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Saving Gateway Accounts Bill

It is a great pleasure to wind up this Second Reading debate, perhaps a little earlier in the day than one might have expected, but it was interesting and informative. We have had a number of contributions, which I will take in reverse order. The hon. Member for Luton, North (Kelvin Hopkins) gave a brief but interesting speech. He regaled the House with tales of his childhood savings habit, and almost entered into one of his usual speeches on the subject of taxation in the 1970s. He has two entertaining speeches, one on that subject and the other on the European Union. I tend to enjoy the latter slightly more, but none the less they are always a valuable contribution to the House. I note that he was the only Labour Member to make a speech in this debate, which is somewhat surprising given that this is a Government measure. One might have expected greater enthusiasm from the Labour Benches. However, I appreciate that we have had nearly three and a half weeks' break for Christmas, which may not have been long enough for every hon. Member. In contrast, my hon. Friend the Member for Broxbourne (Mr. Walker) made quite a return to the House. I note that the ConservativeHome website commended him as man of the day for his speech to the House yesterday on the subject of mental health. It also carried a photograph of him taken shortly after he became a Member of the House, demonstrating the success of the diet that he has undertaken during the past three years. My hon. Friend said that he was frustrated at not being able to lash out at the Government on this matter, but that he wanted to serve on the Committee. He may well be frustrated at not being able to lash out at them because he rather likes the Bill, but I suspect that his application to be a member of the Committee will be viewed sympathetically and will not be a cause of further frustration. The hon. Member for Carmarthen, East and Dinefwr (Adam Price) spoke about the Bill's long gestation and the fact that there was a pilot in 2001. He talked authoritatively about the experience of the pilot schemes, the difficulties in producing statistics that are hugely helpful, and the fact that the focus groups produced a number of quotations that suggest that there is something to be said for these matters. He also gave an historical perspective on the savings culture of the working classes and the poorer sections of society, and talked about how at times, when such measures have been successful, there has been a great evangelism for them. I do not know whether evangelism quite categorises the Government's approach to the Bill, but he made a very interesting contribution. My hon. Friend the Member for Weston-super-Mare (John Penrose) spoke about the decline in the savings ratio in the past 10 years. He set out the case for how savers are struggling and have been adversely affected by interest rate changes, and made an argument for doing more to support them. It was an excellent speech. I hope—although he did not put it as explicitly as my hon. Friend the Member for Broxbourne—that it can be taken as an application to serve on the Committee. My right hon. Friend the Member for Wokingham (Mr. Redwood) made an interesting point in his speech and in an intervention on the Chief Secretary when he asked what the interest rate, as opposed to the matching amount, is likely to be on these accounts. He argued that if part of the reason for the Bill is to encourage people to get into the habit of saving, the account should be as much like a normal bank account as possible, including the benefits of achieving interest. When he asked what the Government's expectation was, he did not get an answer. In the course of that exchange, my hon. Friend the Member for Fareham (Mr. Hoban) stated that he suspected that there would be no interest on the accounts. My right hon. Friend suggested that my hon. Friend had ““stumbled across”” the point. I think that he probably meant to say that he had ““homed in with laser-like intensity on a key possible embarrassment for the Government.”” In any event, it was right to raise the matter and to express more general concerns about the lack of clarity in the Bill. I think that it would be fair to say—indeed, there is consensus on this across the House—that the Bill's objectives are admirable. The desire to encourage a savings culture, particularly among the poorer sections of society, is absolutely right. We share a desire that people should have assets that provide them with a degree of protection in the event of adverse circumstances. The other aspect, which was touched on by the Chief Secretary, is that that goes some way towards dealing with financial inclusion. If we can encourage people who might be excluded from normal financial products and services to partake in proper accounts and to become part of the wider financial community, that is clearly of benefit. Conservative Members acknowledge that the Bill's objectives are laudable. Indeed, as my hon. Friend the Member for Weston-super-Mare pointed out, in 2005 we advocated a lifetime savings account along very similar lines, and it would therefore be rather odd for us to object strongly to these proposals. The Government appear to be in the habit of doing that: yesterday, they announced support for employers taking on the long-term unemployed; tomorrow they may announce a national loan guarantee—who knows? Today continues the pattern of yesterday, and we will not knock it. Some might say that we could save time if we were able to announce and then implement policies instead of waiting for the Government to do so some weeks or years later, but there we go. This country has a problem as regards the low level of savings. As my hon. Friend the Member for Fareham pointed out, in 1997 one in 10 households had no savings; by 2007, the figure was one in three. The savings ratio has fallen from 9.6 to 1.8 per cent. We recognise that that is a dangerous weakness in the economy. A savings culture is valuable. It makes households more resilient and more able to cope with a rainy day. People should use the good times to prepare for the bad, and one could argue that that applies to Governments as well as people. The decline in the savings rate and the savings culture has left this country, our economy and our people more exposed to difficult times than would otherwise be the case. That is our view, and I would be grateful if the Economic Secretary would say whether he recognises it as a problem. Does he accept that the savings rate fell too low? Is it a weakness in the economy? Does it suggest that we are less well placed for difficult times than we might otherwise be? There are inherent limitations to the Bill and the saving gateway accounts in tackling the problem. That is not to dismiss the proposals or the Bill. Just because it does not address every aspect of savings does not mean that it is not a useful contribution. Notwithstanding the Bill's objectives, does the Economic Secretary accept that the Government need to do more to encourage saving in the long term? We need a strong savings culture, and as things stand, we do not have one. Given that this is a week in which the Government are inclined to look sympathetically on our ideas, will he consider abolishing the standard rate of income tax on savings? I know that we announced that only relatively recently, and it usually takes the Government some time to take up our policies, but I urge him to do so. Although the provisions are limited, they contribute towards tackling a weak savings culture, or at least I hope that they do. One of the issues raised by my hon. Friend the Member for Fareham and the hon. Member for Carmarthen, East and Dinefwr was that the evidence from the pilots is, it is fair to say, a little sketchy. My hon. Friend set out two tests that are useful in assessing whether the pilots demonstrate that the scheme will work. First, are the savings created through the accounts new, or would they have occurred anyway? What is the evidence from the pilots? To the extent that the Economic Secretary is able to address that point, it would be helpful to the House for him to do so. Secondly, what happens at the end of the account period? Will people continue to save at the end of the life of the saving gateway account, or will they just take it as a windfall of £300, which is then spent rapidly? Will there be a real cultural change? That is a key point: what has the experience of the pilot schemes shown? Another area that I would like to explore was touched on by several hon. Members: the level of interest from potential product providers. In the course of the debate, the Economic Secretary made it clear from a sedentary position that the Government have been talking to banks and other product providers. My right hon. Friend the Member for Wokingham raised a point about the interest rate that is likely to be provided, in addition to the matching fund. That will depend on the level of commercial interest, and if there is little such interest, the Government will be grateful for whatever they can get and will hope that someone will provide the saving gateway accounts. But if there is more interest, we are likely to see interest payable on the accounts. Where are we on that? What are the Government anticipating? In the course of her remarks, the Chief Secretary said that the Government will be urging the banks or the product providers to provide interest on saving gateway accounts. The Government spend quite a lot of time urging banks to do one thing or another with interest rates, but several banks are now largely in public control. It will be interesting to know whether the Government or Ministers will put any pressure on state-owned banks to provide the saving gateway accounts or to provide interest on them. It would help the House to know precisely what the Government envisage. There is quite a lot that we do not really know about how the accounts will work. The point has been made that they are a work in progress and that the details will be in regulations. The hon. Member for Taunton (Mr. Browne) pointed out that there are 29 powers to make regulations in this 32-clause Bill—and we are grateful to him for not listing all of them. A point on which I would be grateful for clarification is that as I understand it, the period of time for which a saving gateway account will exist is two years. I do not think that that is specified in the Bill, but I am sure that the Minister will correct me if I am wrong. If it is not specified, why not? Another question to be answered is whether someone could open more than one account. As far as I can see, it is not made clear in the Bill that a participant could not open two accounts at the same time. Perhaps more realistically, once one account had been completed and the two years were over, would it be possible for someone to open a new saving gateway account, and to do the same every two years? The Chief Secretary said that the intention was to encourage people who have not saved before to do so, which suggests that someone could participate only once. Again, however, the precise intention is not entirely clear. One could ask many more questions about various aspects of the Bill, and those serving on the Committee will be able to do so. I have raised the matters that I have to indicate that the Bill is very short on detail. Its objectives are laudable, although its impact is likely to be limited and should not be overstated. It is thin on detail, which clearly needs to be much greater. It has been in gestation for eight years, and we heard that the announcement of the first pilot scheme was in 2001. Only one Labour Back Bencher spoke in favour of the Bill, and I therefore fear that there is a sense that the Government's enthusiasm for it is a little limited. One could certainly get that impression. I am sure that the Economic Secretary can address those concerns, and that he will demonstrate much enthusiasm for the Bill and assure the House that the concerns that have been raised will be addressed both today and in Committee. I am sure that the Government are confident of the effectiveness of the Bill and the saving gateway accounts, and that the House can be assured that we will make a useful contribution to returning to this country the savings culture that it so badly requires.