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Saving Gateway Accounts Bill

People might ask why, in the middle of a recession, when the Government are encouraging people to spend, they are proposing a Bill that encourages people to save, but I see it as long overdue recognition of the need for savings and the impact of the lack of savings on families today. No one should underestimate the importance of savings for families. Savings provide a cushion against financial uncertainty, especially in times such as these. They help people to take responsibility for their future and enable them to make purchases without relying on credit. The culture of saving should never be seen as the preserve of the affluent. It is important that, when possible, people are encouraged to save, regardless of income. That message was brought home to me when I visited a credit union a couple of years ago. Staff told me that people were paying their benefit into their account and then withdrawing all of it, bar a few pence. When I asked why, I was told that it was a way for people on benefit to accumulate a small nest egg, to put aside some money for a rainy day or to meet unexpected expenses. People who might otherwise have turned to a loan shark or a pay-day lender could rely on their savings instead. The Bill is helpful in tackling financial exclusion and encouraging savings, but it comes against a backdrop of low saving in the economy as a whole and an astonishing degree of complacency from the Government, who seem happy to allow the economy to grow on the back of debt rather than build sound foundations with a reasonable level of savings. Ministers challenged about the fall of the savings ratio from 9.6 per cent. in 1997 to 1.8 per cent. today seem to wear it as a badge of honour and as a sign of people's confidence in the Government's running of the economy. That hubristic attitude means that households are now badly placed to face the downturn; they do not have savings to act as a cushion against financial uncertainty. With the lowest savings ratio in 30 years and a third of families having no savings in 2006, compared with only one in 10 in 1997, families are ill prepared to cope with the financial shocks that many face today. There is evidence of families in financial distress turning to their credit cards for short-term help; they are even being encouraged to use credit cards to pay their council tax, because they have no savings to dip into. That is a symptom of an economy built on debt and a culture that depends on debt to fund a lifestyle. What we need to move towards is an economy built on savings—savings that provide investment in industry, as well as a cushion for people's future and savings that help people to provide for themselves as well as help them to face unexpected challenges in their income and outgoings. We must help people to rebuild their savings in good times to prepare them for bad times. The Bill's narrow focus means that it will not help the vast majority of families and households to build up savings and protection for their future, because it is targeted very narrowly on people in receipt of benefits or on low incomes. The Bill will do little to repair the savings culture in the UK, which the Government have allowed to decline over the past 11 years; nor will it help families to switch from paying for big-ticket items from savings rather than from debt, or restore saving as a mainstream habit rather than an eccentric interest. In short, it is no answer to our nationwide addiction to borrowing.