Clause 7
5:30 pm
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
As nearly always, the hon. Gentleman has a point. The Government have to make judgments on what the best action to take is if we are to ensure a plurality of provision of saving gateway accounts on the one hand and the ability to ensure that transfers can take place when they are in the interests of individual savers on the other. Clause 7 addresses that, and new clause 1, which the hon. Gentleman has tabled in a probing manner, would place severe restrictions on the opportunity for transfers to take place and would clearly be defective within a couple of weeks when the Banking (Special Provisions) Act is superseded. However, this is an opportunity to show the Government’s current intentions and underlying thinking, much of which is set out in the draft regulations.
We would not expect transfers to be frequent. Unlike child trust funds, these are short accounts lasting two years and, unlike ISAs, it is not likely that account holders will want to change providers regularly to obtain a better interest rate—the match payment will be the same with any provider and will be significantly larger than any return paid by the provider. However, we are attracted to saving gateway account holders having the option of transferring their accounts between providers. For example, an account holder may move and find that their current provider is no longer accessible. That is potentially the case for people moving within rural areas. However, we do recognise that this remains a concern for potential account providers, as the Committee heard in the evidence session.
The hon. Gentleman is right to say that there are, potentially, administrative costs involved in paper-based transactions, if transfers were to take place. That is one reason why we need to continue to discuss this matter in detail, as we mentioned in the explanatory notes to the draft regulations that we published. However, clause 7 would be required, whatever the outcome of those discussions. Even if transferability were not a requirement of offering saving gateway accounts, a mechanism for transfers would be necessary to cater for cases where the transfer is triggered by the account provider, rather than the account holder. For example, if an account provider were to choose to withdraw from offering saving gateway accounts, their accounts would need to be transferred. The same would be true if a provider had their approval withdrawn by Her Majesty’s Revenue and Customs or ceased to qualify as an account provider for any reason. In such cases, transferring the accounts to another provider would be the only way of ensuring that they could continue to account maturity, so that the account holders could receive their maturity payments.
The new clause would permit transfers to another provider, only in the circumstance that the saving gateway provider with which the account is held is subject to the Banking (Special Provisions) Act 2008. Our intention, as set out in the regulations, is broadly that a transfer may be made where an account holder wishes to move from one provider to another and that there should be no charge when an account holder wishes to do this. We understand that the complexity and potential costs involved remain a concern. I assure the hon. Gentleman that we will continue to discuss this matter in detail, as I have already said.
Let me explain why the new clause, although intended to probe, is limited in scope. It is subject to the Banking (Special Provisions) Act 2008, which, as Committee members know, gives the Government power to take a failing UK deposit taker into public ownership or to transfer its assets to another private sector body to maintain the stability of the UK financial system or to protect the public interest. That is a narrow set of circumstances and a provider could be subject to the Bill only in the specific circumstances that it sets out. The new clause would not permit transfers where, as I have said, a provider chose to withdraw from offering saving gateway accounts, and it would not permit transfers if a provider were to have its approved status removed, so it is defective as a piece of prospective legislation.