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2 Nov 2009 : Column GC1
Grand Committee
Monday, 2 November 2009.
3.30 pm
The Deputy Chairman of Committees (Viscount Simon): My Lords, before the Minister moves that the first statutory instrument be considered, I remind noble Lords that, in the case of each statutory instrument, the Motion before the Committee will be that the Committee do consider the statutory instrument in question. I should perhaps make it clear that the Motion to approve the affirmative instrument will be moved in the Chamber in the usual way. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Saving Gateway Accounts Regulations 2009
Copy of the SI
22nd Report from the JCSI
Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Saving Gateway Accounts Regulations 2009.
The Financial Services Secretary to the Treasury (Lord Myners): My Lords, it is a pleasure to open today's debate on the Saving Gateway Accounts Regulations. These regulations follow from the Saving Gateway Accounts Act, which received Royal Assent in July. Alongside that Act and the Saving Gateway Accounts (No. 2) Regulations, which cover tax relief and so are being debated only in the other place, these regulations will set out the legislative framework for a national saving gateway scheme.
As noble Lords will know, the saving gateway will give around 8 million working people on lower incomes the chance to earn 50p from the Government for each pound that they save. It aims to kick-start a savings habit and to bring people into contact with mainstream financial services, some of them for the first time. I am pleased to say that those aims have had widespread support from all sides of this House, in the other place and beyond. I hope that noble Lords will also support these regulations, which will make the saving gateway a reality.
The regulations cover three main areas, which I will briefly outline. First, they provide further details on eligibility for the saving gateway. The saving gateway account sets out that eligibility will be passported from entitlement to certain benefits and tax credits. This is the simplest and most efficient method available for determining saving gateway eligibility. These passporting benefits and tax credits include both working tax credit and child tax credit. However, as these tax credits can be received at a range of different incomes, we have been clear that only claimants with incomes below a certain level should be eligible for the saving gateway. These regulations will align that level with the income threshold for child tax credit, which is
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The second major area that the regulations cover is the features of saving gateway accounts. Many of these will be familiar to noble Lords and are now as they were announced in December last year. They were contained in the draft regulations published in February and were discussed during the passage of the Bill earlier this year. Let me pick out the most significant of these features. Regulation 7 sets the maturity period-how long each saving gateway account will last-at 24 months. Regulation 11 sets out the monthly deposit limit for saving gateway accounts at £25. Regulation 9 sets the amount that the Government will contribute to each pound saved-the match rate, as it is sometimes called-at 50p. As noble Lords may know, we experimented with different match rates during the second pilot of the saving gateway and we believe that a rate of 50p for each pound provides better value for money than a higher match rate, while still providing a strong incentive to save. Together, these features of the saving gateway mean that account holders will be able to save up to £600 in their accounts and earn up to £300 from the Government.
Thirdly, the regulations set out the detailed requirements that will be placed on account providers. The noble Lord, Lord Newby, spoke on a number of occasions during the passage of the Bill about the importance of there being a range of providers. I have been working hard to ensure that this is the case and I am confident that there will be sufficient providers to support a national saving gateway scheme and to provide eligible people with a choice of where to open accounts. I am encouraging major retail banks and potential providers to recognise the importance of being involved with the saving gateway, which will benefit the wider community, particularly at this current time.
As I said, the regulations set out the requirements that will be placed on saving gateway accounts. The noble Lord, Lord Newby, stressed during the passage of the Bill the importance of these requirements being kept to a minimum and being as simple as possible. That is very much the approach that we have followed. We have, in fact, made a number of changes to our original proposals for the saving gateway in order to achieve that. For example, the regulations do not include any requirement for providers to pay interest to account holders and they require providers to issue statements only six-monthly, rather than quarterly as originally proposed.
During the passage of the Bill through this House, we also decided that account providers would not be required to offer account holders the opportunity to transfer their accounts between providers other than in a limited range of circumstances. That was a point raised by the noble Baroness, Lady Noakes, and it is the position taken in these regulations. The regulations also set out the detail of the returns that providers will make to HMRC. We have been careful to minimise the amount of information that will be required.
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In conclusion, these regulations will form a vital part of the legislative framework for the national saving gateway scheme to be introduced next year; we will announce an exact start date for the saving gateway in due course. They reflect the lessons learnt from the two pilots of the saving gateway, the responses to the detailed consultation that we carried out in 2008 and the comments that we have received since they were first published in draft in February. We are very grateful for the input from many different groups, including many noble Lords during the passage of the Bill earlier this year. For example, the noble Baroness, Lady Noakes, argued in Grand Committee that the regulations should prevent account holders from selling their accounts or borrowing against them; Regulation 10(1)(g) now provides that the account must be in the "beneficial ownership" of the account holder.
I believe that the engagement and consultation that we have had over a number of years have contributed to the design of a scheme that will offer a real incentive to save, in the financial mainstream, to working-age people on lower incomes-a group with lower savings and higher levels of financial exclusion than the remainder of the population. This is a targeted initiative that could make a real difference to the lives of around 8 million people in this country and I am pleased that it has had such widespread support in this House. I hope that that will continue today.
Baroness Noakes: My Lords, I thank the Minister for introducing these regulations and I congratulate the Treasury on heeding the report of the Joint Committee on Statutory Instruments in July and on tabling revised regulations to take account of that report. The Minister will be aware that I tabled a Motion in July to ensure that the report of the Joint Committee was taken into account and I am glad that the Treasury has done so with these revised regulations.
As the Minister said, we debated the content of the regulations in draft form fairly extensively throughout our deliberations on the Bill, so there is little that we find unexpected in the regulations that we have before us, which should cut down the time that we take today.
I have just one prior point for the Minister. In talking about the saving gateway scheme, he said that an account holder would get 50p from the Government. In fact, the 50p savings incentive will come from the taxpayer. We must never forget that the scheme has to provide value for money to the taxpayer; it must represent a good use of money in the effect that it has on savings in the target community. We look forward to the report that will be made on the saving gateway scheme, which the Government produced an amendment for in the final stages of the Bill. However, that is some way off, so I just confine my remarks to reminding the Minister that it is taxpayers' money, not the Government's.
There are two areas where I want to question the Minister, the first of which relates to timing. I want to press him to say when the Act will be commenced and, following on from that, when the scheme will be commenced. I think that he said something like "in due course", which is one of those phrases that are designed to convey no information whatever. Therefore, I ask the Minister to be a little more precise if he
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The other area on which I want to press the Minister is account providers. I had hoped that he would give details of the account providers who would be likely to come forward. He will recall that during our deliberations on the Bill we had many discussions about the economics of saving gateway accounts and whether account providers would want to come forward. We knew that many wanted to take part, including the Post Office, but that the economics were a potential difficulty.
The Minister has said some warm words about good discussions and about banks potentially coming forward, but I heard no specifics whatever during the passage of the Bill. Several months have elapsed since then and I had hoped that we could get a better idea of whether there would indeed be a diversity of saving gateway account providers. As the Minister will be aware, the aim behind the Bill has all-party support and, therefore, we want to see this experiment take place and be judged properly. A proper experiment cannot take place unless there is proper diversity of account providers, so I hope that the Minister can go a little further than the rather careful words that he used in that respect.
Lord Newby: My Lords, I thank the Minister for his introduction to this short debate. As he said, the draft instrument contains no surprises. In one respect, I am sorry that it does not, because one point that I made, no doubt at laborious length, as the Bill was going through was that, uniquely among all the areas where the Government are encouraging people to save through the tax system, in this case there is a very tight time limit of 24 months. That principle does not apply to pensions or child trust funds and it is a pity that it applies here. I think that the argument that if people have saved for up to 24 months they will carry on saving when the benefit is withdrawn is seriously flawed. However, I realise that this is not an issue on which we can make much progress today.
The only substantive point that I want to make beyond that is to pick up on what the noble Baroness said about providers. The Minister said that he was confident that there would be sufficient providers, including a number of the major retail banks. Like the noble Baroness, I should be grateful if he could say a bit more about that. When the Bill was going through, the only organisation that expressed any public willingness to participate in the scheme was the Post Office, and then only with very heavy qualifications in terms of the economics. Given everything else that is going on at the moment, it is unlikely that Mr Crozier is spending much time worrying about whether he can introduce saving gateway accounts.
At some point in our debate on credit unions last week, or possibly the previous week, there was a throwaway reference-and I apologise for not having it to hand-about credit unions possibly being able to offer this product. I found that rather surprising, because credit unions are very small and I should have thought that the bureaucracy involved for them in setting up the scheme might be too much of a burden.
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3.45 pm
Lord Myners: My Lords, I thank the noble Baroness, Lady Noakes, and the noble Lord, Lord Newby, for their contributions to the discussion. I am pleased to note that, as I anticipated, we have continued to see broad support for the concept of the saving gateway, as evidenced during the passage of the Bill. The noble Lord, Lord Newby, is right to point to the timeliness of the proposal in the context of current economic circumstances.
I agree with the noble Baroness about the Joint Committee once again showing its effectiveness and directing us towards improvements, which we have welcomed. I also note the noble Baroness's comments about the taxpayer as opposed to the Government. I have to say that I regularly struggle, when talking about our investments in the shares of a number of banks, in deciding whether I should say that these are in public ownership, owned by the taxpayer or owned by the Government, but I think that we all understand the noble Baroness's point, which is that the state has no money of its own; it acts in that respect on behalf of the taxpayers and must be accountable for the Government's decisions. I believe that that accountability has been evident in the thorough research that has taken place in support of this proposal.
On timing, we have announced that the scheme will be available nationwide from 2010. The precise starting date depends on a number of factors, including in particular the progress of our discussions with potential providers about when they would be ready to offer accounts. They need to make significant systems investment and we do not want the accounts to be launched until such time as there are sufficient account providers to ensure that we have national coverage and accessibility for the eligible community and that the account providers are able to operate the scheme effectively. It is with that in mind that I continue to have regular engagement with a number of banking institutions in connection with the provision of saving gateway accounts; indeed, I have been in such discussions in the past week or so. As has been noted in debate, the Post Office has indicated a wish to provide a saving gateway account, which would be entirely compatible with its ambition to improve the range and quality of its banking offer. My words on timing were, therefore, carefully chosen and are importantly predicated on reaching a point when we can be assured that the scheme will launch effectively without any administrative problems.
The noble Baroness, Lady Noakes, was also right to remind us that, for a bank, the question whether to offer such accounts is one in which the economics need to be carefully evaluated. However, we have always been very clear that we would not expect the decision to be made solely on the basis of economics. At a time when the banking industry has to face serious challenges around reputation and utility, there is clearly an opportunity for retail banks to evidence their commitment to provide something that has a
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The noble Lord, Lord Newby, asked why the gateway should be time-limited to 24 months. It certainly needs to be time-limited, although whether 24 months is the right period is debatable. Research suggests that the combination of the amount of monthly deposit, the matching benefit and the time should be sufficient to establish the saving habit. This is a proposal to kick-start saving and initiate people into the formal financial sector, giving them the habit of saving. One hopes that, with the encouragement that the taxpayer's support provides, people will then continue to save, through ISAs or some other mechanism. We have committed to review the effectiveness of the saving gateway account. One of the most critical questions that we will need to answer is whether it has led to the establishment of a saving culture for those who had previously not saved or who had not saved through the formal financial system.
We hope and expect that some of the larger credit unions will offer saving gateway accounts. Officials have been in detailed discussions with their representative bodies.
I think that I have answered most, if not all, of the questions raised in debate. As I said at the start, these regulations will be an important part of the legislative framework for the new national saving gateway accounts to be introduced next year. I am delighted that they have received support from all sides of the House and am grateful, once again, to noble Lords who contributed both to today's debate and during the passage of the Bill. I express my thanks to the noble Baroness, Lady Noakes, and the noble Lord, Lord Newby, for their contributions. In a number of cases, as I have shown, we have taken on board their very helpful contributions, as a result of which we have a better Act and a better set of regulations.
Financial Restrictions (Iran) Order 2009
Copy of the SI
22nd Report from the JCSI
Considered in Grand Committee
3.52 pm
That the Grand Committee do report to the House that is has considered the Financial Restrictions (Iran) Order 2009.
The Financial Services Secretary to the Treasury (Lord Myners): On 12 October, Her Majesty's Treasury laid before Parliament the Financial Restrictions (Iran) Order 2009 under its powers in Schedule 7 to the Counter-Terrorism Act 2008. This order contained a
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In keeping with the undertakings given to Parliament during the passage of the Counter-Terrorism Act 2008, today I shall set out the reasons for this action, provide some details on the specifics of the direction and finally outline the work that we have done to ensure that these measures are well understood by the UK financial services industry. Due to the nature of the material that informed the decision to take this action, noble Lords will understand that there are limits on what can be shared. I will, of course, provide as much as is possible within these constraints.
The direction contained in this order was given on the basis of the Treasury's belief that the activity of Iran that facilitates the development or production of nuclear weapons poses a significant risk to the national interests of the UK. As the Exchequer Secretary to the Treasury highlighted in her Written Statement to Parliament issued alongside the order on 12 October, Iran continues to fail to meet its international obligations. Most notably, its nuclear programme presents an immediate challenge to the global non-proliferation regime. Work being carried out as part of Iran's nuclear programme would facilitate the development or production of nuclear weapons.
The International Atomic Energy Agency is being refused the access that it seeks by Iran, which also declines to answer questions put to it by the agency's staff about alleged studies indicative of military aspects to Iran's programme. As a result, the IAEA director-general has stated that he is unable to verify that Iran's nuclear programme is for exclusively peaceful purposes. Iran's ongoing improvement of its ballistic missile capabilities also continues to give rise to international concern. Its failure to answer questions from the IAEA about possible military dimensions to its nuclear programme increases concerns that its ballistic missile programme represents a potential nuclear delivery system.
The Government consider the requirement to cease business relationships and transactions with Bank Mellat and IRISL to be a proportionate response to the threat. This is because the direction focuses on two entities that we have evidence have been engaged in activities of concern. Bank Mellat has provided banking services to a UN-listed organisation connected to Iran's proliferation-sensitive activities and was involved in transactions relating to financing Iran's nuclear and ballistic missile programmes. IRISL has transported goods for both Iran's ballistic missile and nuclear programmes. Both have links to the UK financial sector. As such, this is a targeted action against two Iranian entities that have been identified as facilitating proliferation-sensitive activity in Iran, rather than a sanction against Iran.
To protect the national interests of this country and the integrity of our financial sector, this direction prohibits any financial or credit institution from providing services that benefit these entities and thereby support the activities in which they are engaged. This action
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Let me now provide further information on the operation of the restrictions. The requirement contained in the direction came into force on Monday 12 October 2009. Shortly after the restrictions came into effect, the Treasury published a series of documents on its public website to alert the financial sector to the restrictions and provide detailed guidance on their implementation. These documents were also e-mailed to over 8,000 subscribers to our e-mail alert system. In addition, we have asked various supervisors-for instance, the FSA and HMRC-and trade organisations, such as the British Bankers' Association, to publicise the direction and provide information to firms on the requirements in the direction. The Treasury has also met with those firms most affected by the direction to ensure that they are in a position to comply with the requirements.
The documents published by the Treasury on 12 October included three general licences exempting specific acts from the restrictions, which were issued by the Treasury under powers in Schedule 7. These general licences enable financial and credit institutions with existing business relationships or transactions with the entities concerned to manage the cessation of business in an orderly and controlled way. Further licences, whether general or individual, may be granted by the Treasury to manage the impact of the requirements on third parties. This approach is similar to that used in asset freezing.
4 pm
The direction applies requirements to persons operating in the UK financial sector. This includes FSA-authorised firms, money service businesses and credit institutions. Firms are required to establish whether any current or future business relationships or transactions are affected and to take steps to comply with the requirements of the direction. In this case, firms will review their business dealings, cease any business relationships and transactions that are prohibited by the direction and ensure that their systems and controls are adequate for ongoing compliance with the direction. The use of existing procedures and systems that firms will have in place to meet obligations relating to financial sanctions and anti-money-laundering should assist in minimising the burden of compliance.
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