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Saving Gateway Accounts Bill

It is a welcome addition to a suite of products, but the savings rate in this country has fallen from 9.6 per cent. in 1997 to 1.8 per cent. today. The Government's measures have not been effective in encouraging people to save. If they had been, we would see more families with savings, not an increase in the number of families who have none. The Government's measures have not been effective in creating a savings culture. Instead, people have moved from seeing savings as a way of protecting themselves from financial uncertainty and unexpected changes in their income to depending far more on credit to see them through. We need to address the cultural change, which is one of the factors behind the decline in saving. It is important that we give people an incentive to start a saving habit, and the gateway account recognises some important truths about the way people save. People are more likely to save more if the money is put into a separate account, rather than staying part of their current account, preferably with an incentive to discourage access. The scheme works in that way by rewarding savings with the 50p in the pound bonus based on the highest account balance. We understand and support the concept of heavily incentivising long-term savings, while recognising that people may need to withdraw savings to meet short-term needs—indeed, that concept underpinned the proposal in our 2005 manifesto of a lifetime savings account. There is some common ground in our understanding of the approaches that need to work if we are to encourage and rebuild the savings culture. We need to ensure that the scheme can demonstrate a change in cultural attitudes—that it can encourage people to save. People must be able to save while the account is in existence, and they must be able to increase their net worth, not just over the saving gateway account period, but in future. We also need to make sure that banks, building societies, credit unions and the Post Office participate in and promote the scheme. Interestingly, the pilots indicated that the further away someone lived from a bank that offered the saving gateway account, the less likely they were to open the account. That is why it is important to ensure a network of providers. In her opening remarks, the Chief Secretary to the Treasury said that the Post Office was interested in providing the accounts. It would be helpful to know which other institutions are prepared to set them up. Banks and building societies have said a lot of warm words in support of the saving gateway account, but I am not aware of anybody else who has made a definite commitment to establishing a saving gateway account. The hon. Member for Northampton, North (Ms Keeble) mentioned the Government's other measures to incentivise savings. Stakeholder products were introduced following the Sandler review of savings, but take-up of some of the basic products has been poor because of flaws in their design. The child trust fund could contribute significantly to saving, but the proof will come when the fund starts to mature and we see what 18-year-olds do with the amount that has built up in their account.