Clause 16 — Transfer of funds on account ceasing to be Saving Gateway account

Bill Presented – in the House of Commons at 2:30 pm on 25th February 2009.

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

I beg to move amendment 1, in page 7, line 9 , at end insert—

'(1A) Subject to subsection (1B), funds in the account will be transferred into an account which pays interest at a rate which is equal to or greater than the rate paid on funds held in an Individual Savings Account as set out in the Finance Act 1998 (c. 36) operated by the Savings Gateway Account provider in question.

(1B) Where an account provider does not operate an Individual Savings Account, the amounts will be transferred into an account that it provides which—

(a) has no penalty for the withdrawal of funds without notice; and

(b) offers a rate equal to or higher than the highest interest rate offered on other accounts operated by the provider.'.

The final amendment covers an important point that we discussed in Committee. Clause 16 deals with the transfer of funds when an account ceases to be a saving gateway account. It is a significant element of the Bill because it creates a clear expectation of what should happen when an account comes to an end, and should be seen in the context of ensuring that people are given as much incentive as possible to continue the savings habit which they will hopefully have developed over the two-year period.

In the pilot programme, the default option was a savings account with a very low interest rate. That is a better option than defaulting into a current account, not only in terms of the interest that someone might earn, but because a savings account might discourage them from withdrawing the money, whereas if it is lumped together with their existing current account balance, there might be a greater incentive to spend it.

The amendment seeks to reflect some of the concerns expressed about the default option. The intention behind the Bill is to ensure that when the account comes to the end of its two-year period, there is a roll-over into an individual savings account. I sought in Committee to make that mandatory. A number of objections were raised, which I try to reflect in the amendment.

In the evidence-taking session there was some debate about whether an ISA was the appropriate default option. Teresa Perchard from "Which?" expressed a preference for a plain vanilla savings account because of some of the complexities attached to ISAs. Matthew Wakefield from the Institute for Fiscal Studies was more open to the idea that the account should default into an ISA. One of the other arguments made in the evidence session—by Adrian Coles of the Building Societies Association, I think—was that some providers might wish to default a customer into an account with a much higher rate of interest than an ISA. That would be a positive move, but in most cases the ISA rate is higher than the rates generally offered on instant access savings accounts.

Others made the point that some potential account providers did not offer an ISA. One can imagine a credit union, for example, not offering an ISA, and I would not want credit unions to be excluded from the provisions of the Bill, so my alternative suggestion is that where a provider does not operate an ISA, the amount should be transferred into an account where there is no penalty for instant withdrawal without notice, and which offers a rate equal to or higher than the best rate offered on another savings account.

If somebody is rolled into an account that offers the best possible rate for that saver, it is meant to be an attractive option and to ensure that rather than the money being lost to a current account at the end of the two-year period, it rolls into a savings account and that we get the best possible deal for the saver by mandating that it should be an ISA or, where that is not offered, an account with a rate equivalent to the best rate that the provider offers.

What happens when the account matures is, as Alan Cook from the Post Office said, a critical issue. It will help to influence the way in which people manage their money in the future. The more we can do to ensure that the default option is an account such as an ISA which offers a good rate of return and a sense that the money is set aside, the more likely it is that we will encourage people to continue to save in the future.

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Photo of Stephen Ladyman Stephen Ladyman Labour, South Thanet

I agree with Mr. Hoban to this extent: all the accounts must have a default option. People should be told what that is when they go into an account. They should be told that at the end of the two-year period, they will have choices. It should be made explicit that there is not one option, but a range of choices that they can make. They should be told that if they do not exercise that option, the provider has a default option, which should be explained.

I agree with the hon. Gentleman that there are many people for whom the best default option will be an ISA, from which they will get the best rate of return. Equally, many of the people at whom the scheme is aimed will not be payers of income tax. We won today a kind concession from the Minister that carers, for example, will be entitled to saving gateway accounts. Those people may envisage a very long period of being a carer; if so, they will therefore not be income tax payers in the near future. For them, a different type of account may be preferable to an ISA. For example, a national savings and investments account, where payments are made without income tax being removed from the account, might be the best and most convenient option for them.

I hope that people will decide for themselves when they go into saving gateway accounts whether they are likely to benefit from an account that defaults to an ISA or an account that defaults in some other direction. It is even possible, as we discussed in Committee, that the Post Office will act in partnership with other organisations to provide saving gateway accounts. The Post Office might be able to offer a plurality of choices into national savings and investments accounts or into ISAs as a result of such partnerships.

To the extent that the hon. Gentleman intends to ensure clarity about offering choices at the end of the saving gateway accounts, and to the extent that there will have to be a default option, I agree with him. Where we part company is on his belief that for everybody an ISA will be the best option. For many of the people on very low incomes whom we are discussing, that will not be the case. I want to see a range of providers who cater for that market, as well as for those people who would benefit from an ISA.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

There are three broad areas of consideration in respect of this issue, and we touched on them during our early deliberations; I think that we broadly agree on all three. The first is that people who take out the accounts should be able to access their money in full whenever they wish to. We agree on that, but the principle is important. Although we do not want them to access the money as that would rather undermine the purpose of the scheme, many of them would be unlikely to participate in it unless they felt able to access their money if they chose. We have to be extremely cautious about sending out the message that barriers—even if only procedural, rather than absolute—are being put in their way.

The second point is that the accounts should resemble a normal savings account as much as possible. In Committee, we discussed whether the accounts should attract any interest, as well as statements and all the features with which people with normal bank savings accounts will be familiar. If we wish people to take up the savings habit and the transition into conventional savings accounts once the two-year period has elapsed, we should want the characteristics of the gateway account to represent a normal account; that is desirable in so far as it can be achieved.

The third area relates to the purpose of the entire Bill. Even if the people who take up the option of having one of the accounts decide on occasions to use the money that they have saved on short-term expenditure, the scheme will still succeed if it makes them more likely to be longer-term savers. For me, that is the purpose of the legislation. A significant group of people in society—perhaps, 10, 15 or 20 per cent. of people—have an insufficient stake in their country and society as a whole; I am thinking of their participation in the democratic process and civic society, but the issue is most keenly felt in their lack of stake in the financial future of the country. Even quite modest savings will give such people a feeling that they have something to gain—and even something to lose—according to the fortunes of the country in which they live. It is important that those people do not feel isolated from the mainstream. Any amendments or progress that we can make that encourage people to regard the account as the start of a longer-term trend for their finances, and inclines them to save beyond the two-year period, is to be welcomed—with the caveat that they should not be compelled.

I am sympathetic to the motivation behind amendment 1, but I fear that it is too inflexible. The motivation is good, because it accords with the principles that I have sought to outline. Perhaps, however, there is a means of reaching that point that is superior to going down this rather narrow path. If the Minister knows of such means, I would welcome it. However, I urge him to take seriously the inspiration behind amendment 1, because that will govern whether the legislation is deemed a success in five or 10 years' time.

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Photo of John Howell John Howell Conservative, Henley

The debate about amendment 1 has been helpful because it gets to the heart of what the Bill is about. The ultimate success of the Bill would be achieved if people changed their behaviour and were encouraged to save, so it would be unfortunate if we left the post-savings gateway account period in any degree of uncertainty. That would affect two of the Bill's long-term-success criteria, outlined in Committee by my hon. Friend Mr. Hoban. One was about persistency—about whether the Bill will make the culture change happen. The second was about the increase in net wealth that ought to come with it. Brian Pomeroy added the criterion of wider entry into financial inclusion.

One of the most telling remarks in the evidence sittings came from Teresa Perchard of Citizens Advice, who talked about how we all feel an inertia about banking—even those of us who are experienced at banking. She said:

"Everybody hates their bank but will not shift accounts." ——[ Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 16, Q33.]

That inbuilt inertia is also a good reason for the sentiment behind the Bill and for making the post-account period clearer in relation to what we expect to happen as a result of it.

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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 2:45 pm, 25th February 2009

I sympathise with the sentiment behind the amendment. We all want to ensure that savers benefit from good returns on their savings when funds are transferred out of saving gateway accounts that have matured; we disagree on whether that should be mandated. In many ways, the amendment is a good example of the considerations that the Government need to take into account when designing policy. Mr. Hoban will no doubt be familiar with the work of Thaler and Sunstein, whose book "Nudge" discusses the setting of sensible default options. I am particularly interested in the application of behavioural economics to policy making. I recommend the works of Daniel Karmann, as much as I would that of Thaler and Sunstein.

We can have a legitimate debate about how we address the issues. We are all clear on the policy objective, which is to kick-start a savings habit. We want to make sure that the saving continues in the longer term, when the account matures. We want to see saving gateway accounts transferring on maturity to an appropriate account, through which the individual continues to save. The issue is whether we should mandate a default roll-over account into which funds should be transferred when the account holder does not give any instructions about what should happen to their account balance at maturity, or whether there should be more choice and no mandatory requirement. As part of that, we considered carefully whether default roll-over accounts should be ISAs, for example. We have decided against that for a number of reasons, some of which I explained in Committee.

However, I point out again that we have said that we will permit transfers from matured saving gateway accounts into ISAs to be treated as previous-year subscriptions. That is an important point—in other words, those accounts will not count towards the annual ISA subscription limit. That means that savers can continue to save tax free and gain the benefits of ISAs. As the House will be aware, about one in three people in the country—more than 18 million UK adults—already have an ISA account.

The amendment would take a prescriptive route in trying to achieve the outcome by mandating a default account; we have decided to take a permissive approach because we think that account holders may want some flexibility. As my hon. Friend Dr. Ladyman rightly said, account holders may well find themselves in different financial circumstances and have different requirements, so it would not be right to mandate one particular type of account.

Providers may also wish to have some flexibility to ensure that the account into which accounts roll over will be appropriate for their customers. As soon as conditions are laid down for what these accounts will look like, that flexibility would be constricted or eroded. The amendment's prescriptive approach would also mean additional costs and complexity. It would require the account into which saving gateway funds are transferred to pay interest at a rate at least as good as that of an ISA offered by the provider in question, or as good as any account offered by a provider that does not offer ISAs. I applaud the hon. Member for Fareham for the ingenuity with which he phrased his amendment following the discussions that we had in Committee. However, it does not mention for how long this requirement would need to be met beyond the point of transfer. This would need to be monitored and policed to ensure that it was effective, and that process would add costs and complexity for providers and for Government in administering the scheme. The hon. Gentleman mentioned Alan Cook, the managing director of the Post Office, who said:

"If there is over-prescription, you will introduce extra costs. We do business in different ways with our customers, and we should allow the organisations to play to their strengths." ——[ Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 28, Q52.]

We need to take that into account.

I have every sympathy with the hon. Gentleman's intentions. We want to see good rates of return offered to savers, and I am aware of the need to consider the setting of sensible defaults because there may well be inertia and people will not be making active decisions. Nevertheless, I still think that the balance of the argument lies with not being prescriptive, and I want to give two reasons for that. First, under the banking code and the requirement to treat customers fairly, banks or others that offer saving gateway accounts that are being rolled over should be offering interest-bearing accounts that are appropriate to the interests and needs of their customers. Our expectation is that at the end of the two-year period, funds will be transferred into the most appropriate account that the provider offers. Of course, we will want to monitor that very closely.

Secondly, as I stressed in Committee, we want competition and a marketplace. We want saving gateway customers to have good deals that are offered by saving gateway providers. Part of that package should involve setting and offering a good default option for when accounts roll over at the end of the two-year period. The more providers there are, the greater the range of options that are available, and the more competition that there is for savings when saving gateway accounts mature, the better that will be for the customer. We want individual savers to be able to choose what happens when their account reaches maturity. If they do not believe that the default option that is being offered to them by their provider is right for them, they have the right to move their saving gateway account, on maturity, to an account that is more appropriate. Obviously the advice and support that account holders receive as their account nears maturity is critical, and we want to continue to work on that with providers and intermediaries.

The balance of argument that has influenced our policy design has been to say that the obligation to treat customers fairly, the competition and marketplace that we think will be there, and the need to give consumers choice rather than have it constrained for them outweigh a requirement to set a mandatory default option. We will of course want to monitor the situation closely. Everyone would be concerned if it became common practice that people offering saving gateway accounts were then encouraging people, on maturity, to roll over into accounts that provided no or very low levels of interest, or certainly levels that were not competitive.

For the reasons I have set out, we do not believe the prescriptive approach that the amendment proposes is the right basis on which to proceed. I hope that I have explained my reasons for the Government's decision.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

We have chewed this over in Committee and again today. My concern is to ensure that the default option is a good one for saving gateway account holders. Where there is inertia, as there will be for many people, who will not necessarily make the rational choice that we might want them to make, we want them to default into an account that pays them a good rate of interest. I was keen to move down a more prescriptive route to ensure that there is a good deal for those who effectively make no choice when the account matures. We have to be careful about assuming that people always act in a rational fashion, because that is not always the case. I am an accountant by background, and I am not sure that my financial decisions are always rational. People will not always do a whole of market review to see what the options are and decide that National Savings and Investments is the right approach for them.

I am keen to ensure that the default option is a good choice and that people will not do themselves any harm by defaulting into something that offers a rate that is not comparable to an ISA. Even people who are not paying tax are probably better off in an ISA than in a normal savings account. My approach is to say that we should encourage them to take up a good option that should not cause them too much harm. That would not preclude them from exercising choice, in the same way that in personal accounts there is an auto-enrolment process whereby once someone is enrolled they can decide to opt out. The default option is meant to be a positive one on which they can make a choice. This is the same approach. I would not say that someone has to be in an ISA for two years, 18 months, six months or even a week, but once they have gone into it they can then choose, if they wish, where the best home for their savings is.

There would be another benefit from having a vehicle like an ISA as the default option. This goes back to some of the work that Thaler and Sunstein and others have done on behavioural economics; it is about the concept of mental accounting. If someone has some money locked away or put in a separate account, they have to make a conscious decision to access that money. Sometimes people on low incomes adopt a "jam jar", mental accounting approach to saving. That is why Farepak was attractive. It may not necessarily have been something that most people would accept as a reasonable way of saving for Christmas, but it worked because it was a form of mental accounting in that the money was locked away until it was needed. That is one of the attractions behind defaulting into an ISA. It would be a powerful way of getting people to think about setting their money aside, and it is an account that would do people the least harm to default into, compared with a savings account paying 0.1 per cent. interest, as in many cases at the moment. It would represent a good deal for people who have a saving gateway account that has reached the end of its life.

I do not think that the Minister and I have a huge disagreement; it is a matter of how this is put into practice. He clearly signalled to account providers the sort of options that should be offered to people when their account matures. I hope that the Government will think not only of the choices that they offer to people in the financial education that they put alongside that, but how they ensure that for people who do not make a conscious choice the option that the account rolls into will represent a good deal for savers rather than a less satisfactory deal. That is the driver behind the amendment. We are not far away from the outcome that we want, but there is perhaps a difference of approach in how to get there. However, I am assured that providers will take from this debate the message that there is a commitment on both sides of the House to ensure that people have choice when their account matures, but that where choice is not exercised the default option is a good one. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Third Reading

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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 3:00 pm, 25th February 2009

I beg to move, That the Bill be now read the Third time.

We had an interesting debate on Report, and I am grateful to all the hon. Members who took part in it, and to the Members of all parties who contributed in Committee. I am grateful for the constructive approach that all sides took in the Committee sittings, and for their approach to the Bill in general. We had some very useful debates and we have made some progress in understanding the Bill. I would also like to thank those witnesses who took the time to give evidence to the Committee.

As hon. Members will know, the Bill will create a national saving gateway scheme from next year. The scheme has two objectives: first, to kick-start the saving habit among working-age people on lower incomes, and, secondly, to promote financial inclusion. Those objectives have been widely welcomed in this House and beyond. The pilots that were run over recent years showed that the saving gateway can achieve these objectives. Sharon Collard, who helped to evaluate the first pilot, told the Committee in our evidence sessions that

"the aim of the saving gateway is to kick-start a savings habit...There is evidence that that can happen."

We designed the scheme carefully, learning the lessons from the pilots, and during the debate we touched on many major aspects of how the scheme can work. We have, rightly, paid close attention to eligibility, which we discussed again today. I agreed in Committee to continue to consider the case for the carer's allowance to be a qualifying benefit. As I said then, carers will be eligible for the saving gateway through the qualifying benefits that are already set out in the Bill, but as I said on Report, the Government are minded to table amendments in the other place to ensure that recipients of carer's allowance who are of working age are entitled to participate in saving gateway accounts.

We looked at the match rate on Report, and at the Government's proposed contribution of 50p for each pound saved in the scheme, and I believe that all parties, and the witnesses in Committee, agreed that that is the right level at which to set the rate. We covered various aspects of the scheme's design, such as the monthly deposit limit, the length of accounts and what should happen to the accounts when they mature.

There has also been debate about delegated powers, and the procedure to be followed for their exercise. As I said in response to the amendments of Mr. Hoban, we believe that we have struck the appropriate balance, but we will continue to consider the issue in the light of any forthcoming report from the Delegated Powers and Regulatory Reform Committee in the other place.

These have been useful debates, and we were pleased to have the opportunity to put the Government's thinking to the test and to put these issues on the public record, as well as to debate them with Members on all sides of this House. I believe that this is an important Bill. The fact that there is such a broad political consensus should not detract from the fact that we are taking steps to establish a national savings gateway scheme for the first time, which will give around 8 million people a strong incentive to save. By giving them a chance to save up to £600, and earn up to £300 from the Government, but also by helping to build a lifetime savings habit and by bringing people into the financial mainstream, the Bill can make a real difference to people's lives and I commend it to the House.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 3:04 pm, 25th February 2009

As the Economic Secretary said, there is broad support for the Bill. He also mentioned on Report how long it had taken to get the Bill on to the statute book. The idea behind it was first mooted in Labour's 2001 general election manifesto, and it will come into force after the next general election—I do not know whether that is the longest time it has taken a pledge to move from manifesto to enactment, but 10 years is a long time for people to wait.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury)

I have one example of something that has taken longer: the forthcoming referendum on introducing proportional representation. We still await that keenly.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

I should always expect a Liberal Democrat MP to make a reference, wherever possible, in any debate, to proportional representation, but that may take longer to introduce. I suspect that, from the outset, the Bill was far more likely to come into force than his demand for a referendum.

Some might argue that the Bill is a distraction from the economic and financial crisis that the country is facing, but we also need to bear in mind that one in three households in this country have no savings and no cushion against being laid off, or are facing wage cuts or an end to overtime. This Bill serves a valuable purpose in encouraging people, particularly those on low incomes, to save. People on higher incomes have an opportunity to smooth out fluctuations in income and expenses to which those on low incomes do not have access. If the Bill is successful in encouraging people to save, it will enable them to create a modest buffer against variations in income, such as the unexpected expense of being laid-off for a short period. It will give people a degree of financial security that they have not had hitherto.

The Bill is a means to an end. It is designed to develop a savings culture in this country and there is a relatively generous match of 50p in the pound to encourage that culture to develop. A clear belief was expressed in the evidence that we heard that the two-year duration and the match level would be sufficient to start to encourage the development of that savings culture.

I do not believe that the account in itself is enough. Alongside it, we need an emphasis on financial education and other ways of tackling financial exclusion. We need to help people to understand why it is important to save, and although the lessons people learn from the financial crisis will act as a spur to save at the moment, a longer-term change in culture is needed.

We need to ensure that there is an evaluation of the effectiveness of the scheme. We need to demonstrate that it works. There is a significant cost to the taxpayer—it will cost £340 million in the first three years of its operation, falling to £60 million thereafter—so we need to demonstrate that taxpayers' money is being spent well and wisely, that the Bill has led to people saving money and to an increase in net wealth.

There are some rough edges to the Bill. We talked on Report about the mismatch between the groups of people we want to help and the way in which the Government will deliver the Bill by tackling the issue of benefit entitlement. We understand the practical and pragmatic approach that the Government have adopted in trying to achieve the Bill's goals, but we should not forget that there will be people on low income who are not eligible for the account, and we need to find ways of encouraging them to save. More work needs to be done on that.

The Bill is a welcome measure that will help to tackle the lack of savings among a small group of people—although it must be said that 8 million people are eligible. The problems families are facing today give a clear sign that we need to do far more work to encourage people to save to provide a cushion for short-term fluctuations to their income, and to enable them to take responsibilities for their families' futures in the long term. The Bill is a start, but far more work needs to be done to achieve the goal of increasing savings in this country.

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A

Similarly, I should always expect a Conservative Shadow Minister to denigrate, wherever possible, in any debate, proportional representation.

Submitted by Anthony Tuffin

Photo of Stephen Ladyman Stephen Ladyman Labour, South Thanet 3:09 pm, 25th February 2009

This has been an enjoyable Bill to be involved with, and I am grateful to Members of all parties for that. The debate has been good-humoured and largely consensual, and we have done some good work. At worst, the Bill will put about £250 million into the pockets of people on low incomes that they would not have otherwise had. At best, it will encourage some of those on low incomes to get into the savings habit to make their lives a bit more comfortable in the future. I do not believe that any Government other than a Labour Government would ever have contemplated introducing such a Bill. It might have taken slightly longer to get here than we envisaged, given that we first put it in the 2001 manifesto, but the fact that it has reached this stage is most welcome.

Not only have we had an enjoyable time bringing the Bill to this point, we have even won an important and welcome concession from the Government on ensuring that carers of working age will be included in the ambit of the Bill, as the result of an amendment that my hon. Friend the Economic Secretary has said he will introduce in the Lords. It is not often that Members win a concession from the Government, and I am sure that the Whips will be keen to point out that it was won through argument and persuasion, without the need for blood to be spilled on the floor of the Lobby. I am grateful to my hon. Friend for the open way in which he listened to arguments and accepted them, and for saying that he will act to address the matter.

The one thing that we need to think a little more about is the fact that we are all being a little bit po-faced about the objectives of the Bill. The whole purpose of it is to get people into the savings habit, but we seem to be assuming that that will be a positive thing only if they carry on saving everything and keep all their money in the bank. I believe that if we manage to encourage people on low incomes to do some saving, one of the best ways to encourage them to keep saving in future will be if they spend some of the money that they gain on something fun. I would not want us to create an environment in which people think that they have to put every penny of the benefit that they gain from a saving gateway account into another savings account immediately and lock it away there for their retirement. I hope that some of my constituents use it to buy themselves a new pair of fancy shoes or a weekend break with the family. As long as they get the savings habit and carry on saving, the Bill will have been well worth while. I congratulate my hon. Friend the Economic Secretary on his work in bringing it this far.

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Photo of Jeremy Browne Jeremy Browne Shadow Minister (Treasury) 3:11 pm, 25th February 2009

This stage of the legislative process is a little bit like an Oscars ceremony, as we run through all the people who are worthy of appreciation and thanks. I should like to thank the witnesses who appeared before us in the Public Bill Committee a few months ago, the civil servants for the assistance that they have given and Mr. Hoban for his thorough and intelligent scrutiny of the Government. I thank the Economic Secretary for the considered way in which he has taken on board all the representations that have been made to him.

Dr. Ladyman is right to draw our attention to the way in which the Minister has found himself persuaded—I shall not call it a concession—by arguments that carers should be brought within the scope of the Bill. That is an important change, which will be appreciated by many people who feel somewhat neglected in other regards or feel that their burdens are not sufficiently appreciated by society as a whole. They will have looked upon our deliberations, and when they come to feel the full consequence of them they will appreciate what has been done.

There are two important features of the Bill, which have been the reasons why it has commanded support from all parties. First, it will provide a buffer for people who otherwise run their finances down, often because they have very little money, to a point where they have no security if there is some external shock for which they have not budgeted. That can make people's lives difficult. As we have said before, if the washing machine breaks down or some feature of their life is suddenly changed without their being able to anticipate it, those people have no scope to address that difficulty. If the Bill helps in that regard, it is very much worth while.

The bigger objective is to give people who currently have the smallest stake in society a bigger stake, and particularly a financial one. The amounts of money saved do not have to be particularly large, but the people who are enticed to save money because of the Bill will feel that they are participating in a wider collective endeavour and that the actions that are taken in their community, whether by Government or other organisations, have some bearing on their lives. They will then feel that they have a stake in the process, which is hugely important. As I said on Second Reading, it is the equivalent of the share-owning democracy being extended to people in the bottom 10 to 20 per cent. of society. That will bring widespread social benefits if the Bill works out as successfully as we all hope.

Of course, we will see whether we have got some of the details right once the Bill takes effect, such as whether the 50p rate is correct, too high or too low and what people do after the two-year period has elapsed. However good the pilots were, we will never really know that until the scheme is properly up and running. I very much hope that it will succeed, and I have enjoyed participating and wish the Bill well.

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Photo of Charles Walker Charles Walker Conservative, Broxbourne 3:15 pm, 25th February 2009

The Bill is a small step towards ensuring that this country rediscovers the savings culture. Our long-term prosperity will be built not on spend now, worry about it tomorrow but on savings and investment for the future. This is a small but important step.

We must drive discipline through the income scale. The Bill is about low earners, but the savings culture is relevant to everyone, wherever on the scale they appear, because they all have costly needs and demands. When people lose their job, it does not matter whether they are earning £10,000 or £100,000, they find themselves in difficulties. We must ensure that in future, people put some money aside for a rainy day.

We must remember that although the current financial crisis was not caused by people on low incomes, they are too often paying the price. Credit is drying up at their end of the scale as well, and they are struggling even more to gain affordable credit. As a result, they are being forced deeper into the arms of loan sharks charging exorbitant rates. We talk about putting things on the never-never, but as we know, as soon as someone misses a payment to loan sharks, they are on the doorstep making their life extremely difficult and miserable.

I need to be able to sell the Bill in Broxbourne, because it will be relevant to many of my constituents. I hope that the Minister and his civil servants will put together a pack of information leaflets, brochures and so on so that I can play my part in selling it to my constituents and getting the citizens advice bureau involved. I want to play an active part in giving it the push that it deserves.

I congratulate the Minister on all his work on the Bill. I hope that when he gets back to his office this afternoon the phone will be ringing off the hook, with all the chastened chief executives of major clearing banks calling him up and demanding the chance to deliver this initiative as soon as it comes into being next year. It has been a great pleasure to serve on the Public Bill Committee and to participate in the Bill's various parliamentary stages. I wish it the best of luck.

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Photo of John Redwood John Redwood Conservative, Wokingham 3:18 pm, 25th February 2009

The Bill is a mouse of a measure to handle an elephant of a problem. The Liberal Democrats say that this is the Oscars ceremony, but can anyone believe that the Bill deserves an Oscar when it is well below the standard of an amateur production, albeit by a group of professionals who should know better? Indeed, Ministers' audacity in not realising how feeble the Bill is in relation to the savings problem that they confront takes one's breath away.

We meet against the background of a huge economic crisis, in which savers are being wiped out daily. If they have risky assets, they are falling in value catastrophically. If their money is on deposit in the banks, the interest rate is now tiny. In the stages of the Bill in which I participated, one of my biggest disappointments was the unwillingness or inability of the Economic Secretary and the Government to tell us anything about how the money would be invested and what sort of return it might earn, yet they have had a decade to prepare the measure. They tell us that they have consulted the savings industry, which will help effect the Bill, but there the Economic Secretary sits, thinking of something else, because he knows that he will get his Bill and he has not a clue about what sort of offer or deal will be available when it is enacted and translated into action on the ground.

It is a disgrace that so many people in this country are so poor that they have no savings. It is a disgrace that a savings culture for such people has not been more actively promoted to give them a buffer and more options and choices in life. It is a common aim of all the parties represented in the House to do something about it. However, do the Government genuinely believe that such a measure will work if interest rates for savers are 0.5 per cent. or 1 per cent.? Do they believe that it will work if all they do is borrow more and more, thus conveying the message that the way to get ahead and have a decent job is to borrow and borrow, not save and be prudent?

The Government are by far the most imprudent with whom the country has ever been cursed. They add trillions to the public debt— [Interruption.] They think that that is funny, but they have the audacity to say to the very poor that they must never borrow, but save, and that the Government will give them a tiny increment from the money that they will borrow on behalf of us all. They cannot even tell the prospective savers what sort of an interest rate they might get on their money.

It is typical of a Government who have lost the plot, who are wrecking the economy and driving us deeper and deeper into gross national debt that they introduce a pathetic, limp, delayed and inadequate Bill and feel proud of themselves.

Question put and agreed to.

Bill accordingly read the Third time and passed.

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