Clause 6 — Account Opening

Bill Presented – in the House of Commons at 2:00 pm on 25th February 2009.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 2:00 pm, 25th February 2009

I beg to move amendment 2, in page 4, line 19, at end insert—

'(6) After the first exercise of the powers in subsection (5), the Treasury will be required to consult interested parties on any changes to those regulations and lay a copy of the report on this consultation before Parliament before any further regulations are made.'.

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Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

With this it will be convenient to discuss the following: Amendment 9, in clause 27, page 13, line 4, after '(4)', insert ', 4'.

Amendment 10, in clause 27, page 13, line 4, after '(4)', insert ', 6'.

Amendment 7, in page 13, line 7, leave out 'The first'.

Amendment 8, in page 13, line 10, leave out subsection (6).

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

This group of amendments tries to address one of the issues that Mr. Browne mentioned on Second Reading, which is the fact that the Bill is an enabling Bill and contains a large number of regulation-making powers. I think that he said that there were 29, and virtually every clause contains at least one regulation-making power. The Government have already published some draft regulations, and the amendments try selectively to enhance the parliamentary scrutiny of the regulations. I accept that there are circumstances in which the negative resolution is the appropriate route, when matters are relatively uncontentious, but I have suggested a number of areas where I felt that the affirmative procedure might be more appropriate given the implications for the taxpayer of changes to some of the criteria in the Bill.

First, let me deal with amendment 2. Clause 6 is about eligibility and it talks about people being able to open a saving gateway account having received the notice of eligibility. When we discussed the clause in Committee, there was some discussion of the regulations under subsection (5), which are very permissive and enable people to have more than one saving gateway account at any one time or more than one over their lifetime. They also restrict the number of saving gateway accounts that someone might have. We know that the intention of the Minister and the Government is that people should have only one saving gateway account and that was the consensus that was underlined in Committee and in the evidence-taking sessions that we had before the Committee scrutinised the Bill line by line. Sharon Collard and Brian Pomeroy, among others, made it clear that if people have not got into the savings culture through one account, it is unlikely that being offered further opportunities will enable them to develop the habit of saving.

Amendment 2 proposes that once the Government have made their first regulation to limit accounts to one per person, there should be a proper consultation if they seek to make any subsequent changes. The consultation should consider whether there should be more accounts and a copy of it should be laid before the House before any further regulations are made, to ensure that the House is aware of the outcome of the consultation before it is made.

Amendments 7 and 8 refer back to clause 14, which gives the Government the power to make regulations for the treatment of the accounts in the context of income tax and capital gains tax. Again, the Government's intention is that the accounts should be free from income tax and capital gains tax. However, the Bill states that although the first regulations made under the clause will be subject to the affirmative resolution procedure, any subsequent changes will be made under the negative resolution procedure. Given that subsequent changes could make accounts subject to income tax or CGT, it is appropriate to build in a safeguard requiring proper parliamentary scrutiny, so that any subsequent orders would be made by the affirmative rather than the negative process.

Amendments 9 and 10 deal with other parts of the Bill that allow changes to be made by the negative procedure. Clause 4 is important, as it determines the maturity period that applies to saving gateway accounts and the maximum amount that can be paid into an account. The draft regulations published by the Government set the maturity period at two years and the maximum monthly payment at £25. Any amendment to those terms would be made by the negative procedure, but lengthening the maturity period could lead to increased costs to the Exchequer as people build up higher balances that would be subject to the 50p in the pound matching process.

Similarly, increasing the monthly payment from £25 to, say, £30 or £40 would also lead to increased costs to the Exchequer. We believe that both processes should be subject to the affirmative rather than the negative procedure. That is a reasonable extension of the affirmative procedure, and it would provide some safeguard for taxpayers.

Amendment 10 makes a similar point in connection with clause 6. In amendment 2, we ask that a report be laid before Parliament when the Government propose a change to the number of accounts that can be held. In amendment 10, we argue that any subsequent use of the power after the first use should be subject to the affirmative rather than the negative procedure because, again, the cost to the Exchequer will be greater if the rules are modified to allow people to hold more accounts.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

As Mr. Hoban rightly said, on Second Reading I spoke about what I consider to be the Bill's excessive flexibility. I said that the Government would be able, through regulations and without sufficient reference to Parliament, to change quite fundamentally how the Bill works in practice, and I maintain that that is still the case.

I can understand that all Governments like to have some flexibility. Legislation probably benefits from a degree of flexibility, especially if there are financial considerations that mean that the Government may need to manoeuvre to some extent to respond to events. However, we are sent here to represent our constituents and to make sure that Bills are scrutinised properly, and there are a very large number of moving parts in this Bill. The word "mockery" is too strong, but it undermines the scrutiny process if Bills brought before us for our approval have so much scope for interpretation by Ministers at a later date.

I continue to hold that view about this Bill. I regard it as broadly benign, but a wider principle is at stake. However, I shall not detain the House unnecessarily, as I agree with all the accurate and wise comments made by the hon. Member for Fareham. Rather than making them all again, I shall confine myself to saying that I hope that the Minister will respond accordingly.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I hope that I can convince the House that the Government's approach to what is put on the face of the Bill and what is contained in secondary legislation—as well as to what is subject to the affirmative and negative procedures—is fair, reasonable, proportionate and appropriate.

This group of amendments covers two points. Amendments 7 to 10 ask whether the exercise of some of the regulation-making powers should be subject to the affirmative rather than the negative procedure, whereas amendment 2 would introduce a requirement for the Government to consult interested parties and report to Parliament before using one specific power in the Bill.

I shall begin by responding to Mr. Hoban—and, by default, I suppose, to Mr. Browne—on amendments 7 to 10. As I have said a number of times, we believe that the current use of delegated powers is appropriate. The important features of the savings gateway, including the list of qualifying benefits and credits and the method of calculating maturity payments, are all set out on the face of the Bill. However, many of the details of the operation of the saving gateway are relatively technical and our view is that they are best tackled through secondary legislation, because that provides the flexibility that will allow the scheme to be amended in the future to ensure that it continues to meet its objectives.

We know that those objectives have the broad support of the House, and we want them to be amendable without the need for further primary legislation because we also know that that can suffer from the pressure of parliamentary time. We think that we have struck the appropriate balance, and I shall explain our approach to the House.

The first use of all but one of the delegated powers in the Bill will be subject to the affirmative procedure. We think that that is the right thing to do to allow appropriate parliamentary scrutiny of the details of the scheme that is being introduced. However, subsequent use of most of the powers in the Bill will be subject to the negative procedure, as that will provide the necessary flexibility to make minor or technical changes to the scheme.

Of course, we can debate which changes are minor or technical: hon. Members might have different views, and it is right that the Government be probed about such matters. However, I want to explain that there are four exceptions, under which each use of the regulations will be subject to the affirmative procedure. They include all three delegated powers relating to eligibility, which is clearly a central feature of the savings gateway. It is therefore right that any changes should be subject to full parliamentary scrutiny.

The same is true of the match rate—the amount of maturity payment earned for each pound saved. The power to set that amount in regulations under clause 8(1) is therefore the fourth delegated power that will be subject to the affirmative procedure on each use. All the key parts of the savings gateway architecture are therefore either on the face of the Bill or subject to the affirmative resolution procedure. Moreover, all changes to eligibility and the match rate will be subject to the affirmative procedure.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 2:15 pm, 25th February 2009

Can the Minister explain why he has decided that variations to the match rate should be subject to the affirmative procedure, when the amount that can be saved in the account is not?

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

Yes, indeed I can. Moving from a match rate of, say, 50 per cent. to 100 per cent. would be a major decision, with serious cost implications. We think that our figure for the amount that can be paid in monthly is appropriate, and we anticipate that future adjustments will be needed only to keep pace with inflation, or something similar. We are therefore talking about two different matters: we think that a change in the match rate would be a fundamental redesign of the scheme, whereas updating for inflation would not be. As a result, it is more appropriate that such updating should be covered by the negative procedure.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

But the Bill gives the Minister the power to double the monthly contribution by means of the negative procedure. We do not know how much people will save, but that could have the same financial impact as doubling the match rate and leaving unchanged the amount that can be saved.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

That is true; that is how the legislation is worded. If a future Government decided to double the match rate without consultation and without agreement, I am sure that people would pray against the regulations. Our clear policy intention is to update the monthly deposit limit, but we do not at the moment foresee making a fundamental change, such as a change to the match rate. That should be debated, and be subject to the affirmative procedure.

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Photo of Stephen Ladyman Stephen Ladyman Labour, South Thanet

For the life of me, I have never understood why the Opposition always make that point. If the Government cannot afford something, they will not lay the regulations before the House, and if the Opposition do not like a measure, they can pray against it; it will then be debated in the same way as regulations introduced under the affirmative procedure. Will my hon. Friend confirm that Cabinet Office guidelines require a public consultation before regulations are laid before the House? That means that interested parties would have their say even before the regulations were laid before the House.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

My hon. Friend makes a very good point. It is perfectly possible for people to pray against regulations introduced under the negative procedure; indeed, that happens quite frequently. I am simply making the point that a change to the match rate would be a fundamental change to the design of the scheme. As to updating the monthly deposit limit in the light of changes to inflation, inflation is low now, and under this Government, it will continue to be low and sustainable, but we need the ability to update that. A minor, technical amendment that updates the scheme in the light of inflation is more appropriately handled through the negative procedure. The hon. Member for Fareham and I will have to differ on the issue, but I hope that on reflection, he will not see it as a major issue that he wants to press to a Division.

The hon. Gentleman also raised the issue of tax relief. I understand his concern about the possibility of a future Government taking away the tax-relieved status of the saving gateway using the negative procedure. We have been very clear that the saving gateway will be free of income tax and capital gains tax, as is provided for in the draft regulations. I am happy to confirm that we have no intention of reversing our position. Of course, if a future Government were to choose to do so, it would be open to Members to pray against the relevant regulations, but it is not sensible to require all regulations relating to tax relief for the saving gateway to be subject to the affirmative procedure. Some of the regulations may be simple, technical provisions to reflect changes in the tax system more widely. We need to differentiate the policy intention from any fundamental change in policy; that is why the legislation is framed as it is.

The hon. Gentleman mentioned the length of the saving gateway account maturity period. I can see where he is coming from. He is saying that if we increase that length and increase the monthly limits by the negative procedure, it could have as significant a cost impact as a change to the match rate. We agree, but the policy intention is to keep the match rate as it is. On the length, the intention is to evaluate the scheme properly once it has run for a period. If it is right to make changes in future, we will want to do so. Allowing the flexibility to make changes of that kind, so that we can ensure that the scheme continues to meet its objectives, is sensible contingency planning on the part of any Government. It is right that the measures should be subject to the negative procedure.

That brings me to amendment 2, which relates to the number of saving gateway accounts that a person can have in their lifetime. As I said on Second Reading and in Committee, our intention is that people should be able to have only one saving gateway account in their lifetime. That is reflected in the draft regulations. The saving gateway aims to kick-start the saving habit, as we know. It is therefore right that it should be a one-off account. Brian Pomeroy, the chair of the Financial Inclusion Taskforce, said during the Committee's evidence sessions:

"it is right that they get only one shot, because the basis of the scheme is that it should be a kick-start." ——[ Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 18, Q38.]

I think that the hon. Member for Fareham agrees with us on that point. However, we believe that it is right, and sensible contingency planning, to maintain some flexibility on the issue and to give this and future Governments the freedom to allow people more than one account per lifetime, if that is thought reasonable at a later date.

Amendment 2 would restrict that flexibility by requiring the Government to consult interested parties and to lay a report of that consultation before Parliament. That would be an unusual requirement for legislation to impose, and it is not necessary. If we wanted to consider a change to the number of accounts that a person could hold in their lifetime, I am sure that we would want to consult on the idea. As my hon. Friend Dr. Ladyman says, under the normal procedure and the guidelines followed in such cases, we would consult. We would want to make sure that any change was effectively targeted, which would mean consulting and talking to various bodies. We have shown in recent years that we are keen to take the views of interested parties into account, when it comes to the design of the saving gateway. Indeed, it has been pointed out that we have hardly rushed into introducing saving gateway accounts. There has been extensive consultation and dialogue, and we are continuing to discuss with various providers how the accounts will be implemented, as the House will be aware.

I do not believe that the Government's flexibility should be restricted in the way proposed in amendment 2. Nor do I think that the changes proposed in amendments 7 to 10 strike the right balance when it comes to what should be covered by the affirmative procedure, and what by the negative procedure, so I hope that the hon. Member for Fareham will seek leave to withdraw his amendment.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 2:30 pm, 25th February 2009

Dr. Ladyman asked why Opposition Members argue for the affirmative procedure; it is because we want increased parliamentary scrutiny. We know that it is more convenient for the Government to get their business through with as little grit in the process as possible. That is why Governments tend to prefer the negative procedure.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

Perhaps Dr. Ladyman should have asked the Minister why the Government are so unkeen for the affirmative procedure to be used; he might then have got the answer to his question.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

Given the ministerial experience of the hon. Member for South Thanet, I suspect that he knows exactly why Governments prefer the negative procedure. Of course, we will treasure his remarks, just in case roles are reversed in the next couple of years and he then argues in favour of applying the affirmative procedure.

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Photo of Stephen Ladyman Stephen Ladyman Labour, South Thanet

I have noticed that the frequency with which the Opposition ask for the positive procedure to be used seems to be in inverse proportion to their lead in the opinion polls.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

Well, I do not think that the two are in any way correlated. There is a debate to be had about what the level of parliamentary scrutiny should be. The Minister's explanation of why he rejects the amendments indicates that there is a fine line to be drawn, because there are areas where technical changes could be subject to the negative procedure. Part of the issue is that there are some instances where the Government could make a minor, technical change, such as a change to some detail in the tax treatment of saving gateway accounts, or a fundamental change.

What we lack in the Bill and in the procedure of the House is a way of distinguishing between a significant change and a technical change. As the Minister said, there could be a change to the monthly contribution limit just to index-link it. We would all agree that that would be a relatively minor change, which could go through on the negative procedure. However, the Government could make a significant change to double or halve the monthly contribution, which would be far from a technical change. It would be a substantive change, and the Opposition would have to go through the negative procedure by praying against the regulation.

The Minister commented that he viewed my amendments more charitably than did the hon. Member for South Thanet. Perhaps I view the powers that the Government have under the Bill less charitably than I should; perhaps I see the opportunity to make significant changes and emphasise that opportunity rather than the possibility of making minor technical changes. On balance, I would prefer more parliamentary scrutiny with the capacity to make a significant change that could have an impact on the account, and I would prefer to err on the side of caution, rather than make it easier for Governments to get business through. However, I appreciate the points that the Minister made, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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