Clause 2 — Repeal of Saving Gateway Accounts Act 2009

Savings Accounts and Health in Pregnancy Grant Bill – in the House of Commons at 6:45 pm on 22nd November 2010.

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Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

With this it will be convenient to discuss the following:

Amendment 13, page 2, line 10, at end insert 'with effect from 1st January 2014'.

Amendment 14, page 2, line 10, at end insert-

'(1A) The provisions in subsections (2) to (5) come into force with effect from 1st January 2014.'.

Amendment 15, page 2, line 36, in clause 4, leave out subsection (2).

Amendment 16, page 2, line 39, leave out 'The rest of this Act ' and insert 'This Act, apart from section 2'.

Amendment 27, page 2, line 39, leave out 'The rest of'.

Amendment 40, page 3, line 1, leave out subsection (4).

Amendment 28, page 3, line 1, leave out from beginning to '3(1)' and insert 'Section'.

Amendment 29, page 3, line 2, leave out 'extend' and insert 'extends'.

Amendment 41, page 3, line 4, leave out subsection (5).

Amendment 31, page 3, line 4, leave out from beginning to '3(2)' in line 5 and insert 'Section'.

Amendment 32, page 3, line 6, leave out 'extend' and insert 'extends'.

Amendment 39, page 3, line 7, leave out 'The rest of'.

Amendment 37, title, line 1, leave out 'to repeal the Saving Gateway Accounts Act 2009;'.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

We are in danger of repeating discussions that we had in Committee, but the Prime Minister has said that opposition is an important constitutional duty, and I intend to fulfil it in the next hour on the question of saving gateway accounts.

Amendment 2 seeks to remove the abolition of those accounts by removing clause 2. As ever, and as I said in relation to the first group of amendments, I am trying to be pragmatic. The Minister will note that amendment 13 seeks merely to delay the abolition of the saving gateway until 1 January 2014 to allow him and his officials a period of reflection in which they can examine whether abolition is required.

The saving gateway, which was passed originally in the Saving Gateway Accounts Act 2009, is important- [ Interruption. ]

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. One conversation in the Chamber is quite enough at any one time, and the conversation we are supposed to be hearing is the shadow Minister addressing the House.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am grateful, Madam Deputy Speaker. This debate is about how we help poorer people in society and save resources. Of course, that might not interest all hon. Members in the Chamber today, but that is another discussion- [ Interruption. ]

The Saving Gateway Accounts Act was introduced to pave the way for a national scheme. Members will be aware that the saving gateway was to be a cash savings account for those on lower incomes. It was to provide a financial incentive to save, with the Government making a matching contribution for each pound that people saved into the scheme. The saving gateway was first proposed in 2001, after which it was consulted upon and piloted twice. In total, more than 22,000 people took part in the pilots, achieving an additional £15 million of savings. As Members will know, accounts would have run for two years and would have been offered by financial institutions such as banks, building societies and credit unions. The Government would have contributed 50p for each pound saved, which would have been paid at the end of the accounts.

The criteria for opening a saving gateway account were fairly straightforward. If an individual in the community was on income support, jobseeker's allowance, incapacity benefit, employment support allowance, severe disablement allowance or carer's allowance, or if they were on tax credits and their income was less than £16,040 a year, they would qualify for the saving gateway scheme. The objectives of the saving gateway scheme were quite simple: to kick-start a savings habit among people on lower incomes, by providing a strong incentive to save through a matching fund contribution from the Government; and to promote financial inclusion by encouraging people to engage with mainstream financial services.

The pilots, which were successful, were delivered in partnership with the then Department for Education and Skills, with the Halifax bank-now HBOS plc-providing banking facilities. The first pilot ran from August 2002 to November 2004, with individual accounts open for an 18-month period. In the first pilots, about 1,500 people took part, and the scheme covered five areas: Cambridge, east London, Hull, Cumbria and Manchester. People living in those areas were eligible to open an account if they were of working age-between 16 and 65-and had household earnings of less than £15,000 or individual earnings of less than £11,000, or if they were out of work and receiving benefits, as I have described. Individuals in the first pilot were allowed to save up to a limit of £25 a month in the account, up to a maximum of £375 overall, for which they received a pound-for-pound match when the account matured. A final evaluation of the first pilot was produced in March 2005. Based on that pilot, the largest saving gateway pilot was run in the same five locations, as well as in another area, South Yorkshire. That pilot started in March 2005, and the accounts were open for 18 months, as in the first pilot. In total, around 22,000 accounts were opened and the second pilot was opened to a wider income group, including households with incomes of less than £50,000, individuals with incomes of less than £25,000 a year and, similarly, those receiving benefits.

The point of the pilots was to establish whether the scheme would be successful and whether it would meet the objectives that we had set, which were to encourage lower-income savers and to ensure that individuals saved resources that they would not have saved previously. The key findings from the pilots were that the saving gateway scheme generated new savers, that new saving was generated among existing savers and that the scheme brought individuals into contact with mainstream financial institutions for the first time. Research from the pilots showed that 60% of participants were still saving regularly two years after they had ended, and that three in 10 participants who were not saving regularly before the pilot were now doing so. Participants were extremely positive about the saving gateway. I quoted in Committee the fact 98% of people involved in the pilots said that they would open another saving gateway account if offered the chance, while an astonishing 99% would recommend it to a friend.

In the Budget on 24 March, my right hon. Friend Mr Darling announced that the first saving gateway accounts would be available from July, and that Lloyds Banking Group, the Post Office and the Royal Bank of Scotland Group would provide the accounts on a regular basis. Before we touch on the fact that the accounts did not open in July, it is important to refer to the all-party support for the saving gateway account before the election. One of the reasons I wanted to give the Minister a chance to reflect, having had discussions in Committee, was that when the then Saving Gateway Accounts Bill came before the House in February 2009, he said:

"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."-[ Hansard, 25 February 2009; Vol. 488, c. 323.]

That was the Minister, before the pilots had been completed, saying that he believed that that Bill had merit, that he supported it and that he believed that it would meet some of the difficulties that people on low incomes would face if they lost their jobs. However, it was not just the Minister saying that, but Mr Browne-now the Minister of State, Foreign and Commonwealth Office-who was then the Treasury spokesman for the Liberal Democrats. On Third Reading, he said that

"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."-[ Hansard, 25 February 2009; Vol. 488, c. 325.]

The evidence that we took in Committee from those responsible for administering the scheme and for looking at its effectiveness indicated that they had no reason whatever to believe that in the event of a change of Government, which I accept and acknowledge has happened-

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am a realist-the Government have changed-but any realist would say that before the election the Conservative party and the Liberal Democrats supported the then Bill, along with my right hon. Friend the Member for Edinburgh South West, the then Chancellor, and his team, and every other Labour Member. Nothing has changed since except for the change of Government, which has meant that the Minister and the Liberal Democrats have stood on their heads and jettisoned the scheme, which would have been in place in July and would have helped to support the poorest in our society.

Photo of Sarah Newton Sarah Newton Conservative, Truro and Falmouth

There is another significant change since that time, which is the financial mess that we found we had inherited. This Bill, along with other measures, has to sort out our finances. When the Public Bill Committee took evidence, Carl Emmerson of the Institute for Fiscal Studies said:

"I think that £1,000 at age 18 will improve their life outcomes and will help. I think that the money spent on education or on increasing their family's incomes over those first 18 years is probably going to help more." --[ Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 12, Q23.]

Does the right hon. Gentleman agree?

Photo of David Hanson David Hanson Shadow Minister (Treasury)

There are two points about that. I do not wish to cause the hon. Lady any difficulty, but I think that her intervention relates to the previous group of amendments, on the child trust fund. We are now talking about the saving gateway account, which is for poorer people. It does not relate to people under the age of 18, and if she looks at Hansard, I think that she will realise that she is talking to the previous group of amendments.

However, I should also say that if she thinks that the current financial situation is difficult, I look forward to her supporting amendment 13 in the Lobby, because it would give the Minister time to reflect. Amendment 13 says that we should delay scrapping the saving gateway until 2014. We have had the saving gateway account-which the Minister and the Liberal Democrats supported in opposition and which Labour supported in government-which has had its pilots. The pilots have proved successful, and by any assessment more people have saved, resources have been generated and people on low incomes have learned the saving habit. The Bill abolishes the saving gateway account that was to be implemented in July this year, until the Minister put a hold on that.

Two amendments are the focus of the debate. Amendment 2 would delete clause 2, so that the saving gateway account would not be abolished. However, I am being pragmatic, and I tabled an amendment to abolish the saving gateway account on 1 January 2014. That would provide a three-year gap in which the Minister could, as Sarah Newton said, look at the economic situation and assess whether the financial contributions are practical and desirable. I happen to believe that they are, and that the scheme is affordable now, but I will park that debate for the moment, and simply tell the Minister and the hon. Lady that if they accepted amendment 13, they would accept minimal cost, if not almost no cost, to the Treasury. All that would be abolished, effectively, is the pilots, and their assessment. The saving gateway scheme has not started, and there would be no financial contribution to it because it did not commence in July 2010.

The Minister could accept amendment 13 and not commence the scheme next year. He could accept it and not commence it in 2012, or 2013. He could make an assessment in 2014 of the principles that he espoused in Opposition with his hon. Friend the Member for Taunton Deane-that the scheme is a positive one that brings benefits. If the economic situation improves during those three years-the Minister presumably believes it will as a result of his other economic policies-he could consider returning to the saving gateway scheme without repealing the Saving Gateway Accounts Act, which is what the clause will do, and end any possibility of the scheme being introduced.

I am offering the Minister an opportunity. He need not abolish the scheme, but could reflect on it. He could delay its commencement until 2014, and not rip up a scheme that he supported in opposition, and on which valuable work was done in five areas in the first pilot, and in those areas plus south Yorkshire in the second pilot.

The Minister has a duty to explain why he believes the scheme should not progress now. If the reason is finance, amendment 13 provides the opportunity to reflect on that. The Opposition would swallow our pride and support him in not having the saving gateway scheme starting this year, next year or the year after. That would be a big step for us, but we might consider it if he would accept amendment 13.

Photo of Bill Esterson Bill Esterson Labour, Sefton Central

Is not the truth about the Government's position on the saving gateway that if they were serious about using it as part of tackling the deficit, as Sarah Newton said, they would support amendment 13 and delay repeal of the 2009 Act, because improving the financial habits of people from the poorest backgrounds is part of what the coalition Government say is their solution to solving the country's financial problems?

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I thank my hon. Friend for his intervention. He emphasises that amendment 13 would not cost the Government anything. If it cost anything, it would be a minuscule amount to maintain the scheme because it has not yet started. The Minister froze it, and said that he would not start it in July 2010, as planned by the previous Labour Government. All the expense to date has been on the pilots in phase 1 and phase 2. I remind him that the legislation had his support and that of his hon. Friends the Liberal Democrats without a vote on Third Reading, and with warm words being spoken in Opposition. The situation now-it is self-evident to my hon. Friends-is that we have a scheme that is on the statute book and that has been successfully piloted but that has not commenced. Amendment 13 gives the Minister the opportunity to delay its commencement until at least 1 January 2014.

If the situation improves and the Minister's economic policies ensure that we tackle the deficit, build a strong economy, recoup our money from Ireland and consider all the issues that we have talked about during debates on the economy over the past few months, he will be able, if he wants, to go back to his electorate in Fareham, Truro, Falmouth and everywhere else and say, "Not only have we helped to tackle the deficit, we have not hit poor people in doing so." He will have secured a scheme that he can continue to implement because he will be able to repeal the 1 January 2014 date later. Presumably, both the Liberal Democrats and the Conservatives thought that it was a good thing in February last year, or they would have voted against it on Third Reading, and would not have used such warm words to describe it from the Opposition Dispatch Box.

Photo of Sarah Newton Sarah Newton Conservative, Truro and Falmouth

I agree that the coalition definitely wants to enable people to make better financial decisions, and I am sure that the Minister will detail all the ways in which we plan to do that, but I want to bring the right hon. Gentleman back to the evidence that we heard about the saving gateway from the Institute for Fiscal Studies:

"There was not any really strong evidence from the saving gateway that it led to more overall saving from lower-income households."

I could go on. There is not the strong evidence base that the right hon. Gentleman refers to.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

That is not what the pilots showed. They showed that there were new savings, engagements and increased resources. Does the hon. Lady believe that, at no cost, we could maintain the saving gateway on the statute book, allow it to develop for the next two to three years, and not abolish the scheme until 1 January 2014? If she voted for amendment 13 tonight, she would vote not to spend any money or to start the scheme but simply to say, "Let's note the pilots that have taken place and that the legislation is on the statute book, but let's not repeal it until a future date."

That option would allow the Minister to accept the amendment and reflect on the matter. I remind him that not only did he and the hon. Member for Taunton Deane support the measure in February, but nowhere in the coalition agreement or at the general election was there a manifesto commitment to abolish the saving gateway account- [ Interruption. ] John Hemming asks whether it was in our manifesto. No, it was not. The Minister knows that it was not in his manifesto, but it was certainly in ours to maintain it once it had started.

We heard warm words about the scheme before the general election, no words about its abolition during the election and no manifesto commitment to do so. We have had successful pilots, and there is an opportunity tonight for me to put aside my wish for it to start in July and to ask the Minister not to abolish the scheme now, but to reflect on it and allow it to stay on the statute book. If it is a good scheme, as it presumably was in February and at the election, the Minister could return to it in the future and decide whether the Government can afford to contribute to it.

The pilots showed that the scheme increased poorer people's savings. They were successful, and I hope that the Minister will not throw it out and stand on its head what he said in February 2009. He has had plenty of other opportunities to do that.

Photo of Paul Maynard Paul Maynard Conservative, Blackpool North and Cleveleys 7:30 pm, 22nd November 2010

I welcome this opportunity to express my views on the concept of saving gateways. I listened with interest to the shadow Minister expressing his desire to save them for the future, but in his defence he missed some of the key pieces of evidence that we had heard in the Bill Committee. I should like to remind him of some of that evidence. Adrian Coles, director general of the Building Societies Association, told us:

"No building society had committed to offering a saving gateway".

Eric Leenders, executive director of the British Bankers Association, said that there were

"only a couple of providers who felt that it was suitably beneficial for them to provide the account". --[ Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 34, Q98.]

The Post Office would participate only if provided with taxpayers' subsidy. It will cost £300 million to continue with the scheme.

There was a great deal of debate in Committee about the possibility of the fourth link in that chain being credit unions, and I pay tribute to Yvonne Fovargue for her assiduous advocacy of their cause. In a way, she was quite right. I was impressed to hear how many credit unions there were in Makerfield. I think she said that there is one at the end of almost every street, or certainly within walking distance for most of her constituents. We have a very successful one in Blackpool, too, but they would not be available for this purpose in the many parts of the country where the credit union movement has yet to implant itself fully, so we would be left with the kind of postcode lottery against which the shadow Minister was fulminating in the previous debate. We cannot have it both ways.

Photo of Bill Esterson Bill Esterson Labour, Sefton Central

The hon. Gentleman describes a lack of credit unions in certain parts of the country, which is precisely why the opportunity to have the saving gateway is so important. Does he not appreciate that Government input into helping lower-income families to save is exactly what is needed to provide the necessary impetus?

Photo of Paul Maynard Paul Maynard Conservative, Blackpool North and Cleveleys

Unfortunately, the hon. Gentleman's point was not borne out by the evidence of Mark Lyonette of the Association of British Credit Unions Ltd. He was quite clear when he said of the saving gateway:

"None of the credit unions built their business plan around it, so I don't think its withdrawal is a threat to the health of credit unions." --[ Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 52, Q149.]

It is important to ensure that we give credit unions what they want, and that is why we are seeing reforms to the Credit Unions Act 1979 enabling them to work with more than just individuals-they will now be able to work with interest groups, social enterprises and the like. We should not therefore allow the Opposition's statement that credit unions have to be involved to obstruct the fact that this scheme will cost £300 million to continue. This might cause some Opposition Members to roll their eyes and shake their heads, as they did earlier in response to my hon. Friend Sarah Newton, but we are now living in a very different fiscal situation. The shadow Minister was quite right: the Government have changed, and we now have to take tougher financial decisions. We cannot justify spending £300 million on a saving gateway that will not be universally accessible across the country because there simply are not enough commercial providers willing to provide it. This is not a debate about a group hug, or about trying to encourage everyone to save more. We all know about those things.

I was delighted to hear the hon. Member for Makerfield refer to Brighthouse, of which there is a branch in my constituency. I almost thought that she must have sneaked into my surgeries, because her tales about her voters' problems with Brighthouse were the same as mine. However, I do not think that the saving gateway is the answer to the problems that many poor people face in getting access to cheap credit. It is not the answer to the problems we have been discussing. It fails the test that I raised on Second Reading-a test that I call my rhododendron test. The Opposition have a tendency to fixate on a single item of legislation that they believe will somehow solve all the problems in the world, but I am afraid that the saving gateway, however popular the pilots might have been, has not been popular enough with the providers that we need to ensure its success. That is why I support the Government's decision to remove the scheme.

Photo of Yvonne Fovargue Yvonne Fovargue Labour, Makerfield

I want to talk about the abolition of the saving gateway and the disappointment felt not only by the putative savers but by the credit unions, which thought that it would have a massive impact on the sector. The credit unions put a large amount of time and money into designing and introducing their product because they believed that the scheme had cross-party support. While matching the money is important in incentivising savings, it is not the only factor involved; in fact, it is not always the most important factor in influencing people to save. As we have heard, ease of access to a financial institution cannot be overstressed, and to use the existing credit unions at the heart of the community and to encourage the growth and development of the sector via this product was seen as vital. Indeed, Mark Lyonette said that encouraging people to save with credit unions was the issue. People are used to credit unions giving out loans, but the important thing is to provide them with products that encourage people to save.

The message that has been endorsed by the Government via the scheme is that even a small amount of savings matters, and that cannot be overstated. Most people do not deliberately set out to be in debt, but life events-such as the loss of a job, accidents, disability or even something as simple as the cooker breaking down-can cause debt. A small amount of money saved can act as a buffer, and people can then feel more in control and have more confidence. The value of that feeling cannot be overestimated.

It might be conventional wisdom that people should pay off all their debts before they start to save, but I take issue with that, as do people from the credit unions. As I said, events happen. The washing machine might break before someone has paid off the cooker, and if there is nothing to fall back on, the spiral of debt gets faster and deeper. That is when people turn to the legal loan sharks who charge more than 2,000%, or the actual loan sharks who prey on the vulnerable who have no resources. It is vital to provide a mechanism to remove people from the spiral of debt and make it easier to save. We know that people want to save for such events. Otherwise, why would so many people have saved with Farepak, a scheme that they believed was safe? If we could provide a trusted, easily accessible, local savings vehicle to encourage saving, we would prevent a considerable amount of human misery as well saving the health service a considerable sum for the treatment of depression and, in some cases, attempted suicide due to debt. A small amount of investment now could prevent a huge amount being spent later, and I urge the Government to reflect on that.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

The Government have to look at what can be done when resources are limited. It is generally accepted that we need to enable people on lower incomes to save, and access to bank accounts and credit unions are important in that regard. We had an evidence session in Committee, which was quite useful. The Institute for Fiscal Studies has no axe to grind in this regard, but its acting director, Carl Emmerson, said that

"perhaps the £115 million should just be spent on boosting the incomes of these individuals."

I then asked him:

"Or potentially on a system with more crisis loans?"--[ Official Report , Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 19, Q47.]

His response to that question was yes.

There is no question but that people need to balance their costs when they have to replace a washing machine, for example, and need the resources to do that. There is an issue there, but the Government need to look at the best way of helping people in those situations.

Photo of Fiona Bruce Fiona Bruce Conservative, Congleton

The Government are not leaving people entirely bereft of support, are they? Next spring, the new national financial advice service will be introduced, which will make available to everyone who needs financial advice-not just those in education-real support to ensure that they make the best financial plans for their families.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

Indeed. The difference with this particular scheme was that it was to provide a way of matching funds that people put into their savings. If we go back to the evidence session, we find that the Institute for Fiscal Studies was asked whether it thought the child trust fund did no harm; in fact, it showed that this particular scheme had the potential to do harm by encouraging people to put money into the savings account rather than pay off the debt at the time. The Royal College of Midwives said that if people have just had a baby, it is better for them not to save money, but to spend it on healthy living and feeding the baby well. I believe that this is where the Opposition are fundamentally wrong. According to the IFS-again, I stress the IFS rather than the Government or the previous Government-there was no strong evidence that greater saving was encouraged.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I would be grateful if the hon. Gentleman could tell us why the Minister of State, Foreign and Commonwealth Office, his hon. Friend Mr Browne supported the scheme prior to the election, did not oppose it during the election and did not vote against it on Third Reading?

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

We need to find some way of reducing this country's borrowing. We do not want to end up like Ireland or Greece. If, on looking around, we find something that costs £115 million-

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Why not support amendment 13 to delay the abolition for three years and see whether the economy picks up?

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

If there were an amendment to say that we should delay it until it is instituted by order, I would find that more reasonable, but I do not think we should set a date in the future. If there is not sufficient independent evidence that this scheme achieves a result and there are good arguments to show that there are better ways of helping people in these circumstances, I would press the Government to consider them and work with organisations such as the credit union movement to ensure that everyone has access to accounts, is encouraged to balance out their financial positions and gain wider access to crisis loans.

Photo of Bill Esterson Bill Esterson Labour, Sefton Central

The hon. Gentleman did not answer the question about why there was such a change of heart. When the figures came out after the election, they showed that borrowing was £20 billion lower than had been assumed before the election. That could not have been the reason for the change of policy.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

The hon. Gentleman ignores the fact that there was a sovereign debt crisis in Greece and that we need to learn from circumstances. If we do not do so, we will face great difficulties. We have a saving of some £100 million-plus on a scheme viewed by independent experts as not being the best way to use that money. There is no independent evidence that it even achieved its objective, save perhaps for reducing the amount of money people spent on restaurant bills when eating outside the home or on takeaways. That is what the IFS drew our attention to at the evidence session. If we are serious-and we are-about ensuring that the Government keep the interest rate on sovereign debt down so that we avoid ending up with the problems of Greece or Ireland, we must take that into account.

Yes, I accept there is a job to be done: we need to look after people on lower incomes and ensure that they have access to funding systems so they can balance their finances when they incur higher expenditure. We also need to encourage people to save where appropriate, but it is not always appropriate to do so. As I mentioned, the Royal College of Midwives said that a mother who has just given birth should not be concentrating on saving all her money; she needs to focus on eating well. On that basis, the proposals represent an entirely sensible and reasonable way of reducing the amount of money that the country has to borrow.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

First, the selection of evidence we have heard from the Committee sittings is very limited, particularly from John Hemming. Other people giving evidence explained exactly how helpful the saving gateway scheme had been in its pilot phases and could be in the future. Mark Lyonette of the credit union movement said how important saving was not only because of the money actually saved, but because of

"what it does to people's confidence that they have... a few hundred pounds built up over a year or two. It gives them some sense that they are more in control. They will have credit commitments at the same time, but it is really important to feel that there is something of a buffer. Whether through the savings gateway or some other initiative, we think that the Government can encourage-and needs to encourage-more people to get that better balance between what savings they have, however small, and their credit." --[ Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 49, Q143.]

Yes, he also said that the saving gateway was not the only way to generate savings for the credit unions, but when asked whether it would make an important contribution he said "Yes, absolutely", it would.

I did not quite understand the rhododendrons reference of Paul Maynard, but he seemed to suggest that we believed that a scheme like this was "the answer" to deprivation and poverty. That is obviously nonsense. We are not suggesting that and we never have suggested it. It is one part of a whole jigsaw of provision that has to be put in place. It is that part of the jigsaw that needs to look forward to two things: first, questions of asset inequality; and, secondly, long-term solutions where people begin to change their behaviour and build up some assets for themselves.

It is important that we start looking to the long term. What worries me about the response from the coalition Government to this Bill is that it is very short term. The response is in effect, "Let's get rid of this now. We'll make some savings. We'll destroy some schemes." Both this group and the earlier group of amendments are about looking at issues in the longer term. If we do not start doing that, we are never going to get to the point where we properly tackle poverty and deprivation. It is not that saving gateways are suddenly the answer to everything; they are simply one mechanism that would assist in tackling the problem.

The important part of assisting is not just to give people advice. There is a great deal of advice out there, and there needs to be more of it-I certainly would not disagree with that-but this scheme, because of the matching in it, is about giving people practical help and incentives. It is qualitatively different from giving people advice at school or through an annual health check on their finances, when they can tell the financial adviser that there is no money. That would not be particularly fruitful for a lot of families. This is a practical scheme. It is about matching saving; it is about incentivising saving.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West 7:45 pm, 22nd November 2010

The hon. Lady is dismissive of the importance of advice, good numeracy education in schools and an understanding of money. Proper budgeting and gaining an understanding of how to spread what I accept are limited means-I agree that this Government desperately need to deal with poverty in this country-are important; she should not be so dismissive of the importance of advice and good numeracy education in schools.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I was not being dismissive of advice; I said that it is not enough in itself. To suggest that it can be a substitute for something like the saving gateway is to miss the point-the real nudge, or the real incentive, that comes from the matching.

It has been suggested that there were not enough outlets for people to use the saving gateway, but the housing association movement was very interested in it and had a great deal of discussion about how it could become, in effect, a front end for people who wanted to save through the saving gateway scheme.

Photo of Bill Esterson Bill Esterson Labour, Sefton Central

Does my hon. Friend agree that although advice and budgeting are important, one problem in society is the lack of good financial education? For people on very low incomes, it is difficult to find a means of saving. That is the whole point about the saving gateway and credit unions; otherwise, there are not the accounts or mechanisms for people on low incomes to save.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Indeed; I agree with my hon. Friend.

My point about the housing association movement is that the people who say that there are not enough outlets to make the saving gateway really work are not sufficiently prepared to look at some of the things that already exist. I firmly believe that we could have built the scheme up. If tenants could have agreed to small savings being taken at the same time as they paid their rent, for example, which would then be passed over to the provider-whether it be a credit union or another organisation involved in the saving gateway-that would have provided a relatively straightforward and easy-to-access method for those tenants. Housing associations, which see themselves as having a wider role than simply being a landlord, felt that this would have been helpful for their tenants.

We hear so much of "We have to do this because of the deficit." We are told by the coalition Government, "We had to change our minds about all these things"-in fact, both Government parties did not support all these proposals, although they did support the saving gateway scheme-"because of the financial situation." We have two different views about how to get out of a recession. The Government parties did not just want to pay down a deficit which they suddenly claim not to have known about before, although they did know about it and, as was pointed out by my hon. Friend Bill Esterson, it had in fact been falling. They decided to reduce that deficit speedily, within five years, regardless of the consequences. There is another choice, although the Government may not agree with it.

The Government say to us, "You cannot support child trust funds or any of the other measures involved, because if you do, you will not reduce the deficit." That is not the case. We take a different view on the economy. Our view is that the deficit should be reduced far more gradually. That was also the clear view of the Liberal Democrats as recently as late April: they said that fast cuts would be exceedingly dangerous. I do not see what has changed since then.

Ireland has been mentioned yet again. It cut public sector salaries and services, and it cut very hard. Indeed, only a few months ago it was being set up as a model in that regard. However, it has not got itself out of its financial difficulties.

We believe that if we reduced the deficit more slowly, two things would happen. First, we would be able to make choices about the things that are important, and I believe that the saving gateway would be one of them. Secondly, if we did not cut so drastically, unemployment would not be as high, which would mean more money for the Treasury, and we would not have a growing deficit problem. I firmly believe that if we proceed with the Government's proposals the deficit will not be reduced as fast as they would like, despite the cuts, and it may actually increase.

We believe that those choices exist, and that the saving gateway is important because of the advantage that it brings to low-income families. It represents a long-term and real effort to change behaviour and improve the circumstances of such families, and that is why we want to retain it.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

The speech of Sheila Gilmore was remarkable. It appears that only one group taking part in international debates is suggesting that we should be less aggressive in tackling the deficit and should put ourselves at the mercy of international markets, and that group is the Labour party. Surely the one lesson that should have been learned from our current circumstances is that a credible plan is needed to tackle the deficit, but Labour lacks that credible plan.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Many economists share our view, including Joseph Stiglitz and David Blanchflower. It is not true to suggest that it is only the view of the Labour party. There are different views, and it is entirely legitimate for people to hold different views, but it is simply not true that no one shares our view that reducing the deficit too rapidly is dangerous.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

If the hon. Lady reads the comments of international organisations such as the OECD, the International Monetary Fund and the European Union, and those of rating agencies such as Standard & Poor's, she will find that mainstream opinion agrees with the Government about the need to take action now to tackle the deficit in order to avoid the crises that we are seeing elsewhere in the world. All that we hear from the Labour party is "Let us delay the difficult decisions. Let us go into the election with the structural deficit, and try to deal with it in four or five years' time rather than now." That has been the theme of Labour Members' contributions throughout our debates on the Bill. They have denied the need to tackle the deficit now, and have ignored the lessons that are being presented all around us.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

Let me make some progress and explain why we are repealing the Saving Gateway Accounts Act 2009. The repeal is part of our deficit reduction policy. Mr Hanson quoted from my Second Reading speech. It was the third time that I had heard him use the same quotation. Let me now, for the third time, expand a little on what I said on that occasion. I said:

"The pilot scheme demonstrated some benefits, but it demonstrated some challenges too... What are the long-term benefits? What are we getting in return for the quite generous bonus that we are giving to savers?.. In the second pilot, questions were raised about whether the scheme was effective... First, there was no statistically significant evidence that, in delivering genuinely new savings, the saving gateway accounts delivered higher overall net worth."

I referred to a

"number of anecdotes, rather than hard evidence, used to support the proposal", and added:

"It appears that money was moved from one set of savings to another, perhaps from a current account to a savings gateway account, simply to secure the Government match."-[ Hansard, 13 January 2009; Vol. 486, c. 145.]

While accepting the principle behind the saving gateway account, we nevertheless flagged significant concerns about its effectiveness.

The right hon. Gentleman mentioned the pilots. According to the conclusion from the second pilot,

"when we look at a broader measure of net worth (including investments as well as all cash deposit accounts), there is no statistically significant evidence that funds held in these forms have increased... we nevertheless do not find statistically significant evidence of an increase in overall net worth among this group."

Carl Emmerson said in his evidence to the Committee:

"There was not any really strong evidence from the saving gateway that it led to more overall saving from lower-income households." --[ Official Report, Saving Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 18, Q42.]

Given the fiscal constraints that we face, we must question the value for money to be obtained from this project. It would be nice to be able to proceed with it, but the evidence suggests that it does not increase saving and does not possess the benefits ascribed to it by Labour Members. Not only is the evidence of its effectiveness in question, but it would cost more than £300 million over the next five years, which makes it unaffordable in the light of the need to reduce the deficit.

The other strand of the argument, touched on by Yvonne Fovargue, is access. Who would be able to gain access to the saving gateway account? My hon. Friend Paul Maynard echoed Adrian Coles, the director general of the Building Societies Association, who said that

"no building society had committed to offering a saving gateway account".

Eric Leenders of the British Bankers' Association said

"there were only a couple of providers who felt that it was suitably beneficial for them to provide the account."

The banks that said they would provide accounts were Royal Bank of Scotland and Lloyds. The Post Office would take part in the scheme only if it received more taxpayers' money.

I do not think we would have seen the easy access that the hon. Lady believed to be a key part of the scheme's attraction. The only credit union outlet in my constituency is in a deprived area, and is open for only a short time each week. In my constituency, credit unions would not have been a vehicle for access to the saving gateway account.

Given that we do not intend to proceed with the scheme, we should leave no room for uncertainty among financial institutions or advice-giving bodies, and the best way in which to be clear about our intentions is to repeal the 2009 Act. I believe that if a future Government revisited the scheme, they would design it very differently. If the right hon. Gentleman wishes to press his amendment to the vote, I will ask my hon. Friends to oppose it.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am disappointed by the Minister's response, but that is the nature of the role that I currently fulfil. He did not oppose the saving gateway in opposition or in the general election; he did not vote against Third Reading of the Saving Gateway Accounts Bill; and he could have taken the opportunity today to accept the amendment enabling him to delay the repeal of the Act until a later date in order to judge how the economic situation developed. I have to assume that he says one thing in opposition and another in government, and that he is abolishing the scheme on the basis of dogma rather than the economic situation. I urge my hon. Friends to reject clause 2, and to support the amendment.

Question put, That the amendment be made.

The House divided: Ayes 197, Noes 300.

Division number 123 Savings Accounts and Health in Pregnancy Grant Bill — Clause 2 — Repeal of Saving Gateway Accounts Act 2009

Aye: 197 MPs

No: 300 MPs

Ayes: A-Z by last name


Nos: A-Z by last name


Question accordingly negatived.