John Howell (Henley, Conservative)

I beg to move amendment 38, in clause 6, page 4, line 10, at end insert—

‘(4A) An account provider may not unreasonably refuse to open an account for an eligible person.’.

I want to probe in a little more detail a subject that we briefly touched on this morning. As the British Bankers Association website is at pains to point out,

“no bank is obliged to open an account for anyone.”

The situation that I envisage with the amendment is one in which a person has a notice of eligibility and goes to a bank, which refuses to open an account. As was hinted at this morning, that could occur if the bank’s procedures for opening an account are complex—anyone who has tried to open a bank account recently will have found out that it is complex and does not portray the good side of saving. Even the requirement for normal proof of identity may not be straightforward. For example, utility bills are often in one partner’s name, rather than both, making it difficult to produce a utility bill in one’s own name. That may occur for reasons that are practical, financial, or even cultural, as was also hinted at this morning.

We need to have some idea of where the line will be drawn in the exercising of discretion by the banks. Does the Economic Secretary envisage that the current general unwillingness of banks to open accounts for former bankrupts or those who have had county court judgments against them will be allowed to apply? In themselves, saving gateway accounts should be a safe bet, but I see from draft regulation 13(5)(c) that he is bringing normal money-laundering requirements to bear on those accounts. Indeed, banks may be less willing to see those accounts as safe is there is a feeling that they may be swung into an individual savings account or some other form of financial instrument at the end of their life. I heard the Economic Secretary’s general assurances about that this morning, but I hope that he will welcome highlighting the more specific concerns about this aspect of the Bill.

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

Clause 6 concerns the rules and processes at account opening, and is designed to ensure a consistent and simple process for applicants while providing for some basic checks on an applicant’s eligibility for the saving gateway. I share the hon. Gentleman’s concern that eligible people should not be unreasonably deterred from opening an account with their preferred account provider, the phrase he uses in his amendment. However, I would be surprised if, having opted to offer saving gateway accounts, an account provider chose to decline to offer accounts to eligible people unreasonably, many of whom would be potential new customers.

I assure hon. Members that we will work closely with potential account providers and others in the run-up to the launch of the scheme, to explore how eligible people can most easily access accounts, consistent with the account providers’ normal account-opening checks. However, to put the position beyond doubt, subsection (3) requires account providers to open a saving gateway account for all eligible applicants, as long as the application is made in accordance with the rules set out in the Bill and in regulations. Moreover, we intend to make it a condition of approval to offer saving gateway accounts that a provider undertakes to accept properly completed applications from eligible people who have received a notice of eligibility. That is in the draft regulations. However, those requirements are subject to certain limited and necessary exceptions, to be specified in the regulations.

I hope that hon. Members will agree that it is reasonable that account providers should not be required to open an account when they have reason to believe that the notice of eligibility presented is, or may not be, genuine, that a declaration or application contains matters that are, or might be, untrue, or when they are unable to satisfy any requirements of money laundering legislation. As hon. Members can see from the draft regulations,those are the circumstances in which we propose that account providers can refuse to open an account for an eligible person who is prepared to agree to the terms and conditions under which the account is offered. We would expect them to vary to some extent between providers. However, I wish to stress that we will continue to discuss that in detail with potential account providers and others, and that we recognise that concerns have been expressed.

Stephen Ladyman (South Thanet, Labour)

There was a hint in the evidence session—although without going through, the transcript I cannot put my finger on where I got this impression—that some of the banks might wish to limit the gateway saving accounts to people who already have some sort of account with them, such as a basic bank account. Is my hon. Friend saying that they will not be allowed to do that? One of the banks certainly gave the impression that it would only market to existing account holders. Does he have a view as to whether providers should market more widely than their existing customer base?

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

From my discussions with the banks, I do not recognise the hint that my hon. Friend mentions. One of the objectives of the legislation is to encourage people to start the savings habit. We do not want to see people who have already been saving simply transferring savings into a gateway account. People might have bank accounts in which they have not been saving, and they might then start to save for the first time. We would  want to encourage that, but one of the purposes of the legislation is to encourage more people to save for the first time, whether through a saving gateway account offered by a bank or through one offered by another financial institution. A variety of provision is important.

John Howell (Henley, Conservative)

The Economic Secretary gave sensible examples from the regulations. They related to fraud in the forms and the unlikely event of money laundering being involved. Will he give examples of what he considers acceptable and unacceptable practices for the banks’ own systems, which go beyond that?

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

In short, we need to have further discussions with the banks and other providers on this issue. With regard to amendment 38, it is difficult to see what a general requirement that account providers

“may not unreasonably refuse to open an account for an eligible person”

could add to the approach that we are adopting. It raises questions about whether a refusal to open an account was unreasonable and what criteria should be used in reaching that decision, so it would create uncertainty.

We believe that the approach that we have set out will provide an easily understood and workable set of rules for account providers. The hon. Gentleman will find that they have been closely modelled on the child trust fund regulations. We will, however, want to keep the rules under review and they would potentially need to be updated by the Government without primary legislation, which is why the amendment is not acceptable. In the run-up to the scheme launch, it will be important for us to continue to work closely with providers and advice-giving bodies to balance the requirement that opening an account should not be an obstacle to savers with the need for account providers to carry out normal account-opening checks on the identity of the applicant and to receive the assurances that they rightly expect.

This issue will be the subject of further discussion. If any changes are needed to the draft regulations, we will consider them at a later date. As hon. Members will be aware, the draft regulations are subject to the affirmative procedure. I hope that the hon. Member for Henley will accept that it would not be appropriate to put the proposed provision in the Bill and that he will seek leave to withdraw the amendment.

John Howell (Henley, Conservative)

I am glad to hear that the Economic Secretary shares my concerns about the issue. I have listened to what he has to say and I accept his assurances that the matter will be raised again and will be raised with the banks as we move nearer to the implementation of the measure. On that basis, I beg to ask leave to withdraw the amendment.

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

I beg to move amendment 30, in clause 6, page 4, line 11, leave out subsection (5) and insert—

‘( ) Regulations shall make provision preventing a person from holding more than one Saving Gateway account during the person’s lifetime.’.

David Taylor (North West Leicestershire, Labour)

With this it will be convenient to discuss amendment 7, in clause 6, page 4, line 11, leave out subsection (5).

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

Subsection (5) enables the Government to make regulations about the number of saving gateway accounts that someone may hold at any one time, about a gap between the end of the maturity period of an account and another account being opened and about whether people can hold more than a specified number of saving gateway accounts, or saving gateway accounts that are held until the end of the maturity period, during the person’s lifetime. That is a very permissive set of regulations.

I think that the Minister said on Second Reading that people would be entitled to have only one saving gateway account, and in our evidence session last week the issue was raised again, particularly with the people who gave evidence in the morning. Mr. Brian Pomeroy, who chairs the financial inclusion taskforce, said that

“it is right that they get only one shot, because the basis of the scheme is that it should be a kick-start. If it fails, it does not work”.——[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 18, Q38.]

The sense that we got from his evidence was that he would expect people only to ever have one saving gateway account, because if they did not develop a savings culture based on the experience of holding one account for two years, they were unlikely to develop such a culture by being given the opportunity to hold a second account or even to be able to open one in year 1 and a second one in year 2. There was a clear sense from Mr. Pomeroy that one account should be sufficient to generate a savings culture. Sharon Collard, who took part in the evaluation of the first pilot, argued that one account was appropriate from a different perspective and that simply having one account would limit the cost to the Exchequer. Amendment 30 would reflect in the Bill the apparent consensus among those taking a close interest in financial inclusion that one account is enough.

The Economic Secretary will perhaps argue, as he has done in earlier sittings, that he needs flexibility and wants to be able to change his mind in the light of experience. All those arguments have been well rehearsed. The Government sent out a clear signal on Second Reading, and there was a clear signal from the evidence session. This may be one area where the Minister could be persuaded to set some of the parameters in the Bill, rather than for ever relying on secondary legislation. I am not sure whether that is the thrust of the amendment 7, tabled by the hon. Member for Taunton. We will hear his arguments in a minute. We need to be clear how many accounts we expect people to have over their lifespan, and understand why that is not in the Bill and why has it been left to secondary legislation.

Jeremy Browne (Taunton, Liberal Democrat)

Amendment 7 which is being considered at the same time as amendment 30 is in my name. I concede that it is a rather blunt instrument. It deletes the whole of subsection (5). Perhaps I could have made these comments in a stand part debate rather than specifically to an amendment, but this nevertheless gives me an opportunity to make a similar point to the one just made by the hon. Member for Fareham. I have some unease that so much of the Bill is left to regulations that will be introduced at a later date. I was slightly uneasy when we discussed the clause 5, as the hon.  Member for South Thanet seemed keen that, once we had completed our deliberations in Committee, and the Bill was back in the main Chamber to be approved by Parliament, the Government would go away and change the nature of the legislation. [Interruption.] Well, that is what I took him to be encouraging the Minister to do to retain flexibility, even when we had approved the measure in its existing form.

Stephen Ladyman (South Thanet, Labour)

I hope that the hon. Gentleman is not accusing me of inappropriate exploitation of parliamentary procedures. I was simply asking for powers to be included in the Bill so that they could be used quite properly at a later date through regulation. The regulation and the statutory instrument process is as much a part of the parliamentary procedure as anything else we do in this place. It is perfectly reasonable to use it at a later date if one wishes to do so.

Jeremy Browne (Taunton, Liberal Democrat)

I am grateful for that clarification. I think that most Members of Parliament would accept that a degree of flexibility in most legislation is desirable, but I am uneasy that the Bill allows so much flexibility that it would be possible for the Government, after the measure had been approved by Parliament, fundamentally to change the nature of the scheme as it would apply to my constituents and those of other Members. That is what I am driving at with my amendment.

Subsection (5)(a) is not too bad, but subsection (b) specifies

“a period, after the end of the maturity period of a Saving Gateway account held by a person, during which the person may not open another Saving Gateway account”.

That period could be one week, or it could be 20 years. It could be never, or it could be beyond anyone’s realistic lifespan. That seems to be allowing too much flexibility. Regulations may be made under subsection (c),

“preventing a person from holding more than a specified number of Saving Gateway accounts, or Saving Gateway accounts which are held until the end of the maturity period, during the person’s lifetime.”

Something that is

“more than a specified number”

could be anything. The regulations might as well have said, “The Minister may at any point decide all the details of the scheme,” in which case we could get on with wafting it all through without having any understanding of what is intended. As the hon. Member for Fareham said, the Bill does not make it clear whether people can have more than a single saving gateway account in their lives and, if they can, the length of the period between the first and second account, if indeed there is such a period—perhaps they can overlap. There is a reasonable school of thought that perhaps the number should be limited, but it would be useful to have that discussion. If only one account is allowed in a lifetime, we can discuss the merits and demerits of that proposal. As it is, however, the whole proposal is so vague that the Economic Secretary is inviting us to endorse a scheme for which he could subsequently put in place almost any details that he wants. That is what I am uncomfortable with, and that is the reason behind the amendment.

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

I do not think that the proposal is vague; it is a sensible contingency plan. Without wanting to feel as if I am in repertory theatre, I shall rehearse some  of the arguments that the hon. Member for Fareham invites me to rehearse about what should be in the Bill and what sensibly and prudently we should provide the Government with flexibility to do in future, should they be so minded. Amendments 7 and 30 would delete clause 6(5). Amendment 7, tabled by the hon. Member for Taunton, leaves it at the deletion, whereas amendment 30, tabled by the hon. Member for Fareham, would insert the words:

“Regulations shall make provision preventing a person from holding more than one Saving Gateway account during the person’s lifetime”.

We are not ignoring advice from Sharon Collard, Brian Pomeroy and others with whom we have spoken and engaged on this matter. Our firm intention is that people should be limited to one saving gateway account per lifetime, as set out in the published draft regulations. However—we come to the rehearsal—we believe that it is sensible to retain some flexibility, which is what subsection (5) provides. While not committing this or future Governments to any particular course of action, it provides the option of introducing regulations permitting people to have more than one account per lifetime, if that is thought desirable. Where that is the case, it would allow regulations to set a minimum period between accounts or a maximum number of accounts that may be held. Keeping open those options is sensible planning. It means that this and future Governments may keep the position under review and respond to the experience of operating the scheme and any other developments without the need for primary legislation. We have discussed that theme already.

That flexibility would be removed by amendment 30. Amendment 7 would also remove that flexibility, as well as any power to limit the number of saving gateway accounts that a person can hold, either consecutively or concurrently, which could increase dramatically the costs of the scheme and encourage people to recycle money into another account. It would be regressive, because it would allow eligible people who are able to save more to receive more. We believe therefore that it is necessary to be able to limit the number of accounts that people can hold through regulations, rather than in the Bill. We also believe that in framing such regulations, Governments should have the range of options set out in subsection (5) from which to choose, rather than specify in primary legislation that people can hold only one account, as the hon. Member for Fareham suggested. I repeat that it is our intention that individuals should have only one saving gateway account per lifetime, but I ask on a contingency basis that we have legislation that prudently allows the Government to change their mind at a later date, if future experience suggests that it is appropriate.

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

The Economic Secretary is better at arguing why there should be flexibility than he is at arguing the principle of why one account is the right number.

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

There is no debate about that.

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

If the case is cut and dried, why require that flexibility to be enshrined in legislation? One account sounds like the right number, although in his evidence,  Brian Pomeroy suggested that someone might be allowed to have a second attempt under certain circumstances—if they had had to terminate their saving gateway account for reasons beyond their control, for example. I am not quite sure what reasons he had in mind, but there could be exceptional circumstances in which people would be allowed to have more than one account.

If the case is cut and dried, I find it hard to understand why the Economic Secretary cannot put it in the Bill. There are other areas where there is more debate— such as the maturity period or the monthly contribution—where the basis for leaving it to secondary legislation is much more robust. My other comment is that regulations relating to the first exercise of this power and the number of accounts will need to be approved through the affirmative procedure. My understanding of clause 27 is that if the Government decide at a later date to increase the number of saving gateway accounts that people can have, they would not require the use of affirmative procedure. The first use of this power would be approved, but not any subsequent use. Therefore, if the Government use affirmative procedure to agree on one account—as they will do when the regulations come before us—they could later decide to use the powers under subsection (5) to increase that number to 10. In that case, the affirmative procedure would not be used, although there would clearly have been a significant change in the Government’s mind as to why they preferred a number higher than one.

The Economic Secretary should think about changing that, so that when the number of saving gateway accounts are increased—should the Government seek to use that power—that increase would be subject to the affirmative procedure rather than the negative. That would be helpful and, given the costs that might be attached to the change, it would give people confidence that there had been proper parliamentary scrutiny. I will leave that thought in the mind of the Economic Secretary, and beg to ask leave to withdraw the amendment.

George Mudie (Leeds East, Labour)

I should like to raise a matter that has been mentioned by the Economic Secretary. It is the example of a person going into a bank and not being allowed to open an account. The Economic Secretary specifically referred to money laundering. When we did an investigation on basic bank accounts, we found that the banks behaved very badly—intolerably—towards those individuals we were trying to encourage to open such accounts, which are the key to a great number of things. These people had to wait in separate queues and money-laundering regulations were cited to them. The staff did not advertise the basic bank accounts and when asked about that, said that they knew nothing about them.

I am conscious that there are individuals who are not used to saving or to going into banks, and who might easily be overawed, but who nevertheless goes in—that is the aim of the Bill—clutching proof of their identity and a letter from the Department saying that they are eligible for an account. I genuinely wonder whether asking questions about money laundering is simply a  requirement that must be put in every piece of financial legislation—if the Economic Secretary gives me a nod and confirms that as a reason, I will sit down straight away. If that is not the case, I think that it is a step too far.

You will have read The Guardian yesterday, Mr. Taylor. It said that FTSE 100 companies are avoiding tax of between £3 billion and £13 billion a year by moving money to overseas companies. Only two of the FTSE 100 companies would tell The Guardian what their tax arrangements were. I am not making the point that these companies were money laundering.

David Taylor (North West Leicestershire, Labour)

Order. The hon. Gentleman is wandering a little wide of the clause.

George Mudie (Leeds East, Labour)

I was just on the point of bringing it back to that, Mr. Taylor. I will bring it back to the Department. Faced with that sort of money, its priority should be clawing some of it to give relief to the British taxpayer. On average, the people covered by the Bill will put in £4 per week or £25 a month. If we could confine money laundering to that amount and to that number of people, it would be at a level we could accept.

In the past, people were refused basic bank accounts. I am sure that the Minister will accept that the object of this exercise is to persuade people for the first time in their lives to go into a bank, open an account, stop all the worries and fears over a new environment and do something that will change their lives. I do not think that we want to make that more complicated than taking in the eligibility form and some identification, and getting them signed up as quickly as possible.

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

I do not want to make the process any more complicated than it needs to be. Some checks are required and it is a matter for the providers to decide what evidence they will accept as proof of identity or address. As my hon. Friend said, we are talking about relatively small sums of money. The money- laundering regulations are therefore not an appropriate model.

My hon. Friend referred to basic bank accounts. Industry and Government data suggest that there has been substantial progress on the provision of basic bank accounts. In the year to March 2007, 600,000 new accounts were opened. The Banking Code Standards Board has taken the view that work done by providers, the enhancements to the code and the monitoring carried out by the BCSB have led to basic accounts being more readily available. It goes on to say that where an individual is financially excluded, they should be able to obtain information and open a basic bank account relatively easily. A lot of work has gone into that. As a member of the Treasury Committee, my hon. Friend will be aware of the work that has taken place in this area.

We must consider carefully what lessons can be learned from the basic bank account when working on the design process for the saving gateway account. Our intention is not to put unnecessary obstacles in the way, so that the process is as simple as possible. We want to encourage people to save. The purpose of the Bill is to kick-start saving.

George Mudie (Leeds East, Labour)

Does that mean that the Minister will look again at the draft regulation that states that a person can be refused an account if they do not satisfy money-laundering legislation?

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

I am advised that the money-laundering rules were introduced for good reason. It would not be sensible to disapply them for these accounts. As I indicated previously, the simple fact that we are talking about relatively low balances means that if banks are taking a risk-based approach in these areas, which one would expect them to do, they should not ignore money-laundering regulations. However, I do not think that they should necessarily be treating a saving gateway account as if it were going to have £10,000 or more going through it. It needs to be proportionate and we will continue to have dialogue with the banks and other potential saving gateway account providers on this issue. If we need to revisit the regulations before we debate them in this House we will certainly do so.