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Lord Soley: My Lords, I reiterate my long-standing support for the implication in the Statement that we will at last have a way of setting the expenses, allowances
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Finally, perhaps I may remind my noble friend of something that I suspect she knows. With the election of a new Speaker in the House of Commons and the fact that we have a Speaker here now, and given what the Government are saying about the reform of this House, it is very important that both Houses are advised and, in some cases, educated about the role of each House. There is a strong case for the two Speakers to be able to enhance and protect the role of this House, as long as we give our Speaker some flexibility in discussing the proposals that eventually come forth. They will be more influential in many cases than party leaders.
Baroness Royall of Blaisdon: My Lords, I completely agree with the point about independence, which is why I am delighted that the Lord Speaker, as chair of the House Committee, has ensured that the SSRB will look at our system of expenses. Of course, both Houses of Parliament need to be much better educated about the other House. In that, I would include Ministers, as it is exasperating when one’s colleagues do not have enough information about what goes on in the other House. The Speaker of each House has a role to play in ensuring that the other House is better informed.
Saving Gateway Accounts Bill
Main Bill Page
Copy of Bill
Explanatory Notes
Amendments
Report
4.45 pm
Clause 4 : Requirements relating to accounts
1: Clause 4, page 3, line 28, at end insert—
“( ) Regulations under subsection (2)(a) may not prescribe a period of less than 12 months.”
The Financial Services Secretary to the Treasury (Lord Myners): My Lords, it is a pleasure to start our Report stage consideration of the Saving Gateway Accounts Bill. In speaking to Amendment 1, I shall speak also to Amendments 3 and 4, which relate to the maturity period of the saving gateway account—in other words, how long each account will last. As noble Lords will know, we intend to set the maturity period at two years or 24 months. I think that noble Lords
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Baroness Noakes: My Lords, when I moved a similar amendment in Grand Committee, it did not meet with instant success, but I am grateful to the Minister for reflecting on this and bringing forward the Government’s amendment, which of course I support.
2: Clause 4, page 3, line 28, at end insert—
“( ) Regulations may not require an account provider to pay interest on a Saving Gateway account.”
Baroness Noakes: My Lords, in moving the amendment, I shall speak also to Amendments 5, 6 and 8 in this group. These are repeat amendments of those that we debated in Grand Committee. They concern areas in the saving gateway scheme that caused particular concern to the British Bankers’ Association. There have been continuing discussions since Committee stage between the Government and the BBA. The Minister in another place subsequently wrote to colleagues in another place and I am grateful to him for copying that letter to me. Those discussions have not resulted in government amendments, so I have tabled my amendments again largely as a vehicle to ensure that the commitments that the Government have made to the British Bankers’ Association in connection with the topics covered by the amendments are clearly on the record.
It has been clear that, while there is good will towards the saving gateway scheme among potential providers—principally the banks, the building societies and the Post Office—there has been great concern about the cost of operating saving gateway accounts. Suffice it to say that it would not be difficult for a potential account provider to conclude that participation was not economic.
One issue is that the draft regulations allowed complete freedom to account holders to transfer their accounts to other providers, which potentially imposed significant costs on account providers. While we would normally support the freedom to transfer, we could see that the cost implications were so considerable that transferability might kill off the scheme. My Amendments 5 and 6 allow transferability in only limited circumstances.
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The draft regulations were satisfactory in two other respects—in not requiring the payment of interest and in not requiring statements to be sent more frequently than six-monthly. These matters are crucial to the economics of participation in the scheme. The BBA wanted to see them dealt with in the Bill, because regulations can be changed by the Government pretty much at will, subject only to the inconvenience of pushing through statutory instruments. Hence the economics of saving gateway accounts could be wrecked at the stroke of a pen. Amendment 2 deals with interest and Amendment 9 deals with statement frequency.
As the Minister pointed out in Grand Committee, my Amendment 5, dealing with transfers, did not quite do the trick technically. I have not chosen to table a more perfect version for today, since the purpose of my tabling these amendments is to give the Minister an opportunity to place the Government’s position on the record. I beg to move.
Lord Myners: My Lords, I welcome the explanation of the intention behind the amendments. I must, of course, be cautious if I am to respond positively to suggestions for improvements of legislation coming from the Opposition Benches even if I am then to be accused of being rather slow on the uptake. But in a number of points to be debated this afternoon, the Government have shown a real willingness to listen with good and respectful attention to comments from the Liberal Democrat and Conservative Benches and to incorporate the best of those in our proposals.
As I said previously, we have no intention of requiring account holders to pay interest or of requiring statements to be issued more frequently than six-monthly. The Economic Secretary also confirmed in a letter last month to the British Bankers’ Association, which was copied to noble Lords who had contributed to the Bill’s passage, that account providers will not be required to allow account holders to transfer their accounts other than in certain circumstances where they are unable to operate the accounts to maturity. As with the payment of interest and statement frequency, we do not intend to change our position on transferability. But on all three issues I believe that the Bill should provide the flexibility for changes to be made in the future by regulations, rather than by the requirement for primary legislation. After all, there has been a range of reviews on all these questions. I also believe that detailed points such as the frequency of statements and the exact circumstances in which transfers should take place are more suitable for secondary legislation in any case.
Having said that, I appreciate the noble Baroness’s argument that we should not leave potential saving gateway providers wondering whether these characteristics of the scheme might change. I am therefore very happy to put on record our commitment that these features will not be changed without full consultation, including with account providers. We have discussed this with the British Bankers’ Association, which said that it provides the reassurances that it requires. I hope that it will also provide the noble Baroness with the reassurance that is sought and that she will seek leave to withdraw the amendment.
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Baroness Noakes: My Lords, I am most grateful to the Minister for placing on the record the assurances that have been given in private to the British Bankers’ Association. It is important that those who choose to start providing saving gateway accounts are given an opportunity to make full representations in consultation if the Government decide to change the economic framework within which saving gateway accounts are operated. I hope that the Government do indeed adhere to that commitment. On that basis, I am pleased to beg leave to withdraw the amendment.
Baroness Noakes: My Lords, Amendment 7 would amend Clause 8 so that the maturity payment may be at the rate of no more than 100p. One of the features of the Bill is that it contains very little in the way of detail of the saving gateway scheme and is one long regulation-making power. There are some very long draft regulations which easily outweigh the Bill itself. The maturity payment is one such example. Clause 8 says that there will be a maturity payment of a number of pence for each eligible pound which has been saved but the number of pence is to be specified in regulations.
The draft regulations give effect to the Government’s decision that the maturity rate should be 50p, giving a 50 per cent matching rate. We have no problems with that matching rate, but it remains wholly within the Government’s power, subject only to the minor irritation of an affirmative order, to raise that to whatever amount they choose.
The rationale for the Bill is about promoting a habit of saving. Allowing the maturity payment to be whatever amount the Government choose is tantamount to allowing them to abandon the underlying principle of promoting savings and using the provisions of the Bill to be a conduit for additional benefit payments. There should be a quite separate mechanism for determining benefit payments.
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We believe that this Bill should be confined to savings, and accordingly Amendment 7 proposes that a cap on the maturity payments should be set at 100p, that is, that the matching rate should not exceed 100 per cent. We understand that the Government wish to preserve flexibility. That is a conventional way in which Governments approach the drafting of Bills, but the Minister gave no substantive reason for having unfettered flexibility in this area in Grand Committee. My amendment gives him a second chance of explaining that rationale, if there is one. I will take some convincing that a so-called saving scheme could be turned into a benefit scheme merely by order. I beg to move.
Lord Myners: My Lords, this amendment would prevent regulations from setting a match rate of higher than £1 from the Government for every £1 saved by account holders. As noble Lords may know, we intend to set a match rate of 50p for each £1 saved, so this amendment would allow some flexibility for increasing the match rate. However, the amendment would limit that flexibility, and I am not convinced that there is a good reason to do so.
Of course, too high a match rate would not represent good value for money for the taxpayer. It would depart from the concept of encouraging saving. However, it is important that we are able to respond to any lessons we learn from the operation of the national saving gateway scheme. We should bear in mind that there are matched savings schemes elsewhere in the world that have match rates of higher than £1 for £1. Although those schemes tend to prescribe a fixed end use for the funds saved, for instance home purchase or to evidence commitment to education, they are still about saving, so it is conceivable that a Government in the future may want to set a match rate, in certain circumstances, higher than £1 for £1. Although that is not our intention, and the noble Baroness has indicated that it would not be hers either, I am not convinced that we should take this option away.
I also remind the House that any change to the match rate would be subject to the affirmative procedure, and therefore not unfettered as described, which means that Parliament would have the chance to scrutinise any change. I hope, in those circumstances, that the noble Baroness will withdraw her amendment.
Baroness Noakes: My Lords, the Minister disappoints me. I invited him to give a rationale for having this very wide, if marginally fettered, flexibility. He responded that I had not given a good reason to restrict flexibility. It is not done that way round. It is for the Government to justify why they should have their flexibility. The Minister referred to some schemes going beyond 100 per cent, but only in very restricted cases where there was a specified purpose for the saving, which is not what this saving gateway account is currently drafted as, and nor could it be turned into such an account, given the powers in the Bill. I continue to believe that we should restrict the Bill to something that resembles saving, and I have thought hard about whether or not to seek the opinion of the House on that. However, since the powers in this Bill may not be exercised by the current Government for very much longer, and we have yet to see what the outcome of the next election
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5 pm
Clause 10 : Account ceasing to be Saving Gateway account
9: Clause 10, page 5, line 21, at end insert—
“( ) An account shall cease to be a Saving Gateway account if it is assigned or charged or is the subject of an agreement to assign or charge.”
Baroness Noakes: My Lords, the amendment would add an additional subsection to Clause 10, which deals with accounts ceasing to be saving gateway accounts. This new subsection says that if an account is assigned or charged or is subject to an agreement to be assigned or charged, it ceases to be a saving gateway account. Importantly, that means that the account would no longer qualify for a maturity payment. The amendment is similar to one that I tabled in Grand Committee and seeks to deal with the possibility that a saving gateway account holder could use eligibility for a maturity payment as a source of profit without even waiting for the two-year maturity period. That would not be compatible with the scheme being designed as a pathway to a savings habit.
For example, if I qualify for a voucher to open a saving gateway account, I might make an arrangement with a lender to borrow the £20 a month to put in the account on the basis that we would share the maturity payment, which would represent a jolly good rate of return to each of us. If such an arrangement exists informally, there is little we can do about it, but if the account was formally transferred or charged by the account holder we could, with my amendment, prevent the maturity payment from accruing. Similarly, if a saving gateway account holder has saved the maximum for, say, 18 months, thus qualifying for a matching payment of £225 if held for the full two years, that person might want to cash in early. He could borrow from one of the people whom the Minister graphically described in Grand Committee as,
- “scoundrels operating in the margin in the unbanked community”.—[Official Report, 1/4/09; col. GC363.]
Those people would be using the accounts as security. I am sure that the Minister would not want to encourage that.
I know that the Minister agrees with these sentiments and that the Treasury has looked further at the regulations. I invite him to set out how the Government intend to tackle the problem, because I think that he has accepted that it is a problem area, and whether the Government’s proposals will achieve the results that I seek to achieve with my amendment. I beg to move.
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Lord Myners: My Lords, I understand the noble Baroness’s concerns in this area and, since our debate on this matter in Grand Committee, we have considered this issue carefully. While we do not anticipate that the situations referred to in the noble Baroness’s amendment will be common, we have decided to strengthen the draft regulations to provide a stronger and broader defence should such cases arise. We now intend to provide in regulations that a saving gateway account can be held only by the person who applied for the account and made the necessary declaration of eligibility at account opening. That is covered by draft Regulation 10(1)(a). We intend that regulations shall also provide that the account must be in the beneficial ownership of the account holder, and not held on behalf of any other person.
The effect of these provisions would be that should the person sell, transfer, assign or otherwise allow a charge over their account, it would cease to be a saving gateway account, and any right to a maturity payment would be lost. We intend that draft regulations should provide that an account provider shall have no right of charge, set off or other security against amounts held in a saving gateway account. That is covered by draft Regulation 10(2)(g). We therefore intend to achieve the effect of the noble Baroness’s amendment in regulations. We think that detailed provisions of this kind are most appropriate for regulations, where they can be updated and strengthened where necessary in response to learnings and developments, without the need for primary legislation.
In view of that confirmation, I hope that the noble Baroness will seek leave to withdraw her amendment.
Baroness Noakes: My Lords, I am grateful to the Minister for explaining how the Government intend to strengthen the draft regulations to meet the points raised by the amendment that I tabled. The only point that I would leave with the Minister is that it is important to ensure that the information provided to saving gateway account holders when they open accounts makes it clear to them that they are not to use the accounts in this way. That should be clear at the outset.
Lord Myners: My Lords, that is rather a good point. I shall go away and talk to officials about that. I thank her again for her constructive suggestion.
Baroness Noakes: I beg leave to withdraw the amendment.
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