Clause 8
5:45 pm
Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
Again, the song remains the same. We do not want to speculate on what a future Government might want to do. I am just saying that as part of sensible contingency planning, any Government would want to include the match rate issue in secondary rather than primary legislation so that if circumstances and evidence indicated that the match rate was not generous enough or too generous, they could alter it without the need for primary legislation. We want to be clear that that would not be done retrospectively, particularly if a lower match rate was being introduced.
To return to the basic question about the 50p match rate—whether it is too high or too low, and why the Government came up with that figure—the first point to make is that our overall policy objective is to kick-start the savings habit. Then it must be asked what the most effective way is to do that. What level of incentive is required to encourage people to save? As the Committee will be aware, we gained information on that matter from the pilots. The second pilot showed that savers found a match rate of 50p for every pound to be a strong incentive to save. A lower match rate would clearly provide less of an incentive to save and would be likely to lead to lower take-up of saving gateway accounts.
The second pilot appears to show that a match rate of 50p for each pound saved made people 10 to 15 percentage points more likely to open an account than a match rate of 20p. Again, in designing saving gateway accounts, as a matter of policy, we had to make judgments about what level would be most likely to get people to participate. As hon. Members will be aware, one pilot looked at a pound-for-pound match rate. I do not think that the evidence suggested that the more generous match rate would produce significantly more savings. We thought that it was poorer value for money for the taxpayer in terms of encouraging our policy objective.
We are at the 50p rate, we believe that that is attractive and we want to continue on that basis. It will be in secondary legislation, which we will debate in due course. Undoubtedly we can rehearse the arguments again, but on the best evidence available from the pilots, our judgment is that 50p is the rate most likely to help kick-start the savings habit.
The hon. Member for Taunton finally asked how much it is likely to cost. That will clearly depend on take-up rates, but we currently score the cost of making the match payments at £130 million in 2012-13, £110 million in 2013-14 and £100 million in 2014-15. I hope that that provides him with the information he requested and that I have been able to clarify some of the Government’s thinking behind our decision to have a 50p match rate. We continue to believe that that will be attractive to the target group, which is people of working age on low incomes. We want them to save and we believe that this will help them to do so.