New Clause 17 - Premium Bonds

Part of Finance Bill – in a Public Bill Committee at 10:30 am on 24th June 2004.

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Photo of Andrew Tyrie Andrew Tyrie Shadow Paymaster General 10:30 am, 24th June 2004

This is a very interesting but minor clause, which should detain us for about six minutes. As I understand it, it only provides the Treasury with the power to vary the terms under which the product is offered to the customer. It does not, as I was initially concerned when I first read it, enable it fundamentally to alter the shape of a premium bond and the type and range of products that may be made available. I should

like the Minister to confirm that important point. As she will probably know, some people consider even premium bonds to be an unacceptable form of gambling. Indeed, Harold Wilson described them as such.

Now, of course, measures to deregulate gambling have been advanced—we do not know whether the gambling Bill will be introduced. It crossed my mind when I saw this clause that it could be part of a wider set of proposals to enable the Government to engage more directly in the gambling sector. As it happens, I would not in principle be against a widening of the structure of premium bonds, but if that were to be undertaken it would merit serious debate.

As it stands, we accept the measure, although I should like the Minister to confirm the point that I have just made about the limit of its scope. I note the increased importance of premium bonds in Government funding; no doubt that is why the clause has been introduced. The Government will need to raise a good deal more money, as the Red Book has shown—perhaps more even than they have set out; if I had to bet, I would do so on that side of the line. The importance of premium bonds has doubled over the past 12 months as a source of funding for the Debt Management Office; I think that I am correct in saying that it has increased from about £4 million to about £8 million. They now account for about 20 per cent. of total national savings activity, or about 7 or 8 per cent. of total funding. What was almost an irrelevant issue not too many years ago, for a Government who were not borrowing much money, is now quite an important one, so any alteration in the terms is presumably targeted at trying to obtain more custom. Certainly, the Government will need to get more custom in.

I should be grateful if the Minister could confirm that I have correctly understood the clause, as the explanatory notes were not terribly clear. I did not have a chance, although I tried, to read the original legislation—the National Debt Act 1972 and the Finance Act 1968—to make absolutely sure that the clause will do what I think it is going to do. There is an inherent tension between any form of gambling instrument that is outside Government activity on the one hand, and premium bonds on the other. It was widely held that the creation of a national lottery would be very damaging to premium bonds. As it happens, the statistics are ambiguous on that. Although the rate of increase for premium bond take-up slowed, it certainly did not fall when the lottery was introduced.

I should be grateful if the Minister could dwell on what her longer-term proposals for premium bonds are, as well as confirming my earlier point.