I beg to move amendment 5, in page 3, line 33, at end insert—
'(1A) Conditions imposed under subsection (1)(a) shall have regard to
(a) location of the provider's premises;
(b) the provider's commitment to financial education; and
(c) the provider's willingness to expand access to broader financial services.'.
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This second group of amendments deals with two particular points. Let me deal with amendment 5 first. The seven lines of clause 5 are designed to deal with the fact that account providers need to be approved. Subsection (1) refers to the conditions that might be imposed on "an approved account provider", but there is no further description in the Bill—much of it gives enabling powers—or the explanatory notes of the conditions that a provider might be required to fulfil.
We had some debate in Committee about the type of providers that we should encourage—or discourage—to take part. I am not going any further down that road, although Dr. Ladyman might want to enter the debate on this group to make those points again. It is important, however, that published guidelines are available to provide some clarity to providers about the conditions and their application. Pilots have already taken place, so it might be possible to draw out three conditions, which the Government might like to reflect on for approving providers.
One point that came out of the evaluation was the importance of the branch network. The take-up of saving gateway accounts in the pilot increased in relation to the closeness of people to a branch of HBOS—the organisation involved in the pilot. If we are to encourage take-up, we need to think about an account provider's branch network. So far, the only group that has expressed a clear intention to participate is the Post Office, which has a strong, if diminishing, branch network. It would fit the bill as a good provider. Access should be easy; people should be able to take their certificate somewhere close to where they live. The more barriers we put in the way of access to the provider, the harder it will be to get a decent take-up of the saving gateway account.
My hon. Friend makes an interesting point. Apparently, these banks are managed on an arm's length basis, but it appears from press comments about the assets insurance scheme that strings are being attached to the receipt of such support. The Minister might like to think about my hon. Friend's suggestion and attach a further string. Participation in a saving gateway account scheme might be a reasonable concession in return for the receipt of protection of apparently £500 billion—indeed, it would be a small price for banks to pay. The Minister might like to discuss with his colleagues in the Treasury and the Department for Business, Enterprise and Regulatory Reform whether this is a feasible concession for the banks to make and whether the Government will press for it. One would like to think that, as part of their broader responsibility, financial services organisations would take very seriously a commitment to broaden access to financial services products and view it as a way of fulfilling that obligation. Paragraph (c) of my amendment stipulates as one of the conditions for approval
"the provider's willingness to expand access to broader financial services".
It is an elastic and loose term, but I hope that when the banks and other financial institutions are thinking about whether they want to be a provider, they will bear it mind as part of their obligations.
I am grateful to the hon. Gentleman. His answer to my question might mean that I will not need to make a further contribution to the debate on this group of amendments. One possible effect of the hon. Gentleman's amendment is that it might be used to exclude small friendly savings providers, such as credit unions, as they do not have the wider access to other banking services that the amendment seems to require. It might also prevent the Government from targeting these accounts through Post Office Counters—something that might help to keep some of the post offices in all our constituencies open. I hope that that is not the intention, but will the hon. Gentleman confirm that it is simply a probing amendment and that he does not intend to limit these accounts to the big banks? If that is his intention, I will certainly want to vote against it.
We want there to be as many providers as possible. We want the widest possible geographical network. I do not want the amendment to be used to restrict provision to a single provider, such as the Post Office, or to exclude such bodies as credit unions, because this is part of the market that they exist to serve. If, for instance, a bank or building society decided to offer saving gateway accounts in only half its branches, I am not sure that either the hon. Gentleman or I would find that particularly acceptable. The condition can be used in different ways to maximise the inclusiveness of the product.
If the hon. Gentleman's intention is to widen the potential provision of the accounts, that would seem to contradict the wording of the amendment, which gives the Government further powers to restrict the availability of the accounts.
I am not sure I agree. The amendment refers to conditions, and to the need to have regard to the location of the provider's premises. It does not say that we can only allow big financial services companies with loads of branches to participate. It poses the question "Will all branches in a network participate, or only some branches?" Its purpose is to probe some of the conditions that might apply when potential providers are encouraged to come forward.
But the wording of paragraph (c) would empower the Government to limit provision to organisations that are willing to provide access to a wider range of financial services. Organisations such as credit unions that could not provide that wider access would be covered by that paragraph, with the result that the Government or a future regulator might prevent them from providing saving gateway accounts.
In the course of discussion about financial inclusion, it has frequently been observed that some institutions are not very keen on encouraging access to financial services products. We want such institutions to commit themselves to widening the range of services available to people who are at present financially excluded. We do not want them to cherry-pick saving gateway accounts and not offer other products to those people. I do not intend to press the amendment to a vote, but it will depend on how the Government choose to use their powers to determine access to financial services products. I want institutions that participate to be committed to financial inclusion. I do not want them to view the saving gateway account as a product in isolation in which they are currently interested, while not being particularly interested in broadening financial inclusion.
Credit unions, as organisations, are committed to financial inclusion. That is the essence of their activities, as is clear from the extension of their offer of savings accounts to include current accounts and their offer of loans consisting of relatively small amounts. Part of their mission is financial inclusion, and I certainly do not believe that paragraph (c) seeks to exclude them. What they may not be able to offer is access. We need to ensure that providers operate in as many locations as possible, are keen to support financial inclusion, and are committed to financial education. One of the issues that emerged from both the public evidence session and the evaluation of the pilot schemes was the need to offer financial education along with saving gateway accounts. The hon. Member for South Thanet will recall, as I do, discussion of whether the accounts should be interest-bearing. Teresa Perchard of Citizens Advice pointed out that if they were not, it should be explained to people what they should expect at the end of the two-year period when their account rolled into a current or basic savings account.
Many factors will help to make the product successful. Three of them—the provision of easy access to account providers' premises, commitment on the part of providers to educating people in order to improve financial awareness, and a commitment to financial inclusion—could prove particularly powerful in that regard. We should ensure that those who are considering putting themselves forward as providers share the commitment to tackling financial exclusion. That is part of what the Bill is about, and it is no good having providers who are not interested in it. I hope that the hon. Gentleman is now reassured about the purpose of this probing amendment.
The amendment refers to
"location of the provider's premises".
Given that more providers are using the internet, has my hon. Friend ruled out web-based providers? Does he believe that providers need a physical location? Having met a good many homeless people, I know that there is a high level of internet penetration. The internet provides a secure way for those without a stable location to manage their finances. Before meeting those homeless people, I had been under the impression that the web base was more for those with a little more money.
That is an interesting question, and not one that we explored in Committee. Perhaps if my hon. Friend had listened a little more carefully in Committee, he would have raised the point then.
The system that we are discussing is based on a notice of eligibility. I had always assumed that a piece of paper would be posted to people, who would then present it to an account provider over a counter. However, like my hon. Friend, I have been contacted by a number of people who are homeless but have internet access. They might indeed prefer to manage their money in that way.
I do not know whether the Minister has had any discussions with potential account providers about how they might supply a web-based service. A point that emerged both from our debates in Committee and from the evidence sessions was that the greater the burden of cost imposed on potential providers, the fewer of them there would be. That is, to an extent, relevant to amendment 6. If we require providers to offer a web-based service, that may involve an additional cost making participation less attractive to them.
We must get the balance right. We want to encourage a wider range of providers because we want eligible people to have physical access to saving gateway accounts, perhaps not on every street corner but within a reasonable distance of where they live. That will mean ensuring that the cost to providers is appropriate, and it is possible that a requirement to provide a web-based service might deter them from participating because of the extra cost. Perhaps the Minister will be able to tell us whether any providers are interested in supplying such a service, which, of course, might pose challenges in the context of financial and digital exclusion.
Let me now turn to amendment 6, which proposes the deletion of clause 11(2)(e). Again, it touches on the costs issue. Regulations made under the Bill will set out how information will be filed by account providers. I am wary that we might create too much prescription on providers and therefore force up costs, and I wonder how permissive or relaxed the regulations will be in respect of the type of information providers will be required to produce for Her Majesty's Revenue and Customs.
Amendment 5 is intended to probe the issue of the guidance that will be offered to providers and what conditions might be attached to them. We are keen for providers to offer commitments on access and on financial inclusion and education. I hope the Minister will recognise that our intention here is to encourage the success of the scheme—rather than to restrict the range of providers, as the hon. Member for South Thanet seemed to think, or hope.
Let me begin by saying that, despite the discussions we have had in Committee and today, I agree with the hon. Gentleman: I want the accounts to be provided through as wide a range of organisations as possible. I was saddened by the attitude of those representatives of the banking industry at the evidence sessions who seemed to say, "We may not be interested in providing these accounts, because there may not be enough profit in it for us." The purpose of these accounts is to help people who would not otherwise have got the saving habit to acquire it. In any other sphere of activity in the markets of this country, that would be welcomed as increasing the customer base, yet bank representatives were sitting there saying, "We're not sure we're interested in expanding our customer base." Given the money we have given to the banks recently, and the debt most of us think they owe to our society at the moment, I would have thought that they would have been falling over themselves to say, "We want to help."
I would not, perhaps, put it that strongly, but, absolutely, that is broadly what I am saying. One of the reasons for our current problems is that we have lost the saving habit. The Prime Minister has made that point in recent weeks when he has spoken about people saving prior to taking out a mortgage and about whether or not it is a good thing that people have 100 per cent.—or 100 per cent. plus—mortgages, so never developing any saving habit or any notion of thrift prior to taking on the obligations of a mortgage. My understanding from contributions from Members in all parts of the House is that what we want the saving gateway accounts to encourage those people who would otherwise not have developed a saving habit to see the merit of doing so. Given our society's current problems as a result of the banks' activities, I would have thought that it would be absolutely on point for them to say, "Okay, we now accept that we need to do more to help people get that saving habit. We accept it is our job to get people to think about thrift. It is now our job to make people think they can't always come to the bank and get 100 per cent. or 120 per cent. mortgages, and that they will actually have to put a bit of their hard-earned cash aside each week and save up for some things prior to borrowing the balance of the money." When we were taking evidence, the banks should have come to us and said, "We don't see that there are huge amounts of profit in this, but we do see that it is absolutely our duty to provide these accounts. It is absolutely our duty to be providing financial education and training and support to people who need it, and it is absolutely our job, whether or not these things make money for us, to provide them and to do so willingly and to provide a good service."
To that extent, I agree entirely with Mr. Hoban, but I do not want credit unions and the Post Office to be excluded from providing such accounts. I do not think that is the intention of the hon. Gentleman's amendments—indeed, he has made it clear that they are probing amendments—but the Post Office and credit unions can play a role. Credit unions tend to be small and to provide a good, almost pastoral, service to some of their customers. They are in a position to say to people, "Let's sit down and talk about your budget. Let's talk about where you've got some extra money, and about the benefits of saving." The saving gateway account represents a big opportunity for credit unions and the Post Office, and I do not want anything to be done that would exclude them. I am happy to note that the hon. Gentleman has confirmed that that is not the intention of his amendments, and I think we have all-party support for how we want the accounts to operate.
I do not understand why the hon. Gentleman should propose in his amendment 6 to "leave out paragraph (e)"—I assume, again, that it is a probing amendment. I would have thought that making an option for electronic filing was a way of reducing costs for those who provide these accounts. If the effect of the amendment would be to prevent the Government from allowing people to file their returns electronically, we might be inadvertently increasing costs. I suspect that is not the hon. Gentleman's intention, and I agree with him that our objective must be to keep the administrative costs as low as possible so that there is a plurality of providers, who are willing to provide the broad range of services that we want those who take out a saving gateway account to have.
I must say that I do not see the point of amendment 5, unless its purpose is to make it clear that we want competent, reputable financial institutions to provide those accounts. I am sure that we all agree that that is desirable, especially given that significant sums of public money will be involved. I share the view of both previous speakers—I think there is general consensus on this point—that we wish to see the broadest possible number of providers, and I would very much like credit unions to be among them as they offer a different type of service, and one that some of the potential customers may feel particularly comfortable with. I would therefore regret it if the amendment were to restrict the scope for, or inclination of, credit unions to provide the service, as Dr. Ladyman feared.
Although the hon. Gentleman has said that he wants to see a wide range of providers, I hope that by expressing our enthusiasm for credit unions we do not sound unenthusiastic about banks providing the service, because I think the one great advantage of banks doing so is that that feeds into the mainstream banking and saving system people who otherwise might not participate at all in normal banking arrangements. That lack of experience acts as a barrier to participation in financial services among wider society. There are some people in my constituency and elsewhere on very low incomes who do not have a bank account or have one but use it in a very limited fashion. Those of us, like everybody participating in this debate, who get used to a monthly salary being paid direct into our bank account should occasionally step back and reflect on how little in cash terms we actually see of the money we have been paid. Most of the money flows in and out of the banking system, and quite a small proportion is withdrawn in cash.
People who are generally better off or in longer term employment get used to how banking systems work and become confident with them. Some people who have less money or who have not been introduced to formal banking by becoming a customer at a younger age may have less confidence in the system. I do not mean confidence in the banking system as a whole, because we all have less confidence in that than we did a year ago: I mean confidence in the experience of being a depositor in a bank or having a savings account. That would be a longer lasting virtue of the Bill, because we are seeking to inculcate the savings habit in the people who take up the service. If they do not maintain that habit beyond the two years in which the Government will provide substantial financial inducements to do so, the Bill will not have succeeded to the extent that we all wish. To that extent, I hope that banks are to the fore, for altruistic reasons and because I share the view of the hon. Member for South Thanet that it will be in their commercial interests to try to widen their customer base.
Who knows whether somebody who opens a savings gateway account may end up being a prosperous customer? After all, that is the basis on which the banks push offers at students. It is not because students have very much money to deposit in the bank. Rather, the banks hope that the students will become good customers in the future. It may be that some of the people who choose to take up this option become more lucrative customers, and even those who do not become so wealthy could still be good customers in other ways, even if the total amount that they deposit with the bank is less. I hope that banks will participate. We want as wide a range of providers as possible and I hope that all those providers will be reputable. In so much as this amendment was designed to probe all those issues and stimulate a useful debate, I hope that the Minister feels that it has done so.
We are approaching a new age of financial responsibility as a result of the current downturn in the financial markets, and we will see a separation of banking services. Investment banks will become separate from retail banks, which will, in their purest form, have to get used to much smaller profit margins. So the traditional reasons for not entering the markets that are the subject of the Bill will eventually disappear.
All banks publish voluminous annual reports, and at the back they include corporate social responsibility statements. There is no better way for the banks to demonstrate their corporate social responsibility than by seizing this initiative and driving it through their branch network. At the moment, banks are rightly held in very low esteem by the vast majority of people and banks need to make some headway in the community. Traditionally, banks have ignored low income groups in favour of chasing those people whom they deem to be more profitable—those who can take out significant mortgages or rack up large credit card debts.
I do not want to see any financial sector excluded from delivering these accounts. I sincerely hope that the Post Office is involved in their delivery, because for many people the post office is their local shop and at the centre of their community. I also hope that credit unions play their part in delivering these accounts, but the credit union sector is still small—although it is growing—and many communities will not have a local credit union over the next decade or so. So banks will have an important role to play in delivering these accounts.
I am sure that when the whiz kids in the banks sit down and look at the accounts they will conclude that they will not make a lot of money out of them. Indeed, banks might make a small loss in delivering the accounts. However, that should not deter them. We have heard many declarations of contrition for the banks' failures in the past year and the failures that undoubtedly lie ahead, but if they are to restore confidence, the provision of these accounts would be a good place to start. I hope that banks will seize the opportunity to volunteer to be at the forefront of this initiative, instead of being dragged to do so.
These amendments cover two distinct areas, but they have in common that they both relate to the requirements to be placed on account providers. I wish to stress that the Government want to maximise customer choice and access, and we are keen to secure as broad a range of appropriately qualified authorised account providers as possible. That includes the Post Office, credit unions, banks and building societies.
The Bill Committee heard from representatives from a variety of potential providers, and the message was that while their members support the objectives of the saving gateway, they want to consider carefully any costs associated with the provision of saving gateway accounts before committing to offer them. It is similarly important to remember that most of the requirements that we impose will apply equally to all approved providers, from the large high-street bank to the smallest mutual society. We must therefore ensure that the requirements that we impose on saving gateway account providers are appropriate and proportionate, as they will affect the number of providers that opt to offer the accounts.
I immediately took a more charitable interpretation of amendment 5 than did my hon. Friend Dr. Ladyman. I thought that Mr. Hoban was trying to be helpful and to probe our intentions. As drafted, the Bill already provides the coverage for conditions and requirements to be imposed on account providers in the areas mentioned in amendment 5. I agree with all the opinions that have been expressed about the importance of appropriate access to account providers, to financial services and to financial education. However, there is nothing in those points that makes them particular to people who decide to open a saving gateway account. As hon. Members will be aware, the Government support a wide range of measures and initiatives to improve financial capability and widen access to financial services. That covers some of the points made in the amendment.
As hon. Members will see from the draft regulations, we have restricted the conditions that we propose to impose on providers to those that ensure that they have the appropriate regulatory permission and can offer and operate accounts as set down in the Bill and regulations. That strikes the right balance. It is important to guarantee the saver regulatory protection and consistency of account features, while ensuring that the conditions on providers are not excessively burdensome.
An important point was made about local branch access. We want easy access for people to open accounts. The draft regulations provide that account holders must be able to make account deposits in several ways, including in cash. That is likely to mean that providers must offer a counter service, or similar. However, nothing would prevent the offering of saving gateway accounts that could be opened electronically. We have had discussions with potential account providers who want to deliver the saving gateway accounts in several different ways. We believe that providers should be required to accept cash deposits, which might make things difficult for a web-based provider. However, it may be possible for a provider to have a web-only account for some customers, if those customers prefer that.
Let me turn to amendment 6. I should explain to hon. Members that we consider the requirement that an account provider's returns and declarations should be submitted electronically to be a reasonable and proportionate requirement on providers. It is not only consistent with broader developments in Government practice, but central in many cases to the smooth operation of the scheme and the prompt payment of match amounts earned by savers.
We set out in the consultation document that we published at the Budget 2008 that we intended to make online filing of returns the only means of sending returns to HMRC. We asked in that consultation document whether that would cause any problems for any particular groups of providers. The response to the suggestion of mandatory online filing was very positive—most providers recognise the benefits of that. Indeed, those benefits are considerable both to providers and to HMRC. Online filing is quicker than submitting and processing papers returns, more cost-effective and more accurate, as well as being more environmentally friendly than a paper-based system. The hon. Member for Fareham did not make a great deal of that amendment, so I do not need to explain in much further detail why we think that there is not a problem in the industry with electronic filing. The consultation confirmed that.
I think that I have addressed amendments 5 and 6. I recognise that they are probing amendments and I hope that the comments that I have made were helpful.
It has been useful to debate the nature of the providers and the terms and conditions that we would expect as well as the things that we would expect providers to do. I want to press forward on the issue of cash, because Mark Lyonette of the Association of British Credit Unions Ltd mentioned the cost of processing cash payments, which was potentially significant for credit unions.
Although I recognise the importance of having facilities available for people to pay cash, when it comes to reducing the cost to the providers of providing the accounts, the deductions that can be made electronically through direct debits, standing orders and pay packets clearly reduce the cost of collection to providers and are a further way of encouraging a larger number of people to participate. Having said that, I know that the Portsmouth Savers credit union not only operates a counter facility through its branch but works through PayPoint, too, spreading the network of payment points widely through the catchment area that it supports. Clearly, there are ways in which credit unions can expand their accessibility in a way that is not available to some other institutions.
That is an interesting suggestion. One issue that credit unions face is the availability of access points and how to provide different methods of access. I am not sure that my caseworker would welcome responding to constituents' correspondence as well as acting as a bank cashier, but that is a matter that I will explore with her. Accessibility is important, as the pilots demonstrated. Part of the rationale for tabling amendment 5 was to tease out some of those important issues that will underpin the success of the savings gateway account.
On amendment 6, the Minister confirmed that there is widespread support for the use of electronic filing by account providers. He said that most respondents welcomed mandatory electronic filing, and I would assume that the sort of systems that bodies such as credit unions are putting in place would be capable of making electronic filings of their returns and if they are, that is welcome. My amendment was a plea for a degree of discretion where systems are not up to electronic filing and where the cost of updating systems might be a barrier to credit unions and other institutions that are prepared to offer saving gateway accounts. Based on the debate, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.