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21 Apr 2009 : Column GC355
Grand Committee
Tuesday, 21 April 2009.
Saving Gateway Accounts Bill
Committee (2nd Day)
3.30 pm
The Deputy Chairman of Committees (Lord Brougham and Vaux): Welcome to the second day of the Committee stage of the Saving Gateway Accounts Bill. If there is a Division in the Chamber while we are sitting, the Committee will adjourn for 10 minutes as soon as the Division Bell rings.
33: Clause 7, page 4, line 20, at end insert—
“( ) A Saving Gateway account held with one account provider may be transferred to another account provider only where—
(a) the Commissioners have withdrawn approval of an account provider,
(b) an account provider is the subject of the special resolution regime provided by the Banking Act 2009 (c. 1).”
Baroness Noakes: I shall speak also to Amendment 34. These amendments concern transfers under Clause 7, which allows regulations to specify when an account may be transferred. In fact, draft regulations give a complete free-for-all on transfers, which account providers have to make whenever requested and at no cost to the account holder. The Minister will be aware that this remains a source of contention with the British Bankers’ Association, acting on behalf of the banks. It has asked us to raise this issue again with the Government, despite the fact that it was discussed at length in another place.
The BBA is obviously not opposed to savers having access to their money and is committed to ensuring that account holders can withdraw their money easily, but transfers to other approved providers raise particular issues of cost, which derive from the fact that the transfer process will probably not be automated and will be reliant on paper-based systems. I cannot think of anything more unsatisfactory in relation to these small-value accounts.
In addition, there would be problems with the production of statements, as that would require the transfer of an account history to the new provider for the new provider to calculate the maturity payment, which requires knowledge of the account history. The BBA has also referred to identification verification of the account with the new provider, which also causes a problem. I do not believe that the problems are confined to the banking sector. In the Public Bill Committee in another place, similar concerns were expressed by
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My Amendment 33 would allow transfers to be made only if approval of a provider was withdrawn or if the provider was within the special resolution regime set out in the Banking Act 2009, which the Minister and I had so much pleasure working on earlier this year. Regulations should be made only in this context, which is what Amendment 34 provides for.
The Government should be aware that this is still a big issue, which may strike at the heart of whether there will be any voluntary participation in saving gateway accounts. That is why I have raised the matter again in Committee. I beg to move.
The Financial Services Secretary to the Treasury (Lord Myners): Amendments 33 and 34 would limit the circumstances in which the transfer of a saving gateway account could take place. It may help if I explain the position on transfers in general, and our intentions, before coming to the amendments themselves.
As noble Lords may know, we have said that we are attracted to the idea of saving gateway accounts being transferable between providers—for example, for an account holder who moves and who finds that their current provider is no longer accessible. However, we do not expect transfers to be frequent. Unlike child trust funds and ISAs, these are short-term accounts and it is not likely that account holders will want to change providers regularly to obtain, for instance, a better interest rate. The match payment will be the same with any provider and will be significantly larger than any other return offered by the provider.
We also recognise that this remains a considerable concern for potential account providers, as the Public Bill Committee in the other place heard during its evidence sessions, particularly from Ms Helen Banks of the British Bankers’ Association. This is an issue that we will continue to discuss in detail with potential providers and their representative bodies. Whatever the outcome of those discussions, a mechanism will be necessary for transfers to cater for cases where the transfer is triggered by the account provider rather than the account holder.
The amendment caters for a couple of specific cases: where a provider’s approval is withdrawn or where a provider is subject to the special resolution regime provided for by the Banking Act 2009. However, the amendment would not allow transfers to be made in a number of other situations triggered by the account provider. It would not, for example, permit transfers to be made where a provider ceased to act as a saving gateway provider by choice, nor would it permit transfers to be made where a provider ceased to qualify for account provider status. In such cases, the amendment would mean that account holders would be stranded and unable to transfer their account elsewhere. I am sure that noble Lords would agree that that would not be a desirable state of affairs.
We continue to believe that this is an area that requires further attention and a degree of flexibility. We shall continue to talk with account providers as the Bill proceeds through Parliament. I have again put on
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Baroness Noakes: I thank the Minister for that response. He is fully aware of my reasons for raising these issues. He is saying, “Trust us and we will get it right”, whereas the British Bankers’ Association is saying, “We’d rather have it sorted out on the face of the Bill”. I will need to consider this matter carefully with the association before Report stage.
The Minister pointed out some technical deficiencies in my amendment. I take the point entirely, but he will understand that I drafted it as a probing amendment in effect, as we cannot make amendments except by agreement in Grand Committee. As I say, I will discuss this further with the British Bankers’ Association, but he should be aware that this is one of the sticking points, which is why I think it important that we should make progress before the Bill moves to its Report stage in your Lordships’ House. I do not think that we have a date for that yet, but there is some urgency behind the Government making progress on this. I beg leave to withdraw the amendment.
Baroness Noakes: Amendment 35 would amend Clause 8(1), which deals with the amount that may be paid as a maturity payment, so that the maximum matching rate, which is to be set by regulations, does not exceed £1. That would represent a rate of matching of 100 per cent.
The Government have stated that they intend the matching payment to be at the rate of 50p per qualifying £1 balance. We have no problem with that, but inevitably they are taking a power in the name of flexibility to set the amount in regulations and have put no maximum on it.
We can see that flexibility might be desirable and are aware that the affirmative procedure is required for an order under Clause 8(1). Nevertheless, we feel that there should be some overall constraint on the amount that could be paid, otherwise we will be legislating for a power that could be subverted to pay ridiculous multiples of saving, perhaps as a way of channelling tax-free amounts to certain categories of individual without proper parliamentary consideration.
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The affirmative procedure is clearly better than the negative procedure but, as we have pointed out in many debates on Bills, it gives relatively little influence to Parliament over the Executive, since the option of voting down a statutory instrument is wisely not followed except in the most exceptional cases. That is why I have proposed an additional restraint in primary legislation.
The Bill allows for a subsidised savings mechanism through the saving gateway. I do not believe that we should use that to create a legislative framework that could stray beyond that noble cause; we should restrict it to what could reasonably be regarded as an incentive to save and not leave an open-ended power on the face of the Bill. I beg to move.
Lord Myners: This amendment would limit the flexibility of regulations. Specifically, it would prevent regulations from setting a match rate for the scheme of higher than pound for pound. Noble Lords will know that the Government announced in the 2008 Pre-Budget Report that they would match each pound saved with 50p.
Leaving the details of the accounts to secondary legislation provides the flexibility to make alterations in the future. This might be necessary if, for example, experience of the national scheme suggests that a different match rate would better achieve the aims of the saving gateway. The noble Baroness has tabled a later amendment that speaks to the need for Parliament to review the performance of the saving gateway scheme. It is precisely as a consequence of such a review, although not the review that the noble Baroness will be proposing, that we wish to retain the flexibility to make changes through regulation.
I agree that too high a match rate may not represent good value for money for the taxpayer. However, it is important that we are able to respond to any lessons that we learn from operating the national saving gateway and that we do not place restrictions on the match rate that regulations can prescribe. Of course, any changes to the match rate would, as the noble Baroness has acknowledged, be subject to the affirmative procedure. I therefore hope that the noble Baroness will withdraw her amendment.
Baroness Noakes: The Minister’s response that the Government would like as much flexibility as possible was entirely predictable. However, in the context of a savings incentive, it is reasonable for the Government to accept that there should be some provision that restricts the power to something that looks like saving. Once you get beyond a 100 per cent match, which I hope the Government will never get to, it is not an incentive to save any more; it is some other kind of channel of money flowing to particular recipients.
I am not convinced by the argument that unfettered flexibility is necessary to respond to the aims of the saving gateway scheme. It might be desirable for all kinds of other things, but not for the saving gateway scheme, because once you go beyond a pound you will be in ludicrous territory. If you had to induce someone to save by giving them pound for pound—or more than pound for pound, because my limit would allow
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36: Clause 9, page 5, line 8, leave out paragraph (c) and insert—
“( ) Regulations must provide that account providers must provide statements at intervals of no less than 6 months except in respect of the final statement where the Saving Gateway account is closed whether by transfer or otherwise.”
Baroness Noakes: I can be brief on Amendment 36, which seeks to amend Clause 9 so that the regulation-making power in relation to statements has to provide that statements are not to be provided more frequently than six monthly unless an account is closed. This was debated in another place and again goes to the heart of an issue on which we have touched several times: the costs that the saving gateway scheme might impose on providers and the impact that that would have on the willingness of providers to get involved.
The Government have wisely provided for six-monthly statements in their draft regulations—we welcome that—but there can be no certainty for providers that the rules of the game will not be changed once they have signed up to be saving gateway providers. If the economics of saving gateway accounts are finely balanced with six-monthly accounts, the business case could be wrecked by a subsequent decision by the Government, perhaps under pressure from consumer groups, to increase statement frequency. If banks and other potential providers have to make their business case with this risk embedded in the calculations, they may not proceed.
It is not only the banks that are concerned about costs. As we touched on during our first day in Committee, the evidence to the Public Bill Committee in another place showed that the building societies also had concerns about costs. Even the managing director of the Post Office, while undoubtedly optimistic and enthusiastic about getting involved in saving gateway accounts, gave equivocal evidence about the economic viability of the saving gateway scheme.
The amendment would provide a small protection, which would cost the Government nothing to concede. If there ever were a competitive landscape for saving gateway accounts, the frequency of statements might well increase if account holders valued them and that provided a competitive advantage. No one would need to legislate for powers to achieve that; it could just happen. But to leave open the possibility that the Government could tighten the terms of the scheme at a later stage is simply not helpful. I beg to move.
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3.45 pm
Lord Myners: The amendment would put in the Bill a requirement that is already contained in the draft regulations for statements to be issued on a six-monthly basis and at the point of account closure or transfer. We believe that this level of detailed requirement is more appropriate for secondary legislation. It is an area where we believe there should be some flexibility to enable us to respond to any lessons learnt from operating the scheme, as well as to keep pace with any future changes in banking practice. The noble Baroness does, however, make a good case. I recognise that the success of the saving gateway is importantly dependent on the availability of a significant number of account providers. While I urge the noble Baroness to withdraw the amendment, I will go away and take account of her comments.
Baroness Noakes: I thank the Minister for that response. I hope that the Government will take away a lot of these issues. There has been an assumption that drafting a Bill with huge regulation-making powers is the most satisfactory way to proceed and, from the Government’s perspective, clearly it is. But from the perspective of the potential account providers, the more flexibility the Government have, the greater their ability to change the terms of business after people have made an initial decision. That may prevent people from making a decision if there is too much uncertainty or it may cause a lot of difficulty after the scheme has started. I hope that the Minister will look again at this and at some of the other issues that we discussed at our first Committee sitting. I beg leave to withdraw the amendment.
37: Clause 9, page 5, line 8, at end insert—
“( ) Regulations must provide that statements are available in hard copy form unless the holders of a Saving Gateway account consents to statements being provided electronically or in some other way.”
Baroness Noakes: Amendment 37 would amend Clause 9 so that the regulations about statements have to provide that hard-copy statements are available unless account holders consent to receiving them electronically. Clause 10 is silent on how statements are to be made available to account holders and so, too, are the draft regulations.
In another place, my honourable friend Mr Ed Timpson moved an amendment that was permissive on electronic statements. The Minister said in response that the Government,
- “do not intend to specify the form that statements have to take, but simply that they must be issued. This would permit them to be issued electronically and it would be a matter for the account provider to decide”.—[Official Report, Commons, Saving Gateway Account Bill Committee, 3/2/09; col. 114.]
That rang alarm bells because I do not think that this issue should be left to the account provider. The cost advantages of doing away with paper, printing, postage
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Let us take the parallel case of the Companies Act 2006, which allows companies to move to electronic delivery of notices of meetings and documents such as annual reports. Once companies have changed their articles to permit it, they are still not allowed to implement it and force electronic delivery on their shareholder base. Each shareholder has to be asked if he wants to stick with hard copy or default to electronic delivery, but there is no similar protection in these regulations.
I am a great enthusiast of the internet, but I still tend to opt for a hard copy of annual reports. Indeed, I have refused the blandishment of my bank to take soft-copy bank statements. In each case, I am given the choice. I wish to preserve choice for those who are drawn into the saving gateway and I think that the Government ought to share that ambition. I beg to move.
Lord Myners: Clause 9 already provides a power enabling regulations to specify the form and content of a statement. This would allow regulations to specify that providers should supply statements on paper unless an account holder requests otherwise, should we wish to go down that route, so the amendment would not add anything to the Bill. However, this is an area where we think it sensible to be permissive rather than prescriptive. We expect that providers will supply statements in paper form as a default, but we do not see that it is necessary to impose a requirement to this effect in the regulations. For a provider to supply statements electronically, it is likely, as noble Lords will appreciate, that the account holder will be required to set themselves up with an internet banking service and at least to supply an e-mail address. It is hard to see how this could be done without the consent of the account holder. I hope, therefore, that the noble Baroness will seek leave to withdraw the amendment.
Baroness Noakes: I thank the Minister for that reply. His argument depends on whether the regulation-making power can ensure that electronic provision is not forced on individuals. I shall look carefully at what he has said to see whether this is adequately dealt with. It is not covered in the existing regulations; the issue is whether the regulations ought to be looked at again. Providers have all sorts of ways of getting details such as e-mail addresses; for example, small print may say, “By giving us your e-mail address, you have allowed us to use your e-mail address”. We cannot necessarily rely on providers to be reasonable about the way in which they do this, because the cost advantages are so great. One has only to look at how devious companies are at slipping in a tiny piece of paper with the annual report package that says, “Are you really sure you want to carry on having hard copy?”. You have to find that little bit of paper to make sure that you carry on having hard copy.
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We have to recognise that the corporate world loves electronic communication and that the consumer world is not necessarily ready for it. It is that which needs to be protected. I leave the Minister to contemplate that. In the mean time, I shall read his comments carefully before Report. I beg leave to withdraw the amendment.
Clause 10 : Account ceasing to be Saving Gateway account
38: Clause 10, page 5, line 12, at end insert—
“( ) An account ceases to be a Saving Gateway account if it is sold, transferred or charged as security by the account holder.”
Baroness Noakes: The amendment would add an extra subsection to Clause 10, which deals with accounts ceasing to be saving gateway accounts. In fact, Clause 10 is merely a regulation-making power and contains no substance.
My amendment, which is probing, says that an account will cease to be a saving gateway account if the account holder sells it, transfers it or charges it as security. My aim is to prevent a saving gateway account holder from cashing in on the maturity bonus by selling it for cash or borrowing against it. I do not think that the Government want to encourage a secondary market in saving gateway accounts, since that would go against the spirit of trying to encourage savings.
I drafted transferring the account into the amendment, but, in hindsight, I do not think that that is what I meant to do, because I did not intend to cover transfers to an alternative provider, which we covered in an earlier amendment. However, I wanted to cover other kinds of transfer such as sales or possibly gifts.
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