect from the saving gateway scheme once it is operational. It is to do with that more granular level, in particular the difference between the relatively higher incomes that were included in some of the pilots compared with the lower incomes that were included in the saving gateway scheme, for reasons that we support. In the pilots, the propensity to save was higher, as is not surprising in those higher up the income scale.

A key issue that HMRC should take into account is whether the providers would be willing to provide at least some basic financial literacy material alongside the accounts. The pilot studies showed relatively little take-up of financial education. I do not know whether that was because of the way in which it was offered, or whether it was genuinely not needed. I have a basic gut instinct that there is a very real need to raise the level of financial understanding of those people at whom saving gateway accounts are targeted.

In another place, there was discussion of the undesirability of saving gateway account holders being bombarded with material offering other financial services inappropriately. Those of us who have accounts with the main clearing banks know the kind of credit and loan opportunities that we are constantly offered. There was a feeling in another place that it was undesirable that those should be pushed at this group of account holders. I toyed with whether something along the lines of HMRC abstaining from such marketing to such account holders should be proposed. Instead, my amendment focuses on the positive of giving information, raising awareness and educating people in this group, rather than prohibiting the banks from doing things.

Financial literacy is such a huge problem, as the Thoresen review showed, that any way of improving the level of understanding in society would be valuable. If we can link it to the saving gateway in a formal and

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positive way, that would be helpful, and it would improve the possibility of good outcomes from the saving gateway scheme. I beg to move.

Lord Myners: I understand the noble Baroness’s intention in tabling these amendments, which would ensure that eligible people have access to financial information, support and guidance. I share the noble Baroness’s view about the importance of improving financial literacy, particularly for those who previously have been excluded from the formal financial sector. A point that has not yet come out in Committee is that the saving gateway will attract, we hope, significant numbers into the formal financial sector who are at the moment largely involved, or significantly involved, with the informal financial sector, with some of the risks that might be so attached.

The amendment would ensure that the commissioners for HM Revenue and Customs, which will approve account providers to offer accounts, will, in the exercise of this function, take into consideration access to financial information concerning savings. As I have said, I agree with the noble Baroness about the importance of appropriate access to financial information about savings. The Government and the FSA are working to deliver a shared vision of better informed, better educated and more confident consumers who are equipped to take control of their finances and play an active role in the financial services market, and, in so doing, enhancing their own lives. To that end, last year, we published jointly with the FSA an action plan for financial capability, which set out a number of measures and initiatives to help people manage their money now and in the future.

The Government have launched a number of initiatives in that respect that will also be well positioned to offer support to saving gateway account holders and those who are interested in opening accounts. The £12 million regional money guidance pathfinder, which is funded and delivered by the Government and the Financial Services Authority, is on track to launch in the north-west and the north-east of England in the spring. Financial inclusion champions, sponsored by DWP, have been asked to support and work to promote active engagement with government-supported saving schemes, including the saving gateway. HMRC will also send information direct to eligible holders, along with their notice of eligibility. This will explain the scheme and how to open an account. An HMRC contact staff centre will also be able to answer queries regarding the scheme and information will be available on the HMRC website. The Government will continue to explore the advice and support that will be available to eligible people at account opening.

The noble Baroness asked when we could expect to see the full Ipsos MORI report. I believe that it will be published next month. The noble Baroness also made the observation that pilots had wider flexibility, so the results were possibly not representative. Her observation is true, but we are carrying out further research, which focuses on people with incomes up to £17,000. We will report on that in due course. I therefore hope, in the circumstances, that the noble Baroness will agree that much is already being done—there is a recognition by the Government and

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the FSA that there is more to be done—and that the steps being taken are such that the noble Baroness will agree to withdraw her amendment.

Baroness Noakes: I am slightly disappointed by the Minister’s response. He outlined the work that is already going on. The Thoresen review is worthy, but it will take a long time. It is only in the large-scale pilot, and we do not know when that will happen. We do not know whether there will ever be a roll out. On HMRC sending information to account holders, I do not think that you would look to HMRC to be a provider of financial education or to be within the financial inclusion envelope. Perhaps other mechanisms need to be found: I am sure that the DWP would be more likely to handle this better. The Government are missing a trick. My amendment simply said that, in selecting account providers, HMRC should bear that in mind. The Minister did not even tell me that it would. Not only does HMRC not need it in statute, it is not even described as a feature of what HMRC would look for in account providers. This does not just have “government programmes” written all over it. If delivery of information about savings and personal financial management through financial service providers can be extended more widely, that is better than relying on government schemes and bodies such as the CAB, valuable though they are. That is why I am disappointed that the Government are going to miss a trick. I beg leave to withdraw the amendment.

Amendment 20 withdrawn.

2.45 pm

Amendment 21

Moved by Baroness Noakes

21: Clause 4, page 3, line 10, after “period” insert “of not less than 12 months”

Baroness Noakes: Amendment 21 amends Clause 4(2)(a). The paragraph says that a saving gateway account has to be held for a period provided by regulations. The Government say that they will start with a period of two years. My amendment would continue to allow the period to be prescribed by regulations, but that it must exceed 12 months. If it is possible for the Government to specify a maturity period of less than a year, I would argue that that is not a genuine approach to creating a savings habit. I could argue that two years, the period that has emerged from the pilot studies, is also hardly enough to represent a real savings habit, but I accept that that may need to be informed in the long run by studies of savings behaviour over a long period of time. However, no matter what happens to the upper limit, I cannot see that it is a good use of public money to incentivise short-term savings, which is what a period of less than one year would amount to.

I hope that the Government can agree that it should never be possible to set a saving gateway account at less than a year, and that they will be able to accept my amendment. I beg to move.



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Lord Myners: The amendment seeks to limit the flexibility of regulations to set the maturity period, or account duration. Specifically, regulations would not be able to specify an account duration of less than 12 months. Members of the Committee will know that the Government propose that these accounts should last for two years. Leaving this detail to secondary legislation provides the flexibility to make alterations in the future. That might be necessary if experience of the national scheme suggests that a different account length would better achieve the aims of the saving gateway.

Based on evidence from the pilots, we believe that an account duration of 24 months will best help to initiate a savings habit. I agree that too short a period is unlikely to be effective in achieving the goal of this policy initiative. However, it is important that we are able to respond to any lessons and information that we secure from operating the national saving gateway, and that we do not place restrictions on the account duration that regulations can prescribe. I therefore hope that the noble Baroness will withdraw her amendment.

Baroness Noakes: One of the most frustrating things in a Bill like this, which is one long order-making power, is the unwillingness of the Government to put in the Bill even the bare minimum of how long a scheme should run. The Minister says that he would like flexibility, and I say it should not be for under a year. I cannot believe that there could be any difference of opinion about that, and yet the Government still want a degree of flexibility that would allow them to create a saving gateway account which would not represent savings at all; it would just be a sort of current account that gave you a bonus after a couple of months. I do not think that we should legislate for something like that.

The Government are taking flexibility to an undue degree. It is flexibility that they should not need, because they should be prepared to sign up to a bare minimum of what a saving scheme looks like. I shall consider what the Minister has said before Report, but what he has said today is unsatisfactory. I beg leave to withdraw the amendment.

Amendment 21 withdrawn.

Amendment 22

Moved by Baroness Noakes

22: Clause 4, page 3, line 20, at end insert—

“( ) Regulations may not require an account provider to pay interest on a Saving Gateway account.”

Baroness Noakes: I shall speak also to Amendment 23. Both amendments would amend Clause 4 and set out in primary legislation some basic financial rules about the burdens on account providers. Amendment 22 states that regulations made under Clause 4 may not require an account provider to pay interest. The British Bankers’ Association is especially keen on that. It acknowledges that the draft regulations do not require the payment of interest, but says that it would value the certainty that having that in the Bill would give.



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The problem that banks foresee is that they might be persuaded to be saving gateway account providers on the basis of the draft regulations only to find, having invested in participating in the scheme, that the regulations are changed—whether before the final version is issued or sometime thereafter. Banks, like other businesses, need certainty to plan on anything other than a short-term basis. My amendment does not prohibit the payment of interest, although I think it is highly unlikely that any account provider would find it economic to pay interest, whatever the level of interest rates. I am aware that Citizens Advice believes that interest should be paid to make the account like a proper savings account, but the economics of starter savings accounts are unlikely ever to make that a realistic prospect.

If there were a competitive market where people wanted to attract that source of funds—about which the Minister was optimistic at Second Reading—account providers may need to offer interest to attract funds, but they do not want to be obliged ever to have to provide interest. That is why they seek to have that hard-wired into the legislation.

Amendment 23 addresses the other side of the coin. It prohibits the account provider from making charges. The regulations provide for no charges to be made against the saving gateway account. We have no problem with that, but if account providers are not to be allowed to levy charges on the accounts, it seems to us to be fair and reasonable that there should be no interest payable either. As I sought to put the interest rate provision in the Bill, for even-handedness’s sake, I have also sought to put the other side of the equation, the cost side, in the Bill. The main purpose of my two amendments is to raise the issue of interest, which seems to be a stumbling block towards banks wanting to take part in the scheme. As I said, that is something that they continue to express concern about. That is why I have raised it in Committee today. I beg to move.

Lord Newby: Both of these seem to be sensible provisions, and I am sure that the Government agree with them. That brings us back to the issue that we have already discussed several times about what goes in or does not go in the Bill. It is difficult to see why these two provisions should not go into the Bill, because I am pretty sure that the Minister is going to get up in a minute to say that the Government agree with the substance of both of them.

Lord Myners: These amendments are broadly concerned with the requirements that will be imposed on providers of saving gateway accounts. Amendment 22 would remove the Treasury's power to require in regulations that a provider must pay interest on a credit balance held in a saving gateway account. I can assure noble Lords that we do not intend to impose a requirement on providers to pay interest on account balances. That is our settled view and we have no intention of moving from that position, but we think that it is sensible to retain some flexibility so that, if the position were to change in the future, a change could be made without recourse to primary legislation.



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The Economic Secretary said in the other place that there would be full consultation before introducing any such change, and I am very happy to repeat that commitment to the Committee today.

Amendment 23 would allow regulations to prohibit a provider levying charges on saving gateway accounts. My response here is straightforward. The Bill already provides a broad power to impose requirements on accounts and the draft regulations that have been published make clear that providers may not make withdrawals from a person’s account, by way of charges or otherwise. I refer here to Clause 4(2)(c) and draft Regulation 10(2)(e). I hope this provides the confirmation the noble Baroness is seeking.

I listened with care to the observation of the noble Lord, Lord Newby, about what is contained in the Bill and what is covered by regulations. This is a judgment call that has to be made in these situations. The Government welcome the report from the Delegated Powers and Regulatory Reform Committee. It states that,

I hope that the noble Baroness will seek leave to withdraw the amendment.

Baroness Noakes: I thank the Minister for his response and the noble Lord, Lord Newby, for his support. I shall deal first with the Delegated Powers and Regulatory Reform Committee because the Minister has often said that if that committee does not raise specific points, it is taken as an endorsement of the whole of the Government’s position. The plain fact is that the Delegated Powers and Regulatory Reform Committee does not replace the detailed scrutiny that takes place through the processes of your Lordships' House, and is not intended to, but highlights areas where it is obvious to it, from its examination and the explanations which are sought from departments, that the order-making powers need to be handled differently. But even if that committee makes general statements, that does not mean that it vouchsafes every order-making power as being appropriate. However, we should put that on one side because this Committee is examining the detail of the Bill, not the Delegated Powers and Regulatory Reform Committee.

The Minister says that the Government have a settled view on interest but that the position might change. I struggle to see how the position would change. The Minister did not give any examples of what might cause the position to change. Has he anything to add on how the position might change, which would cause the Government to change their view?

Lord Myners: I simply want to keep the flexibility to respond to changes. As I think I made clear, none is anticipated. I have made a very clear statement to this House, as, indeed, did my honourable friend in the other place, that no changes would be introduced without extensive consultation.



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Baroness Noakes: I am sure that the Government would consult if they proposed making changes; I do not wish to imply that they would not. However, this goes to the heart of the banks’ concern about how saving gateway accounts might turn out. This is an area which I shall need to discuss with them further because it has been made very clear to me that this is one of the stumbling blocks that remain for them on saving gateway accounts.

Lord Myners: I am grateful to the noble Baroness for allowing me to add that we are also in very active discussions with the banks. We have a common interest in avoiding anything that would deter banks from offering this product because we want to ensure that it is made available by private sector banks that are wholly in private ownership, and private sector banks in which the Government have an ownership on behalf of society, and we want to achieve broad geographical coverage.

3 pm

Baroness Noakes: I wish the Minister would be precise when he refers to the banks. They are not private but public sector banks. They are the ones in which he is a controlling shareholder. That is what the UK Statistics Authority says and that is what I will carry on saying.

The Minister will recognise that this is an important issue and he may expect us to return to it on Report. I beg leave to withdraw the amendment.

Amendment 22 withdrawn.

Amendment 23 not moved.

Amendment 24

Moved by Baroness Noakes

24: Clause 4, page 3, line 21, after “the” insert “minimum and maximum”

Baroness Noakes: The amendment would amend Clause 4(3). Subsection (3) states:

“Regulations may ... impose a limit on the amount which may be paid into a Saving Gateway account”.

I should perhaps have sought to require regulations to prescribe a limit since it should be axiomatic that there can never be an open-ended ability to pay money into a saving gateway account and thereby qualify for maturity payment. We support the imposition of a maximum. Indeed, a maximum should definitely be imposed. On the other hand, my amendment suggests that a minimum amount could also be specified. Draft Regulation 10(2)(d) says that the account provider must permit payments into the account by various means but does not specify anything related to the amount. It must surely be uneconomic for the account provider to handle very small amounts, given that providers are not allowed to make charges. I should have thought that a de minimis amount would be reasonable from that perspective.


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