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In addition, a savings habit will not be worth while unless it is for a meaningful sum. Unless savings can accumulate to a sum that is itself worth while in terms of the kind of things for which savings are kept back, it can hardly qualify as genuine saving. I should have thought that a minimum of something like £5 would be reasonable because if that were all that was contributed to a savings account over the two years that is proposed, it would add up to only £120 before the maturity payment. I should have thought that anything less was not really saving at all. The purpose of my amendment is not to prescribe the minimum but merely to propose that a minimum should be prescribed. I beg to move.

Lord Myners: The amendment would amend Clause 4(3) so that regulations may impose a minimum and maximum limit on the amount that may be paid into an account in a month. As the Committee may be aware, the draft regulations, which have been published, already impose a maximum of £25 per month limit on the amount that may be paid into an account. They do not specify a minimum amount.

The noble Baroness has indicated that her amendment is intended to enable regulations to impose a minimum limit per transaction on the amount that may be deposited into an account. We understand that providers may have concerns about the transactional costs of being required to accept numerous low-value deposits. There is nothing in the Bill or the regulations to prevent a provider setting a minimum per transaction limit for deposits in saving gateway accounts to bring them into line with a provider’s general practice for accepting counter deposits. That seems to be the most effective way of addressing this matter as those banks that are most efficient will see the greatest opportunity to cultivate a new target market or to make an important social contribution that will reach their own determination rather than one set by law or regulation. I therefore do not believe that the amendment would add anything to the Bill and I hope that the noble Baroness will withdraw it.

Baroness Noakes: Did the Minister say that the Government are happy for account providers to set their own rules for saving gateway accounts?

Lord Myners: I believe that our policy in respect of minimum contributions is that the account provider can set a limit. We have set a maximum limit.

Baroness Noakes: The Minister is unwilling for the Government to say what minimum level would equal a saving, so would the Government be happy if £1 a month was saved under the saving gateway scheme? Would that be a satisfactory use of the saving gateway advantage?

Lord Myners: I would be very disappointed if people were saving only £1 a month, but I would not be disappointed if, in a particular month, someone felt that they could save only what represented a very small sum. It is for the account provider, having knowledge of their own efficiency and business plans, to reach

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their own determination in that respect. That is a sensible blend of social objective and commercial market practice.

Baroness Noakes: I am content with the assurance that it is for the account providers to set rules on not accepting uneconomic levels of deposit. I am sure that the banks will be pleased that the Minister has said that. I beg leave to withdraw the amendment.

Amendment 24 withdrawn.

Amendment 25

Moved by Baroness Noakes

25: Clause 4, page 3, line 28, at end insert—

“( ) Regulations made under subsections (2) and (3) may not be made unless a draft of the statutory instrument containing the regulations has been laid before, and approved by, a resolution of each House of Parliament.”

Baroness Noakes: Amendment 25 requires regulations made under Clause 4(2) and (3) to be subject to the affirmative procedure. The requirements for orders are set out in Clause 27, but I have drafted this amendment to Clause 4 so that it can be debated alongside the substance of Clause 4. That is for the convenience of the Committee. The regulations under Clause 4 allow the length of the maturity period and the maximum amount of the monthly payment to be set by regulations. These two items can drive the amount of the maturity payment, which is calculated in accordance with Clause 8.

I was surprised to see that the regulations, which can radically change the nature and scale of the saving gateway scheme and its overall cost, are left to secondary legislation subject only to the negative procedure. Admittedly, the first orders will be subject to the affirmative procedure. That is welcome, but as we have the draft regulations to assist us in our consideration of this Bill, the issues will not arise on the first orders because we have the opportunity to debate them now. If issues arise, they will be on subsequent orders.

We agree that these issues are best dealt with in secondary legislation. We have debated today and will doubtless debate again at Report whether more should be in primary legislation, but in general terms we believe that it will be necessary to change the size and shape of the saving gateway accounts over time. Secondary legislation is the best way to do that. However, where those details have a direct bearing on the total cost of the scheme—as they clearly could by regulation changes to Clause 4—the affirmative procedure is the only proper way to achieve those changes.

I might be persuaded that it is only appropriate for the other place to approve such an order, but I would be hard pressed to be persuaded that there should be no formal parliamentary approval to an order that could radically change the shape of the gateway accounts and therefore the cost to the taxpayer. I beg to move.

Lord Davies of Oldham: The noble Baroness has introduced an amendment that deals with some interesting issues. As she recognised in her opening statement, the

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first use of all but one of the delegated powers in the Bill will be subject to affirmative procedure, and I understand that she is content with that. That indicates that the Government are all too well aware of the significance of the secondary legislation. We are making those arrangements.

I listened carefully to what the noble Baroness said a few moments ago. Of course she is absolutely right when she says that scrutiny of the Bill is the responsibility of this Committee and the Delegated Powers and Regulatory Reform Committee comments as it sees fit, but when that committee comments in a way that clearly indicates that the Government have got an interesting area just about right, it is only appropriate that we draw attention to it. I am about to do it again. I know that I am straining the noble Baroness's patience because she is keen to introduce the Delegated Powers and Regulatory Reform Committee only when it is fiercely critical of the Government. I can recall it having been so on one or two occasions in the past on other Bills. She will therefore not mind that the shoe is on the other foot, as it were, because in its report it states that, given the limited nature of the power, it is content that the negative procedure is appropriate for one exception.

We have reached that position with the first stage of this legislation. Now we come on to the question of potential change. Making the first use of almost all the delegated powers subject to the affirmative procedure will allow the necessary parliamentary scrutiny of the detailed scheme we are introducing. After that, the subsequent use of most powers should, in the Government’s view, be subject to the negative procedure to provide the flexibility to make minor or technical changes to the scheme which are appropriate only for secondary legislation.

There are four exceptions to that: the three crucial delegated powers in Clause 3 that relate to eligibility and the power to set the match rate. Those are key features of the saving gateway, so every use of those powers will continue to be subject to the affirmative procedure. We have identified the key areas.

The amendment specifies that other delegated powers should be subject to the affirmative procedure on each use. In particular, it focuses on the powers to set the maturity period of accounts and the monthly deposit account, but we think that the negative procedure is appropriate for the subsequent use of those powers. As I said, they will be scrutinised on first use but, on subsequent uses, the negative procedure is appropriate. As I have said, that the Delegated Powers and Regulatory Reform Committee is largely content with that.

There are precedents for changes to the monthly deposit limit to be set by negative procedure. For both ISAs and the child trust fund, the subscription limits are set in secondary legislation and can be amended in both cases under the negative procedure. As for the length of accounts, we have been clear that they should last for two years. However, there should be flexibility to review this position in future. That can best be achieved by making use of the regulation-making procedure. We contend that that should be the negative procedure—not on first use, but subsequently.



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I know the noble Baroness will not allow me to produce in aid the evidence that the Delegated Powers and Regulatory Reform Committee did not make any comment. As she said, it is not its job to comment on everything. On the other hand, when the Delegated Powers and Regulatory Reform Committee makes a recommendation she expects the Government to jump—as we always do—and treat it with great seriousness. When it does not, she must expect me to comment on the fact that our proposals have at least a clean bill health in respect of the anxieties of the Delegated Powers and Regulatory Reform Committee.

We do not believe that it would be an effective use of parliamentary time to debate some of these matters under the affirmative procedure, save for the first time when the scheme is implemented. Afterwards, it is clear that the negative procedure will be appropriate. It is not as if the negative procedure rules out parliamentary scrutiny. The noble Baroness will give some credence to the fact that I once had the somewhat invidious task of making sure that the Opposition was on the QV with regard to negative instruments, as we always referred to them. She knows that they are profuse, extensive, complicated and mind blowing. Nevertheless, we regarded it as our task. I am sure that the present Opposition discharge their task on negative procedures with the same thoroughness at the other end as they undoubtedly do here. Under that procedure, the legislation is still subject to parliamentary scrutiny, although different from under the affirmative procedure. On the basis of the case that I have put forward, we think that we have got the distribution of affirmative and negative just about right and I hope the noble Baroness thinks so too.

3.15 pm

Baroness Noakes: The Minister referred to the regulation-making powers for ISAs and child trust funds. Can he explain what can be done by negative resolution on each of those?

Lord Davies of Oldham: For both the ISAs and the child trust fund the subscription limits are set out in secondary legislation and can be amended only under the negative procedure.

Baroness Noakes: If the Minister reflects on that he will realise that the subscription limits on child trust funds and ISAs are not on all fours with what is in the Bill. I wonder whether the Delegated Powers and Regulatory Reform Committee did not quite appreciate that while the matching amount in Clause 8, which is specified in affirmative regulations, clearly derives the amount of money that is spent out, less obvious is how you express the maturity and the monthly qualifying amount that derive the calculations when you get to Clause 8. It is that that will actually, and probably more significantly, derive the total cost of the scheme. That is different. It is not on all fours with changing the subscription amount to, say, a child trust fund account and an ISA, which are simply for getting tax relief on the interest. It is not the same as getting this rather large matching amount, which is in turn tax free under the scheme.



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With respect, I do not think the precedents cited are conclusive precedents. The financial implications of the saving gateway are derived as much from the regulations in Clause 4 as they are from Clause 8, and I wonder whether the Delegated Powers and Regulatory Reform Committee did not realise that. Clause 8 refers to money and it would be easy to think that that is where the money derives from, but it is not—it derives as much from the earlier clauses.

I am not happy with what the Minister said or that the negative procedure is appropriate. The Minister said that all Oppositions have the ability to raise questions on negative resolutions, which of course they do. Affirmative regulation is not full parliamentary control but it is better than the negative because it requires the Government to come to Parliament to justify what they are asking for and to ask for approval. That is the significant difference between negative and positive. I urge the Minister to take the matter away and to reflect on whether the order-making power is correct. It is not on all fours with the examples he has given.

Lord Davies of Oldham: The noble Baroness tempts me, particularly as she has entered into the debate on the virtues of the subordinate legislation. Her description is right; I merely sought to indicate that there was a parallel. She went on to refer to the increases in costs. In the cases I cited, the ISAs and the child trust funds, costs would also increase when raising the limits. As far as the deposits are concerned, the sums are large in comparison to this scheme.

The noble Baroness has made an interesting case and I shall look at it again. Where the line is drawn is finely defined and I undertake to look at the matter further.

Baroness Noakes: I am grateful to the Minister. I shall probably return to the issue on Report, because where parliamentary approvals should be set is an interesting point. The dynamics of the Clause 4 regulations in financial terms are greater than or at least as great as the dynamics of the Clause 8 regulations. For that reason, I thought that the matter should be dealt with that way. I have made that point; I shall not make it again. I look forward to revisiting the arguments on Report. I beg leave to withdraw the amendment.

Amendment 25 withdrawn.

Clause 4 agreed.

Clause 5 : Approvals

Amendment 26

Moved by Baroness Noakes

26: Clause 5, page 3, line 36, at end insert—

“( ) Regulations under section 4(1) may require account holders to be eligible for compensation from the Financial Services Compensation Scheme and access to the ombudsman scheme under the Financial Services and Markets Act 2000 (c. 8).”



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Baroness Noakes: Amendment 26 amends Clause 5, which deals with the regulations associated with the approval of account providers. The amendment says that the regulations may require account holders to be eligible for compensation under the Financial Services Compensation Scheme and eligible for access to the Financial Services Ombudsman. The amendment is permissive; I do not see how the Government can possibly object to it. Indeed, the regulations provide for an account to be covered by the FSCS or an equivalent in another member state or EEA state. I am aware that it is difficult, although not impossible, to exclude other members of the EU, but I am less clear about EEA states. Thinking back to the problems that we have had with Icelandic banks and some of the other EEA states, I do not think that it necessarily inspires confidence in financial terms.

The regulations do not refer to access to the Financial Services Ombudsman, which I thought was desirable given the valuable work that the ombudsman does, especially in relation to relatively small accounts. Why are the requirements on the compensation scheme and the ombudsman not in the Bill? It is jolly difficult to see why the Government would want flexibility here. Do the Government intend to include EEA states and, if so, what safeguards will there be for account holders? The experience of relying on Icelandic deposit protection does not give us any confidence in the EEA being problem-free. Will the Minister also set out the position as regards the ombudsman? Do the Government believe that it is necessary for the saving gateway account holders to have access to the ombudsman? I certainly believe that that would be desirable. I am not even clear myself what the position would be if a branch bank from another EU state or possibly even an EEA state were to offer a saving gateway account. Could the Minister help the Committee in that respect? I beg to move.

Lord Morgan: I wish to speak in support of the amendment for reasons that the noble Baroness may find rather startling or even disagreeable; that is, social rather than financial reasons. The important principle of the Bill is one of financial inclusion and the amendment would be helpful in that direction.

First, as I and one or two other noble Lords said at Second Reading, this Bill will in part help to eliminate the class bias in our savings and taxation system. It will help to provide poorer people, particularly working class people, with the range of advice, assistance and possible redress that wealthier people have tried to obtain through Equitable Life and other sagas of that kind. It is very important that a range of opportunity and scope should available for the poorer people whom we anticipate will be affected by the Bill.

The other point that the noble Baroness made very clearly was that the measure would be of assistance in reassuring people, particularly given the utterly appalling record of the banks in the recent period. Reference was made to the Icelandic bank; it is particularly important that the role of the ombudsman is made fully available and that people are told about it. So many of the amendments that we have discussed have dealt with the provision of information. These people are not well versed in financial management, or even

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in the management of their own finances. They simply would not know about the scope offered by the ombudsman. As I say, in the case of Equitable Life, even more affluent people found it extremely difficult to get information of that kind. In the interests of what I take to be the egalitarian principles underlying this measure, from a progressive Government, I hope that they will take it on board.

Lord Myners: The amendment concerns account holders’ savings being covered by the Financial Services Compensation Scheme, and account holders’ access to the Financial Ombudsman Service. I can assure Members of the Committee that, under the powers already in the Bill, we intend to make it a requirement of the scheme that all saving gateway accounts are covered by the Financial Services Compensation Scheme or a similar deposit guarantee scheme recognised in an EEA member state. All deposits of up to €100,000 will be covered.

As Members of the Committee will no doubt know, the Financial Services Authority is currently consulting on the Financial Services Compensation Scheme. As part of that consultation, it is stimulating a debate about a significant increase in the level covered, as well as some of the issues that we touched on in considering the Banking Bill, around brands and other issues, where there is still some complexity and uncertainty.

The issue of EEA member states and the deposit protection provided is a matter of some concern for the Government. My right honourable friend the Chancellor of the Exchequer has raised this with the European Commission. Later today I will be going to Prague to attend the ECOFIN meeting, and I will be raising this matter with those attending. These concerns about the strength of the deposit guarantee schemes are exercising minds in a number of locations, have been touched on recently in speeches by senior officers of the FSA and are referred to tangentially in the de Larosière report produced for the President of the EU Commission.

In addition, I can confirm that all accounts operated in the UK will be covered by the ombudsman scheme, without the need for additional provision in the Bill or regulations. As with other accounts, such as ISAs and the child trust fund, as long as a provider has appropriate permission to accept deposits, there is no need to exclude them from offering the saving gateway. We do not intend to place a restriction on non-UK providers, but I add a caveat to that in reminding the Committee that the Chancellor of the Exchequer has expressed some serious concerns about the cross-border operation of the deposit guarantee schemes. We will no doubt be saying more about that in due course, having discussed these matters with member states of the European Community. I hope that the noble Baroness will agree that there is no need for this amendment, and will therefore withdraw it.

Lord Morgan: Before the noble Baroness replies, my noble friend says that the ombudsman will inevitably be part of the scheme. How would people know? What sort of reassurance could they receive to make them aware of this?



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Lord Myners: I anticipate that that will be included in the information that is made available by HMRC when advising an individual of eligibility, as well as in the information on the HMRC website. If I am misdirecting my noble friend on that matter, or if there is an even better answer, he can rest assured that I will write to him and copy that letter to other Members of the Committee who have spoken in this short debate.

3.30 pm

Baroness Noakes: I thank the Minister for his reply and the noble Lord, Lord Morgan, for taking part in this debate. I do not always just talk about financial issues; I know it seems like that. I occasionally stray into other areas. The majority of the Bill is not just about financial areas.

I was perhaps most distressed by the Minister’s final response to that final query about how people would get information about what compensation schemes they would be eligible for. The thought of this kind of basic information coming from HMRC does not feel right. It is not clear to me that the individuals who are going to receive their eligibility notices will be able to do anything significant with it, because this is part of a much broader financial inclusion agenda, rather than specifically here. We shall see.

The most concerning part is that there will potentially be saving gateway providers which would not have access to an ombudsman because they are not a UK bank or other financial service provider, and that is not automatically seen on a cross-border basis. That is unfortunate, and perhaps HMRC should be putting out information saying that people should only go to a bank when they can use an ombudsman. I hear what the Minister has said on the other points that I raised. I am pleased to hear that the issue around the EEA is being dealt with at government level. I hope that we may be updated in due course.


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