Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

It is a pleasure to serve under your chairmanship, Mr. Taylor.

I will respond to amendment 19, which was moved by my hon. Friend the Member for South Thanet. I assure him that we share his concerns that providers of saving gateway accounts should be appropriately regulated. As he and other hon. Members will see from the draft regulations, we intend to make it a condition of approval that account providers fall within the UK or are other European economic area providers and have the appropriate permission to accept deposits under the Financial Services and Markets Act 2000. A non-EEA provider must be authorised to accept deposits through a UK branch.

It is too early in the process to confirm any saving gateway providers. The Government are in discussion with them, though, and wish to see a wide range of choice of providers. My hon. Friend said that the scheme should only be provided through the Post Office and friendly societies. We are keen to encourage the Post Office to consider offering saving gateway accounts. Some friendly societies may like to participate, but their qualifying would depend on their having the appropriate permission to accept deposits.

My hon. Friend asked whether we have the power to ensure that there is appropriate regulation. I refer to clause 4 (1) which stipulates:

“A Saving Gateway account may be held only with a person (an “approved account provider”) who has been approved by the Commissioners in accordance with regulations.”

It will be through regulations that we have that power. It is our view that we should not limit the provision of gateway accounts, and we would like to see some choice in that area.

Stephen Ladyman (South Thanet, Labour)

I welcome you to the Chair, Mr. Taylor.

I think that my hon. Friend has misunderstood me. I appreciate that he wants a plurality of providers—that is all right. If he were to decide in future that he did not want that plurality and that he wanted to limit this to the Post Office, because we wanted to encourage it, is he confident that the Bill would allow him to do that without being challenged by the banks? My concern is that the commissioners could say that the Post Office is to be the only provider, but the banks might be able to challenge that. Is he confident that they would not?

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

We are discussing an essentially hypothetical point. One of my objectives over recent months has been to encourage the banks to offer saving gateway accounts. Some of banks view these accounts as marginal. The situation that my hon. Friend poses is not likely to arise, but there would be flexibility under the secondary legislation to do what he wants in the unlikely event that the Government consider that an appropriate thing to do.

Stephen Ladyman (South Thanet, Labour)

It might be unlikely that the Government would want to do such a thing, but I might want to get myself on the Statutory Instrument Committee and argue that the provision should be limited to the Post Office. If that happens, I do not want my hon. Friend to stand up and say, “Oh, you can’t do that under the legislation—it would be challenged by the banks.” I am simply asking him whether he is confident that it could be restricted to one of those categories of organisation if it were the will of Parliament to do that in the future?

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

I have already confirmed that we have the flexibility to do as my hon. Friend proposes, but I have also indicated that the Government would certainly not be minded to go down that route and that we want a plurality of provision.

Jeremy Browne (Taunton, Liberal Democrat)

I welcome you to the Chair, Mr. Taylor.

I urge the Economic Secretary to be cautious about giving too big a concession to the hon. Member for South Thanet. Although I accept that the account is exactly the sort of product that the Post Office could and perhaps should offer, there are two potential attractions in banks offering it. First, it would provide an incentive for people who already have bank accounts to open saving gateway accounts with their banks. Secondly, it would give people who do not fall into that category an opportunity or incentive to engage with the banking system in a way that some people on low incomes do not at present. That would be to their benefit. If they were restricted to friendly societies and the Post Office, they might not get the wider benefits—in time, as they acquired the savings habit—of engaging with the banking system in the way that the clause might give them the opportunity to do.

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

The hon. Gentleman makes a valid point. That is something that my hon. Friend the Member for South Thanet might want to take into account, given that his amendment would allow regulations to restrict further the types of financial institution approved to offer saving gateway accounts. As I said, I do not think that that is necessary—we will have that flexibility in secondary legislation—but I will explain that our objective is that savers should be able to choose from as wide a range of appropriately regulated and authorised account providers as possible. That is why we have been in discussion with a range of potential account providers and their representatives.

We have already announced that the Post Office has agreed in principle that the accounts will be available through it, but I do not think that it would be in savers’ best interests or fair to potential account providers to reserve the provision of saving gateway accounts for one or more types of institution. I am afraid that I disagree fundamentally with my hon. Friend, but if he wants to have another go, I will happily give way.

Stephen Ladyman (South Thanet, Labour)

I was only going to point out to my hon. Friend that a Cabinet member—I cannot quite recollect which one it was, but I think that it was the Secretary of State for Business, Enterprise and Regulatory Reform—said at the weekend that he wished the Post Office to develop into a people’s bank. It might therefore become Government policy to limit the accounts to that single provider. I am only asking my hon. Friend the Economic Secretary to ensure that the legislation will allow the Government to do that if that is what they decide to do.

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

I have already indicated the flexibility of the legislation at the moment. I point out to my hon. Friend that the Secretary of State for Business, Enterprise and Regulatory Reform is a strong supporter not only of the Post Office, but of competition. It is in savers’ best interests to have as wide a choice as possible. We hope to persuade a range of institutions—not just the Post Office and provident and friendly societies but credit unions, which are keen to offer saving gateway accounts. We think that that wide range of provision will be welcomed by the sort of people whom we are trying to encourage to save for the future.

Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)

I welcome you to the Chair, Mr. Taylor.

Perhaps I can help the Minister by referring to the evidence—[Interruption.] He is doing a good job, but I just want to give him some more ammunition to deal with the hon. Member for South Thanet. When Alan Cook, the managing director of the Post Office, came before the Committee to give evidence last week, he said that he needed a partner to operate the saving gateway accounts and was looking for a bank or building society to act as that partner. Even the Post Office does not believe that it can operate the accounts in isolation. It will need someone else to help it to provide administrative support and so on to deliver the accounts. It seems odd to restrict provision to the Post Office if the Post Office itself recognises the need for support from other parts of the financial services sector to deliver the accounts.

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

The hon. Gentleman makes a valid comment about what the Post Office has been saying. I repeat that we are still in early days of saving gateway accounts. It is a matter of principle that choice is a good idea and that there should be the plurality of provision that I have been talking about. There will be flexibility to change matters in secondary legislation. That is right and proper. I do not want to restrict things in the way that my hon. Friend the Member for South Thanet wants, but I agree with him that it is important that the regulation is appropriate and proportionate. The legislation will ensure that that is the case.

George Mudie (Leeds East, Labour)

When we were taking evidence, it was mentioned that the Post Office was very keen on the work and that it was probably looking for a partner in the banks to do a lot of the administration. Perhaps the Economic Secretary can reconcile that. I am surprised at the schizophrenic approach of the Government to the Post Office. The Post Office had profitable passports and driving licence businesses, but the Government put them out to tender. They were lost to the Post Office, thereby contributing to its weakness, and that caused a few thousand post offices to be closed. The Post Office is looking for business, but, first, that business is not being put out to tender, which is interesting, and secondly, there is no suggestion that sympathy or a strategy has been worked out to give the Post Office business that would help the network and keep it afloat, as well as providing a big footfall.

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

We are trying through the Bill to encourage and support working-age people on low incomes to get the savings habit. We therefore have a framework of legislation that will provide opportunities for people to do just that. We hope to set up a system whereby, through the match fund, individuals will have an incentive to open saving gateway accounts. We want those accounts offered by a range of financial institutions. It has been mentioned that the Post Office might want to partner with the banks. It might also want to partner with one or a number of credit unions. Flexibility and diversity in the marketplace would be welcomed.

Mr. Jim Devine (Livingston) (Lab) rose—

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

I happily give way to my hon. Friend who knows a great deal about credit unions.

David Taylor (North West Leicestershire, Labour)

Order. I congratulate the hon. Member for Livingston on becoming a grandfather today for the first time, to Erin Molly Devine.

Jim Devine (Livingston, Labour)

The champagne is on me, Mr. Taylor.

My hon. Friend the Economic Secretary is right. I have been investigating credit unions. They cover only 1 per cent. of the population in England and 2 per cent. of the population in Scotland. In Ireland, they cover 70 per cent. of the population. It was interesting that the Irish Government did a similar project about 10 years ago, which worked very successfully, because the credit unions were embedded in local communities. We have post offices that are embedded in local communities. Why do we not use them?

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

I, too, congratulate my hon. Friend.

I entirely take my hon. Friend’s point; he is right to say that there is a strong credit union movement in Ireland and that credit unions are often focal points in local communities. He also right that post offices can also be key focal points in individual local communities. That is why we are pleased about the fact that the Post Office has said, in principle, that it wants to operate saving gateway accounts. At the moment, it does not have a banking licence, which is why we probably need to have discussions with the banks. However, we should not regard saving gateway accounts as something that we would only want people to access through their post offices. As I have said, credit unions, despite the fact that they do not have big coverage in the United Kingdom, are very keen to offer saving gateway accounts, and I think that we should provide the flexibility to enable them to do so.

It is also the case that we ought to look at other mainstream providers, most notably the banks and building societies. There would be additional advantages if those banks and building societies wanted to come on board and offer saving gateway accounts too. It would not be appropriate to exclude them, which is why I urge my hon. Friend not to press the amendment to a Division.

Stephen Ladyman (South Thanet, Labour)

I notice that our deliberations were joined briefly by the deputy Chief Whip. He has obviously got wind that there is a major rebellion going on here in Committee Room 9.

My hon. Friend the Economic Secretary has given me the assurance I sought that all these accounts will be covered by appropriate protection measures and that people will have recourse to the Financial Ombudsman Service if they need it. That is one assurance that I wanted to put on the record.

I accept entirely that my hon. Friend is seeking a diversity of providers. All I wanted was to obtain a reassurance that, if he were to change his mind and not seek a plurality of providers, he would have the power to do that. He has given me that assurance too. I ask him not to rule out the possibility that we may wish to limit these accounts to the Post Office and perhaps to credit unions in the future. There are arguments in favour of that; I agree that there also arguments in favour of there being a plurality of suppliers.

The Post Office said that it was looking for a partner; it did not say that it wanted to get one from the banking or building society world. My understanding is that it was simply looking for a partner. Perhaps National Savings & Investment could be that partner.

Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)

Alan Cook said last Tuesday:

“That partner might well belong to one of the other associations at this table.”————[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 27, Q49.]

Of course, it may well be the case that he will rely on the Association of British Credit Unions, but for the coverage reasons that have already been mentioned, perhaps it will be the banks and building societies that he will look to when he forms a partnership.

Stephen Ladyman (South Thanet, Labour)

Alan Cook may well have been looking for a partner from those associations, but, equally, he may well have not been. There might be other options. All I am seeking is an assurance, which I believe I have received, on what will happen if the Government were to conclude that they would like to limit the provision of the accounts to the Post Office.

Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)

Surely one of the findings of the pilots—it was a point that was also made in the evidence session last week, not by the potential account providers but by some of the witnesses that we heard from in the morning—was that it is important to ensure that there is accessibility. One of the pilots found that the closer that people were to the account provider, the more likely it was that they would take up the accounts. Therefore, what we would be looking for is as many providers as possible, so that we increase accessibility and as many people as possible can take up the accounts. Surely that is something that hon. Members on both sides of the Committee can agree on. By restricting provision to one set of providers, the risk is that we will limit accessibility and work against the principle behind the Bill, which is to encourage a savings culture among people of working age on low incomes.

Stephen Ladyman (South Thanet, Labour)

I agree with the hon. Gentleman that accessibility will be an important factor, but it is also worth noting that the Government are putting a great deal of money into this scheme. If they can get more bang for their buck, they might wish to do so, and the bang that they might be seeking is to use this scheme to encourage the use of the post office.

Conservative Members have been banging on for years now about how we must stand behind the Post Office. All I am saying is that if it were to become the policy of the Government that they wanted to use the saving gateway accounts system to help the Post Office to build up its footfall and customer base by limiting the access to these accounts to the Post Office, they ought to ensure that they have the power in the Bill to do so. I am not suggesting that it is the Government’s policy. I am not suggesting that it is a desirable thing to do at the moment. However, we should ensure that we have got the power.

Jeremy Browne (Taunton, Liberal Democrat)

I understand the hon. Gentleman’s point, although I sympathise more with the Economic Secretary’s point of view. I want to be clear in my mind whether the hon. Member for South Thanet can envisage a scenario whereby the Government would terminate accounts that were held with banks—perhaps halfway through the two-year period—and order those accounts to be transferred to a monopoly supplier. There are potential risks, even if the Government only notionally have that power, of intervening in a way that may cause a lot of disruption.

Stephen Ladyman (South Thanet, Labour)

That is not what I am suggesting at all. What I am saying is that at the outset of these accounts, it may be desirable for the Government to limit them to the Post Office. One of the things that struck me about the attitude of the banks when they gave evidence to the Committee was the clear implication that they do not like poor people very much. They are quite keen on regular savers, they are quite keen on people, such as  MPs, who have a bob or two, but they are not very keen on those accounts that do not provide them with a very big profit.

It may well become Government policy to encourage to a greater extent those providers who will service people on low incomes and who will encourage people with just a small amount of money to save with them, and that might be the Post Office. All I am suggesting is that the Government might wish to consider the possibility, at the outset of the scheme, that they limit the provision to the Post Office and the Post Office’s partner, whoever that might be, in order to encourage footfall into our post offices and to help support the post office network. I am not suggesting that that is Government policy. I am not suggesting that that is what they will do. I simply want to make sure that they have the power to do that at the outset if that is what they choose to do. My hon. Friend has given me that assurance, so I am content, and I beg to ask leave to withdraw the amendment.