Clause 2

Savings Accounts and Health in Pregnancy Grant Bill – in a Public Bill Committee at 6:00 pm on 9 November 2010.

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Photo of David Hanson David Hanson Shadow Minister (Treasury) 6:00, 9 November 2010

I beg to move amendment 38, in clause 2, page 2, line 10, at end insert ‘with effect from 1st January 2014’.

Photo of George Howarth George Howarth Labour, Knowsley

With this it will be convenient to discuss the following: amendment 43, page 2, line 10, at end insert—

Amendment 39, in clause 4, page 2, line 36, leave out subsection (2).

Amendment 40, page 2, line 39, leave out ‘the rest of this Act’ and insert ‘this Act, apart from section 2’.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

In passing, there has always been added pressure for any member of the Committee to have a name at the beginning of the alphabet, and I sympathise with those who were born with the surname starting with “A” or “B”, because it involves that extra amount of concentration.

We move on now, having not succeeded in amending clause 1, which is related to child trust funds, to the amendments relating to the saving gateway. Amendment 38 would insert

“with effect from the 1st January 2014”,

to clause 2(1), as opposed to the existing phraseology, which will repeal the Saving Gateway Accounts Act 2009 with immediate effect on Royal Assent. I wish to see the Act’s repeal deferred until 1 January 2014.

The amendment is designed to test whether the Government’s decision not to introduce the saving gateway is about saving money or, once again, about dogma. The proposal in the Bill will certainly save an element of resources because the saving gateway will not be rolled out. However, we need to first consider whether we need an immediate abolition of the saving gateway, or whether we need to reflect during a three-year gap, when we can consider several issues, not least whether the economic situation improves, whether we wish to see the pilots further evaluated, and whether we believe that the saving gateway scheme is a good idea in principle.

The Saving Gateway Accounts Act 2009 (Commencement No. 2) Order 2010 was made on 24 March 2010, again by the Labour Government, to ensure that we had the development of the saving gateway scheme. That order was revoked by the Saving Gateway Accounts Act 2009 (Revocation of Commencement) Order 2010 on 26 June. That revocation meant that, unfortunately, the first account for savers could not be opened in July 2010, as planned by the previous Government.

I live in hope that the Minister will reflect on such matters and accept the amendment. Should he do so, I will be the first to go outside this building and praise him. My hon. Friend the Member for West Ham suggests that I buy the Minister a drink. I will happily do that and I will happily put out a press release to say that he has done a good job in accepting an amendment to defer the repeal of the Act for three years. If the  amendment is accepted, the saving gateway scheme could be introduced in three years’ time, if the coalition Government believe that the UK economic situation has improved. Will the Minister tell us the coalition’s view on the saving gateway scheme?

The right hon. Member for Eastleigh (Chris Huhne), a member of the Cabinet, said that he is not,

“lashed to the mast with a particular set of numbers.”

He said that it was a bit like setting sail; if the wind changes, one has to tack about to get to the destination. He added that global growth could be either higher or lower over the next three years.

Let us accept that there is a three-year deficit reduction plan. Whatever our disagreements on that plan—they are many and they are deep—the Government have a plan and if it works, there will be a reduction in the deficit. Savings in public spending will be achieved by that plan, by taking out 500,000 public sector workers, for example, or by generally decimating services. However, savings will be made.

Growth may occur in the economy as a whole; there may be the creation of further jobs and successful economies. All sorts of things could happen—who knows? By accepting the amendment, the Minister could freeze the pilots with effect from today, maintain the Act on the statute book, and ensure that in three years’ time he revisits the issue and looks at whether revocation of the legislation should progress.

I would be interested to know whether there is any cost to keeping the Act on the statute book for three years. We would not be taking anything away or developing something that involved a major cost. All we would do is not progress from the pilots to a fully rolled-out scheme. The pilots have happened and they involved a cost. There is no cost in not progressing with the scheme at the moment. Nevertheless, the Minister seeks to abolish the saving gateway scheme and the relevant legislation as soon as the Bill receives Royal Assent. My question to the Minister is about the principle of the saving gateway scheme.

We know from extensive piloting that the saving gateway scheme was proving successful. It demonstrated that it could generate new savers and new savings. Crucially, individuals continued to save after the end of their accounts. We know that because the Bill had support from across the House.

It may be uncomfortable for me to remind the Minister of this—I hope that it is not—but when the Saving Gateway Accounts Act 2009 was going through the House, and when he sat where I sit now, he said:

“The 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 they have not had hitherto.”

That is what the Minister said more than 18 months ago. At that time, the official Opposition did not oppose the Bill, but supported it; they recognised that it had some merits and they sanctioned the carrying out of pilots.

For the benefit of the hon. Member for Birmingham, Yardley, who takes an interest in these matters as a member of the coalition, I will quote the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne), who spoke for the Liberal Democrats on Third Reading of the then Saving Gateway Accounts Bill. 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.”—[Official Report, 25 February 2009; Vol. 488, c. 323-25.]

Some 18 months ago, before the general election, the Liberal Democrats and the Conservatives were happy to support the principle of saving gateways, because they recognised—I do not wish to put words into their mouths—that contributions from the state to help poorer people to save were a good use of state resources to help generate income and ensure that those on lower incomes saved for their concerns at the time.

On 26 October 2010, the Financial Secretary said:

“I believe that people in Britain, including those on lower incomes, need to save more, and there was evidence from the saving gateway pilots that matching was a popular and easily understood incentive to save, but”— this is the crucial point—

“when we looked at the proposal ahead of the Budget, it was clear that this would have been exactly the wrong time to introduce a new scheme that would have cost us up to £115 million a year.”—[Official Report, 26 October 2010; Vol. 517, c. 206.]

Basically, the Financial Secretary believed it was a good scheme and that the pilots worked. He supported it in opposition, but budgetary constraints of £115 million a year mean that he does not now wish to proceed with it.

I will give the Financial Secretary the opportunity not to proceed in that way now, so that he can have the next three years to reconsider. He does not need to do it immediately. He would not need to repeal the Act or scrap the scheme, but he could reconsider it over the next three years. At any point during that time, when the economy picks up, he can introduce the scheme and adjust the costs accordingly. If he believes in it, why is he abolishing it? Why is he not just taking the payment holiday that the amendment would give him?

As a good judge of what is right and what is wrong, my hon. Friend the Member for West Ham keeps me on a fair track on these matters. I know that she and other members of the Committee would say to me, as the Opposition spokesman, “Go ahead with the scheme now.” That is my favoured option and, for the avoidance of doubt, if the amendment is not agreed, I will ask my hon. Friends to vote against clause stand part in due course. My favoured option would ensure that we do not wreck a lot of work on the saving gateway, that we do not throw out the pilots that we have had, that we do not waste those opportunities, and that we do not let the Financial Secretary stand on his head again by saying one thing in opposition and another in government.

The hon. Member for Bristol West is in the Committee Room at the moment. When he was outside, I said to his hon. Friend the hon. Member for Birmingham, Yardley, that the Liberal Democrats supported the then Saving Gateway Accounts Bill on Second Reading. Their spokesman in opposition, the hon. Member for Taunton  Deane, supported it and said that it was a good thing. He wished it well and urged that the pilots be made a success. I looked forward to his supporting that policy during the election, and he made no manifesto commitment to abolish the saving gateway. The Financial Secretary did not do so either, but the amendment would give him the chance to look at the economic situation, to put the roll-out of the pilots on hold for whatever period of time he feels it necessary to do so, and to bank whatever savings he wishes. He could do that without our having to think again, in 2014, that this was a good idea, which should have been taken forward, and without the whole of the legislation having to be revisited and looked at again in detail.

The Financial Secretary will know that the saving gateway was to be a tax-free cash savings account for working people on lower incomes, with eligibility passported from receipt of certain benefits and tax credits. Under the saving gateway, accounts would have lasted for two years. At their maturity, the Government would have made a contribution of 50p for each pound saved, up to a maximum of £300. We would be encouraging poorer people on lower incomes and on certain benefits, with strict eligibility, to put some money aside for their future. Let us encourage people on lower incomes to save in partnership with the Government, by putting in at the end of that process—not at the start or in the middle—50p for each pound saved, up to a maximum of £300.

A savings culture is important. We need to ensure that not only those with trust funds from their families, not only those who are wealthy millionaires or just the well-off in society, but those who are poorer save towards their future. A proven method was used. The pilots showed that it was important that people could save and have independence and security throughout their lives. The then Government introduced individual savings accounts to develop a fairer distribution of tax relief, but the objective of the saving gateway was simple. It was first to kick-start a savings habit among people on lower incomes by providing a strong incentive to save through matching Government contributions. Secondly, it was to promote financial inclusion by encouraging people to engage with mainstream financial services—something that had cross-party agreement.

Such a scheme was good. It was positive. Will the Minister tell me first and foremost whether he still believes that the scheme is good? Let us put aside for one moment the £150 million a year that he has estimated it will cost this year, next year and the year after. Does he believe that the scheme is a good thing? If he does, I urge him to accept the amendment. Again, we are making some sacrifices. We should have started the scheme in July this year. That has now not proved possible because the current Government have wrecked the proposal. I am willing to reflect on our amendment in order to save the scheme. Let us look at matters when the economy picks up. Let us look at whether the Minister actually believes what he said in February 2009, and let us see whether the Liberal Democrats believe what they said in February 2009.

For the benefit of those in Committee who are not aware of such matters, the saving gateway pilots were delivered in partnership with the then Department for  Education and Skills and the Halifax, now HBOS plc, to provide banking facilities. The first pilots ran from August 2002 to November 2004 with individual accounts open for an 18-month period, and about 1,500 participants took part. The initial pilot covered five areas. It ran in Cambridge, east London—part of which my hon. Friend the Member for West Ham represents—and the city of Hull, a fine city, although it has great poverty. I went to university there and I know it well. My right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), the shadow Chancellor, represents a seat in that area. The county of Cumbria was another area, as was the city of Manchester, which is close to the constituency of my hon. Friend the Member for Stretford and Urmston.

People living in those areas were eligible to open an account if they were of working age between 16 and 65 and if they fulfilled three particular criteria: they formed a household earning less than £15,000 a year; they earned less than £11,000 a year, or they received out-of-work benefits or benefits generally. Individuals could save up to £25 a month under the saving gateway pilot and up to a maximum of £375 overall, for which they received a pound-for-pound match when the account matured. The final evaluation of the first pilot was published in March 2005.

I accept that the Minister will undoubtedly make great play of the fact that the Labour Government took a while to get the scheme up and running. Hands up on that one. It was much slower than we wished, but then the initial pilot was in place. It ran and we did the first evaluation in March 2005. That led to the second, larger saving gateway pilot, which ran in the same five locations of Cambridge, east London, Hull, Cumbria and Manchester and was also piloted in the additional area of South Yorkshire. That pilot started in 2005. Accounts were open for 18 months, as under the first pilot, and about 22,000 accounts were opened. That was a success. Twenty-two thousand accounts were opened, which would not have existed before, by people on low incomes who had not been saving.

The second pilot was open to a wider income group in order to see whether we could extend demand in due course. Individuals in the second pilot were of working age—16 to 65—and had household incomes of less than £50,000 a year or individual incomes of less than £25,000 a year, or were, as before, out of work or receiving benefits.

I welcome the Minister’s view on the success of the pilots. Although I am sure that he will give it, I ask him formally: does he think that the pilots were a success? I think that they pointed to a success in matching a targeted incentive to lower-income savers. The pilots’ key findings were that the saving gateway generated both new savers and new saving among existing savers and brought individuals into contact with mainstream financial institutions, often for the first time in their lives.

The research showed that 60% of participants were still saving regularly two years after the pilot ended and that three in 10 participants who had not saved regularly before taking part in the pilot were doing so at the time of the further research. Participants were also positive about the saving gateway: 98% of people who took part in the pilots said that they would open another saving gateway account if given the chance, and 99% would  recommend it to a friend. I emphasise that people who were not saving before and were on low incomes saved money, and 99% said that they would recommend the scheme to a friend. That shows that the pilot was successful in its objective of encouraging people on lower incomes to save.

My right hon. Friend the Member for Edinburgh South West, then the Chancellor of the Exchequer, announced in the Budget on 24 March this year that the first saving gateway accounts would be available in July 2010 and that Lloyds Banking Group, Post Office and the Royal Bank of Scotland Group intended to offer the accounts in 2010. The Government also expected at the time that several credit unions would offer the accounts, and continued to discuss the saving gateway with potential providers. The point about the credit unions is particularly important to my hon. Friend the Member for South Down, because as we heard in earlier evidence—and, I think, as she said herself—credit unions are a preferred method of saving in Northern Ireland, and they could and should take up the slack where the major banks that I mentioned could not offer the accounts.

A key feature of the saving gateway is the fund matching element; the Government offered a contribution for each £1 saved. The pilots showed that that provided a simple, transparent and easily understood incentive to save. Building on that, the Government recognised the need for a wider section of society to develop the savings habit earlier in life. The Budget 2010 announced that the Government would explore options for widening access to matched savings accounts, with the potential addition of more support by the end of this Parliament.

Obviously, things have changed, and we are no longer the Government, but the principle was accepted by the Opposition and the Liberal Democrats as a good thing. The only problem now appears to be the fact that it will cost £150 million a year. Again, I accept that it might be the Minister’s choice to make those on lower incomes the issue when it comes to funding the deficit reduction plan, but I cannot see why he will not accept the amendment and offer the payment holiday.

It is difficult for me to propose such an amendment, because we were looking forward to the beginning of the scheme in July this year, but the Minister has the chance to say that he will maintain the Act on the statute book and reflect on it over the next three years. At any point in that three-year period, he can introduce amendments that start the scheme in July, as initially planned. He can commence it in 2011, 2012 or 2013; indeed, in 2014, at the end of the three-year period, he can consider whether to pass another measure to defer the scheme for another year or bring it on board.

If the Minister believed that the scheme was a good thing when it was introduced in 2009, and if his only objection now is the cost, the amendment will give him a chance to put the cost aside and not roll out the scheme, while maintaining the principle of it so that at some point, the cross-party co-operation on this issue among the Liberals, the previous Government and him could come into play.

The saving gateway account is open for those on income support, jobseeker’s allowance, incapacity benefit, employment support allowance, severe disability allowance, carer’s allowance or tax credits. There will be a lot more people on jobseeker’s allowance in the near future due  to the Government’s policies, and many more people wishing to save for the future. Incapacity benefit changes are in play, and I accept that, but we need to look at the issues. The basic principle is there: there is a scheme in place, which could provide a vehicle, that does not need the £150 million the Minister mentioned.

I remind the Minister that he said on 25 February 2009:

“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… It will give people a degree of financial security that they have not had hitherto.”—[Official Report, 25 February 2009; Vol. 488, c. 322-3.]

If he scraps the saving gateway today and continues with clause 2(1)—

“The Saving Gateway Account Act 2009 is repealed.”— he is not giving people the

“degree of financial security that they have not had hitherto”.

Not for the first time on this Committee or on this topic, the Minister is standing on its head what he said was the right thing to do before the election.

Perhaps there is a coalition agreement to abolish the child trust fund and the saving gateway. Perhaps the Minister has accepted that the hon. Members for Bristol West and for Birmingham, Yardley could cause them to be abolished. He stood on his head to save money and to agree the coalition agreement. There is no coalition agreement to abolish the saving gateway; there is no agreement by the Liberals or the Minister—both supported it. I am offering him the chance to save the £150 million next year, and I will, undoubtedly, be told off by colleagues for doing so, but I am offering him that opportunity. He should accept it and take it without destroying what was a universally accepted and agreed scheme.

On 25 February 2009, the Minister also said:

“As the Economic Secretary said, there is broad support for the Bill. —[Official Report, 25 February 2009; Vol. 488, c. 322.]

I hope that the Minister can do us the courtesy of telling us whether he thinks that the Bill and the words he used in February were nonsense. Did he say them to get himself through the election and to prove that he was not part of the nasty party any more, because it had changed and was concerned about savings and poor people having an opportunity to save? If that is the case, perhaps he could say so today, but if, as I hope, he believed what he said at the time and thought that the saving gateway was a good thing, and, with the Liberal Democrats, believed that it was a mechanism to encourage saving, to allow contributions from the state to poorer people and to have the partnership that we have talked about throughout our proceedings, will he reflect on that and accept the amendment, and not emasculate the Saving Gateway Accounts Act 2009, but reconsider it when the economic situation improves in future?

Before I finish, I would like the Minister’s view on my, perhaps wrong, reading of the current Budget proposals and the previous Budget proposals. The question I ask might make me look foolish, but it is important to ask it anyway. The March 2009 Labour Budget, “Table A1: Budget 2010 policy decisions”, says that the saving gateway funding spend was £10 million for 2010-11,  zero for 2011-12 and 2012-13, and that the net index in 2010-11 was £10 million. That is in column 21 of the Red Book for the Labour Government’s Budget. In the Budget policy decisions, part of June’s Conservative Budget, item 28 on page 40 says:

“Savings gateway: not introduce in July 2010”.

However, it says that the savings in 2010 will be £10 million. That tallies with the Labour Government proposal—savings of £10 million. Savings in 2011-12 are down as zero, which again tallies with the Labour Government proposal. Savings in 2012-13 are £75 million. Savings for 2012-13 under the Labour Government proposal were zero. I would like to know where that £75 million of savings has come from.

Now, it might be a foolish question—I do not know the answer to it. It is always good practice to know the answer to questions that one raises, but I want to get that on the record, just so that we can have the Minister talk to us about that particular issue.

For the moment, as I read this year’s Labour Government proposal and this year’s Conservative Government proposal, the costs in 2011-12 are zero to the Exchequer. Now, if there is zero cost to the Exchequer in 2011-12, why not accept the amendment not to remove the saving gateway now? Why not allow the scheme to develop and, if it is appropriate, pull it next year?

This is an opportunity for the Minister to reflect on all those issues. I would like him to justify to the Committee why he thinks that the saving gateway, which he supported in Opposition, is such a bad idea, which did not do “what it said on the tin” and did not generate savings. Why does he think he cannot accept a situation that allows him to reflect on that still further, at no cost to the Exchequer?

I look forward to the Minister’s accepting the amendment or at least adopting a reasoned approach and saying why he cannot accept it.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury 6:30, 9 November 2010

Let me be clear at the outset. As I said on Second Reading, I support the aims that lie behind the saving gateway. The right hon. Gentleman quoted at length from my speech when the original debate took place and I do not back away from those words at all. Also, I recognise the attraction of matching as a means of encouraging savings. There is quite a lively debate in the pensions and savings world about that issue.

However, we have also been absolutely clear that we will not launch a saving gateway scheme during this Parliament, and there are two principal reasons for that. The first is that the scheme would cost more than £300 million during the next five years and in the context of the deficit that we face, it is unavoidable that we have to cancel this scheme.

The right hon. Gentleman talked about the gap between what was in the Budget document this year and what was in the previous Government’s Budget document. I think that he will find that the cost of the saving gateway scheme was score-carded in an earlier Budget by the right hon. Member for Edinburgh South West (Mr Darling), the former Chancellor.

I also have other concerns. The right hon. Gentleman touched on those when he talked about the comments of the former Chancellor, about who would offer these  accounts, because clearly there was not going to be widespread and significant coverage. Adrian Coles, the director-general of the Building Societies Association, said in the evidence session:

“No building society had committed to offer a savings gateway”.––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 34, Q98.]

Eric Leenders, the executive director at the British Bankers Association, said of the banks 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 said that it would do it only if there was going to be taxpayer subsidy to enable it to do so. I do not therefore think that that was a very satisfactory base on which to offer the savings gateway account.

Photo of Yvonne Fovargue Yvonne Fovargue Labour, Makerfield

Does the Financial Secretary accept that the institutions that he has missed out are the credit unions, which operate in the majority of applicable areas, particularly those with low-income consumers, and that would have provided not only a means for the savers to save in the credit unions, but the credit unions with a means to expand their reach and expand into more areas?

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

The hon. Lady makes an important point and I am sure that if I spoke to a credit union and I asked it how best to deliver support to it, it might not suggest that the saving gateway account was the most effective or efficient way of doing that.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

If the Minister had been here when the Association of British Credit Unions Ltd gave evidence last week, he would have had an opportunity to question the credit union movement. He would have found that it was enthusiastic and looking forward to the saving gateway being rolled out, and disappointed that it will not happen.

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

I have spoken to the credit union movement on the subject on a number of occasions, so I understand its enthusiasm, but there are more effective ways of helping credit unions than this expensive scheme. The £10 million mentioned in the 2010 Budget was the cost of rolling the scheme out to post offices; the scorecard cost was from 2008.

The evidence is mixed. It is not entirely clear that the saving gateway account would have added to savings. On that basis, and given the fiscal position that the country faces, it is not appropriate to continue with the programme, and I expressed those concerns during the debate on the saving gateway account. Indeed, before the second pilot, questions were raised about whether the scheme would be effective in meeting the objective of increasing savings. There was no statistically significant evidence that, in delivering genuine net savings, the saving gateway account would still deliver higher net worth. The evidence is uncertain. Carl Emmerson of the IFS made the same point.

The evidence base is not as strong as it could be. In principle, the scheme is a good idea, but given the current economic constraints, it would not be an appropriate use of taxpayers’ money to pursue it. It is better to have  clarity about the Government’s intention. We do not intend to roll it out in this Parliament. It is best that the measure is removed from the statute book, and that is the purpose of clause 2. It provides absolute clarity to all who are interested that the Government do not intend to pursue it. Anyone who came forward with a scheme at a later date might wish to redesign it completely, so there is no benefit in keeping it on the statute book.

Photo of Claire Perry Claire Perry Conservative, Devizes

The hon. Member for Bristol East made an important point about the credit unions. It was an extremely interesting evidence session, and I know that the Minister has read the evidence. I draw his attention to question 149, when I asked Mark Lyonette, the chairman of ABCUL, for his assessment of how the most impoverished families could increase savings. In response specifically to what we are doing with the post office, he said:

“the channels issue is about how we make that step change. Compared with the scale of Government support in the past four years, it is a much easier and better value thing to do”— that is rolling out the post office network—

“than to keep doing the same or to salami slice what is already happening.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 51, Q149.]

Does the Minister agree that the bold moves that we are undertaking, particularly in rolling out the post office channel, is a way to help our most disadvantaged families gain access to financial services?

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

My hon. Friend makes an important point. We need to think carefully about when to give support for tackling financial inclusion, and where we might get the maximum benefit from that support. The role of the post office is important, and discussions are ongoing about whether the credit unions could access the post office network.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

We have been in Committee for much of the day and have not had much of a chance to catch up with the news, but I was in my office for a brief period and I understand that the Government have pulled the plug on any concept of the Post Office bank going ahead on the ground that it was too expensive. Is the Minister aware of that announcement?

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

There are clearly a number of ways in which we can encourage people to make greater use of the post office network, and I know that the post office will offer greater service, acting as a conduit and allowing customers of other banks to use it for transactions. That has already happened in a number of cases. The credit unions have put forward a proposal to use the post office infrastructure to help the growth of their business. We are looking a range of activities that could strengthen the post office network. It is important when tackling financial inclusion to increase the number of access points. One problem with that project is that there would clearly not be enough access points. That was one reason why we chose to end it.

Although we support the principle of the savings gateway, there is insufficient evidence to show that it would have been effective. There was clearly a problem with the network of outlets for the savings gateway. It is  on that basis that we chose to scrap it. The money that we are saving will help tackle the deficit, which is the most pressing priority facing the people of this country today. This is the right thing to do.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Once again, we are making the mistake of moving too quickly to abolish something that many people have said would have been a good thing in principle—even the Minister said that again just now. Why is it necessary at this point to do away with the proposition that we could have had, to put the scheme on ice—although I would much rather see it start to operate?

In the event, we would have been in a position to incentivise people on very low incomes to save—they will not be incentivised by tax schemes because they do not pay tax, which was the particular reason for a matching scheme. We do not want to reinvent it, to re-legislate and to set up again everything that went into the legislation—we saw how long it took from when the legislation went through in 2009 until the point in 2010 when it was about to come into force. Why is it necessary to do away with it, unless it is not actually a good thing—although that has not been clear from what the Minister has said?

There is so much ambiguity in what is being said. On the one hand, changes of this sort are presented as being an economic necessity—they have to be done because of the deficit. On the other, there is a lot of criticism of the proposed scheme itself—it is not necessarily the best way to help people to save, and we can help credit unions in some other way, although unspecified.

The clear evidence of the credit unions to the Committee was that the scheme was by no means the only way in which people could save. Equally, however, the representatives of the credit unions said that it was an important means of doing so. It was one way in which the business could be built up. People could be incentivised to save and put in contact with credit unions, some perhaps having not been in such contact before. In so doing, those people would become eligible for cheaper loans on a short-term basis, if needed to face a crisis. By making contact with a credit union, they would be open to getting advice and assistance that they might not have sought before, which, in turn, would also help them with their wider financial problems. As a means of helping people not just save but actually get in touch with cheaper forms of credit and financial advice, that important vehicle enabled that to happen.

If credit unions do not have enough outlets, one of the things under discussion—I hope still under discussion—is the suggestion that they might be able to operate in partnership with post offices. That would give people another means of getting in contact with credit unions, which would be a good thing. The lack of it having happened prior to July 2010 does not seem to be a reason for not going ahead with such a proposal. If the scheme had gone ahead and people had started to use it, that would have been an opportunity to widen provision and would have strengthened the case for that link with the Post Office.

Sometimes we have to get going with proposals and new initiatives, and to get them properly on the ground, before they ever work. If we keep waiting for the right  time or for sufficient evidence that enough people will save, we might wait for ever. People need to see their friends and neighbours and the people in their community being enabled to save in this way—one of the biggest ways that people are helped, initially at least, to make contact with organisations such as the credit unions is through word of mouth. If people see their friends and neighbours and the people they work with becoming involved, they are likely to want to take up that option as well.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

On that very point of Post Office involvement and how the scheme might have linked in with a greater role for the Post Office, would the hon. Lady agree with the National Pensioners Convention, which said about the Government’s announcement on the Post Office today that the decision not to have a Post Office bank was extremely short-sighted and would put the future of the post office network in jeopardy?

Photo of George Howarth George Howarth Labour, Knowsley

Order. The hon. Lady makes an interesting point, but I am not sure how it relates to clause 2.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East 6:45, 9 November 2010

I certainly agree with my hon. Friend that it is regrettable that the idea of a Post Office bank seems to have gone the way of many other proposals. I hope that the proposals on partnerships between credit unions and post offices will not go the same way because, regardless of whether there is the saving gateway or not, such partnerships would immensely benefit both credit unions and local communities.

My point about the second pilot was that although there was evidence that some people who had saved in this manner would have saved otherwise, that generally related to people on higher incomes. The second part of the saving gateway spanned a broad level of income, which the proposal in the Act would not—a much more limited scheme was legislated on. The people on the lowest incomes and on benefits who were in that saving gateway pilot were the very people who did save when they had previously not saved, albeit the amounts were small. As was much discussed in the evidence given by various people to the Committee, small savings can make a tremendous difference to people’s financial position and to their ability to weather the storms that they come across.

Is the Minister saying that the scheme is such a thoroughly bad idea that it should not be reopened at a future date without having to go through a legislative process? If that is the case, it means starting again from scratch with all the paraphernalia of legislation. That is absolutely not necessary. I still fundamentally believe that it is regrettable even to suggest putting the scheme on ice because, in such a difficult time, people are experiencing greater financial difficulty, and I suspect that many will go to much less creditable places to get loans.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

May I confirm for my hon. Friend that when I said that putting the scheme on ice was not the preferred option, in fact I hoped that even the three-year gap that we have now suggested could, in fact, be a six-month gap. The simple objective is to avoid the cancellation that clause 2 currently provides for.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I thank my right hon. Friend for clarifying the position that he was putting forward. This is a particularly difficult time not just for the country, but for people on low incomes. Unemployment has risen and hours of work have shrunk. People are struggling to keep going. The evidence given to the Committee from various witnesses demonstrated that if people can be assisted to make some financial provision during the times when they have a bit more income, they will be in a stronger position to be resilient when they perhaps lose their job or are asked to go on to short time or experience any of the other financial difficulties that could arise.

If people do not make such a provision and they find themselves in difficulties, they might have to get more deeply into debt. That will significantly worsen their position. In the end, in many ways, the costs will have to be picked up by the taxpayer regardless, because more people may have to seek crisis loans through the DWP or people will get into such difficulty with their finances that they will not only take out loans, but end up in rent arrears, lose their homes and have to be re-housed in temporary accommodation. Those people will make even greater calls on the taxpayer in due course.

Small-scale schemes that help people’s financial resilience may, in fact, be a saving to the taxpayer, rather than being in any way a drain. In some ways, this measure is one of the most important parts of the three proposals in the Bill. If I were asked to pick one of these to save, it would be this one in particular, because it is so important to such a wide range of communities. That said, I am unhappy to see any of them going. If it has to go into abeyance in the meantime, at least we would have the structure to pick it up again. If the Government are correct, we should be in a position in due course to see things improving and, at that point, perhaps even the Government will be prepared to pick up the scheme again. I urge the Minister to accept the amendment.

Photo of Yvonne Fovargue Yvonne Fovargue Labour, Makerfield

I want to comment on the message that the abolition of this scheme would send to two groups of people. First of all, consider the message to the small savers. People want to save and the success of savings companies such as Farepak proves that. They do not, however, always save in the right places. For me, the saving gateway steered people to organisations that they trusted and were in the community, like credit unions. It stopped unscrupulous organisations taking advantage of them. It was said in the evidence that it was the distance from organisations that stopped people saving. Often, it comes down to how far people have to walk. In my local community of Makerfield, they do not have to walk that far to get to a credit union. A savings gateway would have given people the nudge that Mark Lyonette, the president of ABCUL, said was so important to start people saving. There was a lot of discussion about whether the saving is simply about moving money from one place to another. I make no apology for saying that if people are ceasing to pay phenomenal amounts of interest and phenomenal amounts for goods to organisations such as BrightHouse, because they have no savings, I for one will be grateful.

The other message is to the institutions. The credit unions said that they were concerned that that they would find it difficult to trust Government schemes in the future, given the withdrawal of the original scheme  at such short notice. By freezing the scheme—I would still like to see it go ahead—the message to the organisations that have planned for it is that it will happen in the future, that they have not wasted their time and that their business planning did have a purpose. In my area, the credit unions are fragile. They do not get a lot of money in and this scheme was important to them in expanding, as was the growth fund produced by the previous Government, which gave them a tremendous boost. A small amount of money gives an organisation such as a credit union a tremendous boost.

I support the idea of placing the saving gateway with the credit unions because of the unions’ reach into the community, their ability to touch those who are financially excluded and their work to combat financial inclusion. Although it is not their primary purpose, we have heard that 500 credit unions already run financial inclusion schemes, working with the people who invest with them. We could build on that and assist people so that they do not get into debt and so that they do not go to organisations that take advantage of them. The saving gateway would have assisted in encouraging the small savers—giving them that nudge—to start saving with a reputable organisation. It would also help those organisations to expand their reach and to assist people by giving them the advice that they need at a particular time of their life. I suggest that we do not abolish the saving gateway. We should keep it on the books so that we can return to it. It is a scheme that was welcomed by everyone—do not send the message that it will not come back.

Photo of George Howarth George Howarth Labour, Knowsley

First, I want to alert the Committee to the fact that my intentions, should the Committee reach clause 3 tonight, is to revisit my amendment selection and to select, in a single group, amendments 48, 50, 52, 46, 44, 49, 51, 53, 47 and 45. Those will be taken before the debate on amendment 42. I will arrange for a revised list to be issued when the Committee resumes. I gather that there is an intention for the Committee to sit later into the evening. It is customary in that case for a period of suspension for dinner.

Sitting suspended.

On resuming—

Photo of David Hanson David Hanson Shadow Minister (Treasury)

We have had an interesting debate so far on amendment 38, and I am grateful for the contributions of my hon. Friends the Members for Makerfield and for Edinburgh East in today’s discussions. I feel sure that my hon. Friends will wish to make further contributions to continue the discussion on the amendment.

To remind the Committee, because it is important to do so, the amendment would insert

“with effect from 1st January 2014” at the end of line 10 on page 2. The purpose of the amendment is to ensure that we give the Minister an opportunity not to scrap the Saving Gateway Accounts Act 2009 from now, but to reflect on whether there is a pressing need for the Act to be retained on the statute book, and for it to be potentially examined at any time up to 2014; 1 January 2014 is the appointed date. I hope that by then the economy will have picked up, and the  benefits of the scheme, which the Minister espoused in opposition, will become even clearer to him.

We have had a useful debate, but some issues relating to the amendment still need to be teased out. First, I refer to the Committee’s evidence session, when my hon. Friend the Member for Bristol East asked the representative from the Association of British Credit Unions, Mr Mark Lyonette, some questions about the importance of the saving gateway scheme. She asked him what his experience was of the saving gateway pilots, and I am grateful for her help in raising those issues. She asked:

“Do you think they have been successful and something that, in an ideal world, would be rolled out further?”

Amendment 38 would give the Government the opportunity not to cancel, scrap or end the saving gateway pilots, but to continue to ask whether they should be rolled out at any time between now and 1 January 2014—or indeed after that. It would also give the Minister an opportunity to reflect on the success of the scheme. Mr Lyonette said at the time:

“We were very supportive of the saving gateway for a comparatively small sector—just 900,000 people…We were very supportive of the saving gateway all along, and one of the challenges for our sector, with both any future junior ISA or future saving gateway, will be persuading our members. Even the largest members, which are bigger than the smallest building societies, are still small businesses.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 48, Q141.]

Basically, he is saying that in the event of the gateway being scrapped, any potential future replacement, whatever it is, will be difficult to implement.

My hon. Friend continued:

“You say that your members were enthusiastic about moving forward with the saving gateway.”

Mr Lyonette responded in the evidence session, which is important in relation to this amendment, by saying:

“Yes, we supported and followed most of the thinking on it. We did consistently tell the Treasury that we thought some things about it were slightly counter-intuitive. One was the two-year cycle”.

Let us look at the two-year cycle. The amendment to delay the abolition until 1 January 2014 would give the Minister the chance to examine the evidence provided by Mr Lyonette to the Committee. He said that he was concerned about the two-year cycle, and continued,

“in our experience, there is not much that happens in anyone’s life on a two-year cycle. We always said that that just does not seem right.”

The Minister has an opportunity to reflect on that evidence now—not to scrap the scheme, but to use the three-year gap to look at whether we can have a more in-tune cycle along the lines that Mr Lyonette suggested, which is that people save a high proportion of their income for Christmas. He said, citing his comments to the Treasury:

“‘We know that in our sector people will save for a year, withdraw the money in November, have Christmas and do the same the following year.’ That would have fitted within the saving gateway, but the two-year feature seemed counter-intuitive.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 48, Q142.]

I am giving the Minister the chance to respond to that, to look at reducing the two years to one year, to use the three-year hiatus that I propose in the scheme to consider the representations, and to look at the issue in detail so that we can build on the success of a scheme that the Minister supported in opposition, as did his Liberal friends, and never criticised until he received a Government position.

Photo of Kate Green Kate Green Labour, Stretford and Urmston

Does my right hon. Friend agree that Mr Lyonette’s evidence was interesting because he emphasised the enthusiasm of the credit union sector for participating in and improving the product? The sector is small and fragile, however, and obviously cannot cope with policy chopping and changing in the way that perhaps larger financial institutions can. Does my right hon. Friend agree that freezing a structure within which the credit union movement has become comfortable working would be welcomed by the sector, because it would not feel that it had invested a great deal of time and capital and that it had all been thrown away?

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Indeed. The evidence from the credit union sector on the Bill was very clear: the saving gateway pilots were successful and important, and they generated sufficient support and did a reasonable job.

Photo of Yvonne Fovargue Yvonne Fovargue Labour, Makerfield

Does my right hon. Friend agree that having the opportunity to consider linking in with other annual schemes, for example the “Save Xmas” campaign, would perhaps assist both the credit unions and small savers, and that the freeze would provide an opportunity to look at a more natural cycle?

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Indeed. My hon. Friend’s predecessor in her constituency of Makerfield, Sir Ian McCartney, was one of the prime movers in tackling the Farepak crisis. He recognised that the crisis had a great impact in the towns and communities of Makerfield, and I shall certainly return to my hon. Friend’s points in a moment. It is extremely important that we look at the issues in the round.

My hon. Friend the Member for Edinburgh East, in questions to Mr Lyonette in the evidence session, made some important points about the need for savings, and for savings for people on low incomes. It was mentioned that there should be a real balance in relation to the saving gateway as a source of saving, and my hon. Friend said to Mr Mark Lyonette:

“It would have helped contribute towards that.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 18, Q45.]

He said one word in response: “Absolutely.” There is a clear indication from the evidence we have seen that the saving gateway and health account would have been a success. The pilots were positive, and achieved the objective that my hon. Friend the Member for Stretford and Urmston indicated.

Photo of Kate Green Kate Green Labour, Stretford and Urmston

Does not my right hon. Friend also agree that one thing that Mr Lyonette was perhaps hinting at was that credit unions will want a diverse but secure source of funding for their deposit base, and that the saving gateway, because of the matched element that was coming from Government and which therefore  drew people in and kept them with the savings programme—a crucial bit of evidence that we heard from our witnesses last week—was a much more stable source of capital funding for credit unions and therefore an important part of their funding mix?

Photo of David Hanson David Hanson Shadow Minister (Treasury)

That is an extremely valid point. Mr Lyonette is about defending credit unions, and I accept that that is his business as representative of his organisation. He said that he believes that the scheme provides a good mechanism for securing savings for poorer people, and gives stability because people are undertaking this in a positive way.

The crucial point in the evidence in relation to my amendment, the purpose of which is to give the Government thinking time of three years before abolition, was when I asked Mr Lyonette:

“You said that you were planning the saving gateway on the basis of cross-party support. Do you have evidence for that assertion?”

Mr Lyonette replied:

“We did not have any reason to think otherwise. We certainly were not thinking during the election that something that had developed so far would be pulled. We understand the financial situation, but pulling it for financial reasons would be the only reason. We did not foresee there being another reason to pull the product.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 55, Q154.]

Photo of Alison McGovern Alison McGovern Labour, Wirral South

On the saving gateway, the delay and the timings, I am aware of several all-party groups and various mechanisms whereby the credit unions might have conversations with us politicians. Does my right hon. Friend not think that it is likely that the credit unions would have had such conversations about the future?

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I would hope so. My hon. Friend’s point is, again, that this has been rushed. Whatever mechanisms the Minister is introducing, the general election was just over six months ago, the proposal was announced in the Budget, the roll-out of the pilot was scrapped in July and now we are abolishing the legislation completely in clause 2. My amendment would give him time to reflect on the impact of that and on the representations that have been put to him in Committee and elsewhere.

I have secured some comments in just the past hour by considering the matter carefully. The Daily Telegraph says in a headline:

“Savers ignored in the Budget as new scheme scrapped”.

I read the Telegraph most days, but I do not often subscribe to its political views. The article was written by Myra Butterworth, personal finance correspondent, in June 2010.

I would have thought that one of Government’s great objectives was to encourage saving, and they can do so through a range of measures. The Minister has now scrapped the scheme, and the Telegraph says:

“Savers have been ignored by the Chancellor as a scheme set up to encourage low earners is scrapped, experts said yesterday… Jason Riddle, co-founder of action group Save Our Savers, said: ‘Yesterday’s Emergency Budget was a crucial opportunity for the new Government to outline a clear set of policies to help savers, but instead it has become yet another missed chance for decisive action... If the UK is to lift itself out of its economic mire, it’s vital that the Government puts clear steps in place to re-establish a culture of saving.’”

What better way to do that than by at least focusing on those who are not saving anything at the moment: the lowest, poorest people in society? There are people in many constituencies represented here who are on jobseeker’s allowance, incapacity benefit or other benefits or incomes of less than £15,000 a year and who were not saving but who, in the saving gateway pilot, developed a saving culture, joined the scheme and recommended it to their friends, as 99% did.

The article continues:

Ros Altmann, a governor of the London School of Economics, said: ‘There are no new incentives’” in the Budget

“‘to restore a savings culture’…Mike O’Connor, chief executive of Consumer Focus, said: ‘The Savings Gateway would have been a great opportunity for the Government to remove a barrier for people on low incomes getting on the savings ladder. This will be a disappointment for many potential savers and makes it even more important that the Government reforms financial services so that they better serve people who earn the least.’”

I hold no brief for the chief executive of Consumer Focus, but he has said independently that the Bill will damage the saving culture, hit the poorest hardest and prevent people on low incomes from developing a saving culture. The website—there is a plug for it—says:

“Failure –sending out the wrong message. To encourage you to save… in ordinary bank savings… a string of successive Governments have failed to take bold, decisive action”.

Okay; I will take the criticism for us, but why is the Minister cancelling the scheme now?

My hon. Friend the Member for Makerfield made some valuable points in her contribution. She helped open my eyes a little about the importance of maintaining the scheme or, by passing the amendment and not scrapping the scheme immediately, of giving the Minister three years to consider whether to scrap it or develop it still further.

My worry is not only about Farepak but loan sharks. My hon. Friend the Member for Walthamstow (Stella Creasy) has recently introduced a ten-minute Bill that looks at how we could encourage tightening regulation around such issues. That is valuable. If there is no scheme that encourages saving and matches that with a contribution, I worry that my constituents—as well as  those of the Minister and other hon. Members, particularly in the poorer parts of the UK—will save money in schemes that are not underwritten, are dangerous and could collapse leading to a loss of resources. Such people may also use unscrupulous lenders and savings accounts.

People should be able to save in a scheme, have their savings matched and be prepared for the pressures of life that are felt by those on lower incomes—Christmas, birthdays, or emergencies—we can all think of examples. That is an important issue that the Minister will overlook when he scraps the scheme.

Photo of Yvonne Fovargue Yvonne Fovargue Labour, Makerfield 8:15, 9 November 2010

Does my right hon. Friend agree that it is concerning that people are not saving, as well as that they may be saving in unregulated schemes? That might lead people to go to organisations that offer payday loans, for example, and lend at iniquitous rates of interest such as 2,760%. That leads people into a spiral of debt, which a small amount of savings could have prevented.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Absolutely. As my hon. Friend will know, I have had constituency experiences of such things as, I suspect, have most hon. Members if they have been in Parliament for a long time. They will have seen people who borrowed a small amount of money—£50, £60 or £70—from an unscrupulous lender, and because of that, they have to pay vast amounts of interest and are in hock. I know of an individual in a nearby constituency who recently went to prison to serve a long sentence. The Assets Recovery Agency has taken away his home because of his unscrupulous lending. Poor people in Runcorn, Widnes, Warrington, Cheshire, Chester and Liverpool—my part of the world on the English side of the border—were ripped off by unscrupulous lenders because of a small amount of money.

If rolled out, this scheme would have ensured help and support for poorer people on low incomes, or no income at all, to help them save with support from the Government and ensure that should a crisis happen, they might have £100 in a savings account. At the end of the two-year period, as currently constituted, that account would have been matched by the Government and could have been a little more than the initial saving. That amount of money might have made the difference between facing a loan shark, and not having to do that; between someone losing their resources and finding themselves paying exorbitant rates of interest, and that not happening. That is why it is an important scheme.

Photo of Kate Green Kate Green Labour, Stretford and Urmston

Does my right hon. Friend agree that the emphasis rightly placed on financial education by the Minister would be more meaningful in the context that he described? There would be the sense of a strategy that people with savings in the saving gateway scheme could adopt to avoid becoming involved with loan sharks and high interest rates. Therefore, the education would not have been delivered to them in a vacuum, but with a sense of there being a genuine exit strategy for them.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Absolutely. The saving gateway pilots have shown that it has several benefits. First, it encourages people on low incomes or benefits to save. Secondly, it helps engender the savings culture to which my hon. Friend the Member for Stretford and Urmston has just  referred. Thirdly, it would help avoid having to rely on loan sharks or bad debt and, in the longer term, a partnership between the Government and the individual to help save would be a valuable scheme. I do not want the Committee just to take matters from me, but we are faced with the abolition of the scheme under the clause. The amendment would hold the abolition for three years and provide for the evidence to be reconsidered in detail. It does not want matters to be rushed, but for time to be devoted to such issues.

An article written by Dalia Ben-Galim, the associate director of the Institute for Public Policy Research, earlier this year states:

“It may be overlooked by many but the 2010 budget announced that the Saving Gateway has been deemed ‘unaffordable’ and so will not go ahead as planned. The Saving Gateway was a ground-breaking scheme designed to incentivise and reward saving among low-income families by providing a ‘match’ for each £1 saved. Rigorous pilots have shown that the Saving Gateway has been effective in increasing saving amongst low-income families.”

Evidence from the IPPR’s consumer-spending and debt research showed that low-income families spend, save and borrow, that most families wanted to save and that many successfully saved for Christmas and birthdays because of the scheme. She cites an example, which is worth putting on the record, of a 33-year-old parent with two children who told the IPPR that she had not been one for long-term saving, but that she can now save for a purpose.

According to the IPPR:

“Families had often interpreted ‘saving’ as not spending and were able to juggle income and expenditure for a particular event. But most families did not manage to build up any ‘rainy day’ savings.”

People on low incomes often do not have insurance, so when the crisis hits, the washing machine breaks down or there is a flood, they are driven into the hands of the loan shark and into debt, and, dare I say it, that debt sometimes drives them to crime. Those things are avoidable. The Minister needs to reflect on the benefits involved with the scheme, and he would have three years in which to do so if he accepts the amendment.

Photo of Yvonne Fovargue Yvonne Fovargue Labour, Makerfield

Does my right hon. Friend agree that the psychological impact of having savings has not been fully taken into account? A delay might provide a chance to look at such matters, such as the feeling of control that having a small amount of money gives a family on a low income. We could widen that example and consider the feeling of being out of control and the psychological impact of debt that costs the country a large amount each year.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

My hon. Friend speaks from experience of a constituency that will not be among those that have the top 100 income earners in the United Kingdom. I hope that she will accept that in the way that I meant it. Her constituency will no doubt have debt problems in several areas. I refer to the experience of the IPPR of a 46-year-old mother of two who said:

“We have not been able to put any [money] in [to our savings]. We’re spending so much in the shops and supermarkets and on bills.”

The IPPR said that that was a typical response that it had received. Its research concluded that

“the lack of precautionary saving for low-income families leaves them more vulnerable to income and expenditure ‘shocks’” of the type that I mentioned earlier. It said that a number of families reported shocks of unexpected spending due to the breakdown of household items, such as a fridge, boiler, washing machine. It found:

“While many were trying to save—for example, one family was trying to save their child benefit money…none had long-term savings”,

because they were not able to have long-term savings because there was not a kick-start or indeed the match funding to help it.

The IPPR stated that the

“Saving Gateway provided a ‘match’ for savings—rather than tax relief”,

which is no use to people on fixed unemployment benefit, fixed pension incomes or fixed incapacity benefit. That matching funding rather than tax relief benefited low earners most. It continued:

“We already spend £1.6 billion on tax relief for ISAs (and almost £22 billion in total tax relief for savings.) The Saving Gateway would have cost”

£115 million next year, the year after and the year after that.

I expect my hon. Friend the Member for West Ham will chide me, but I am offering the Minister a chance to stop, reflect, reconstitute, look at the evidence, talk to some of the groups and reflect on what has been said in Committee. If he stops it for one year and brings it back the next, or perhaps looks at it in two years’ time, I will be happy. He could also consider the evidence from Mr Lyonette about the need to make the window a little tighter. The Minister could do all those things if he wished.

Photo of Kate Green Kate Green Labour, Stretford and Urmston

Does my right hon. Friend also agree that it would offer the opportunity to investigate a discrepancy in the evidence that we received from the witness from Toynbee Hall, who suggested that the level of contributions was a significant factor in the success of the product? That witness was quite wary of seeing the Government contribution reduced, whereas other witnesses thought that there was scope to reduce the Government contribution, therefore potentially making the product more affordable in the medium and long term. Does my hon. Friend agree that, given that there is a discrepancy even among expert witnesses who are committed to the product in terms of their attitude to the Government’s match funding, it would allow time to investigate properly that discrepancy and genuinely find the necessary and right level of Government contribution so that the product works effectively and is also cost-effective?

Photo of George Howarth George Howarth Labour, Knowsley

Order. Before Mr Hanson responds, I have noticed recently that there is a tendency for interventions to turn into mini-speeches. May I suggest that members of the Committee bear that in mind before they make any interventions and that they keep them brief, perhaps to a single point?

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am grateful to my hon. Friend for her contribution. She makes some valid points. I simply ask the Minister to reflect on all those issues, because the three-year gap that we are proposing will not cost any money. That is the key thing. It will not cost the Minister a single penny. The pilots have ended. The scheme would cost £115 million this year, next year and the year after. If we do not progress the scheme and do  not scrap it, as in clause 2, we can use that three-year window to see whether the economy picks up and look at the issues we have raised and the representations made, and he can reflect on the manifesto commitments that he gave. All those things will mean that the Minister does not need to scrap it, and could, if I dare say so, scrap it after three years if he so chooses. It would not cost him a penny in the three-year gap in between. It will cost poor people £150 million worth of contributions, but it will not cost the Minister or the deficit a single penny.

Photo of Harriett Baldwin Harriett Baldwin Conservative, West Worcestershire

It will cost the Treasury money, because it has to authorise the financial institutions. There was a list of those institutions and presumably we would have to keep checking that they were still okay to provide the product.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

If the hon. Lady believes that the Post Office, Lloyds Bank and HBOS are going to be unsuitable organisations, it will not cost the Treasury a great deal of money to check on that. I could ask it to check on Google on the computer. It is possible to do that. I am not sure whether she has costed that. Perhaps she can tell me how much she believes it would cost to do a check on those three organisations.

Photo of Harriett Baldwin Harriett Baldwin Conservative, West Worcestershire

I have no idea, but I know it is not zero, as the right hon. Gentleman suggests.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Perhaps the hon. Lady could go away and find out exactly how much that would cost. Even if there was a minimal cost, I do not think that it would take a great deal of resource to cost it. Remember, I am reluctantly and with some chiding from my hon. Friends, offering the Financial Secretary a £115 million saving in each of the next three years towards the deficit, without actually abolishing the saving gateway account.

Let me move on and take one example of the impact of the abolition of the saving gateway on individuals not unadjacent to hon. Members in Committee today. Let us look at a particular aspect of jobseeker’s allowance. Under the current rules, an individual can open a saving gateway account if they get a number of benefits, including jobseeker’s allowance. Let us look at that allowance for a moment. Before we abolish the scheme, it is important that we recognise what one aspect would mean to our constituents next year, the year after and the year after that. I will start in alphabetical order with the hon. Member for Birmingham, Yardley, who has no mandate to abolish the scheme and whose Liberal Democrat colleagues previously supported it. He will find that from September 2010, 4,479 are currently on jobseeker’s allowance in his constituency.

If the hon. Gentleman votes for clause 2 today, those people in his constituency will not be able to qualify for the saving gateway as of July, as initially planned, or at all, after Royal Assent. If he votes for my amendment—the three-year holiday, or it could be one or two years—those people could qualify for the scheme in 12 months’ time, because it would not be abolished until 1 January 2014, by which time, I hope, we will have convinced the Minister about the importance of the scheme’s success.

If the amendment is not accepted, in Blackpool North and Cleveleys 1,937 people who are on jobseeker’s allowance would not benefit from the scheme as a result of its abolition.

My hon. Friend the Member for Bristol East has 2,185 people in her constituency who are on jobseeker’s allowance. If she voted for the clause, those people would not be able to qualify for the saving gateway. I know—and my hon. Friend may want to reflect on this—that those people, who would potentially be beneficiaries of that scheme, could save toward Christmas, or their holidays, or in case of accidents. Accepting the amendment would provide the Minister with the chance to have three years’ reflection on such people.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury) 8:30, 9 November 2010

I thank my right hon. Friend for revealing those enlightening statistics. I look forward to hearing the statistics on Bristol West, which, because of the boundary changes at the last election, has inherited the most deprived parts of the city, which were formerly in my constituency. It will be interesting to see whether they, too, will suffer as a result of the loss of that facility.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

My hon. Friend invites me to talk about Bristol West. She knows that city well and is aware of the measure’s effect on it. She will know that there were 3,490 people on jobseeker’s allowance in September 2010, all of whom would have qualified for the saving gateway and the match funding had the Government continued with the scheme. They could have saved towards the things that we have talked about. I am sad to say that there has been a 1,300 increase in such people in Bristol West over the past five years. It is a key area of deprivation and the Minister—I apologise, I meant the hon. Member for Bristol West; he lives in hope, and now that he has sold his soul, anything can happen at the next reshuffle, particularly if he votes with the Government regularly.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Let me finish my point and then I will certainly do so. If the hon. Member for Bristol West, whose party supported the scheme when it was in opposition, votes against the amendment to delay the abolition, and on clause stand part, votes to abolish the scheme, he will deprive 3,490 people as of September 2010 in his constituency who are on jobseeker’s allowance, never mind those on income support, incapacity benefit, disability allowance, carer’s allowance and all those who are earning less than £16,000 a year. That applies only to jobseeker’s allowance; those are the only statistics that I have been able to garner in the past hour, but they illustrate the impact on people. The hon. Gentleman will deprive those people of the ability to participate in the saving gateway account.

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

I thank the shadow Minister for giving way on that interesting exposition of the various constituencies represented by members of the Committee.

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

Does the right hon. Gentleman not accept, however, that if we do not take resolute and firm action to deal with the deficit, we will end up with a loss of control on sovereign debt interest rates? Potentially,  the country might go off to the International Monetary Fund and there will be much greater cuts, much higher unemployment, and many more people on that jobseeker’s allowance list.

Photo of George Howarth George Howarth Labour, Knowsley

I inform Mr Hanson, before he resumes his speech, which is an interesting canter through the various constituencies represented in Committee that, although he is not out of order, he is in danger of repeating the same point, albeit about different constituencies, over and over again. I ask him to bear that in mind as he proceeds.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Of course I will, Mr Howarth, but I am indicating to hon. Members, before they vote on the clause stand part—[ Interruption. ] The Minister just said that it is a waste of time—is that what he said?

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

I said that the right hon. Gentleman is wasting time.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

That is interesting—I am wasting time.

Photo of George Howarth George Howarth Labour, Knowsley

Order. I shall be the judge of who is and who is not wasting time.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

This is important. The reason I went to the Library in the hour between 7 o’clock and 8 o’clock to get the figures is only that I want to show hon. Members in all parts of the Committee the impact of this particular vote in their constituency—just for jobseeker’s allowance, which is one part of the saving gateway. It might be a waste of time, because the Minister might well instruct his hon. Friends to vote against the amendment and to support the clause, but I do not think that it is a waste of time for the people who we represent and who would have benefited from the scheme had it gone ahead. It is incumbent on the Committee members to know exactly what the impact is before they vote for the clause and against the amendment.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

Is my right hon. Friend aware that, alongside many economic variables, low savings rates cluster around localities. His pointing out the different impacts of the removal of the saving gateway and the possibilities of a review under his amendment seem to me to be relevant.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I am grateful to my hon. Friend. To be particularly relevant, let us look for example at the constituency of my hon. Friend the Member for Bristol East, just referred to, which has 2,185 people on jobseeker’s allowance at this moment in time. The hon. Member for Congleton, who I come to next on my alphabetical list, has 1,237 people on jobseeker’s allowance in her constituency. So, the proportional impact, which we shall come on to in a moment in terms of the equality assessment, is greater in the constituency of my hon. Friend the Member for Bristol East than in the constituency of the hon. Member for Congleton, in terms of jobseeker’s allowance.

Photo of Fiona Bruce Fiona Bruce Conservative, Congleton

The right hon. Gentleman claims that those numbers would have benefited from the scheme, but the figures are not absolute, are they? The individuals would only have benefited had they chosen to take advantage of the scheme. There is a big difference.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

There is indeed a big difference. It is very hard to participate in a scheme that does not exist.

The scheme was supported by the hon. Lady’s party and the Liberal Democrats in opposition, as well as by the then Government. The scheme would have been operational from July. Of the 1,237 people in Congleton constituency, let us say that just 237 of them decided to save. That would have been 237 people who could have saved in her constituency and had match-funding from the Government, as part of the £115 million—yet now they cannot.

My amendment asks the Minister to reflect on that concern in Congleton and to say whether he wishes to deny those people the opportunity to save—remember, they are unemployed, low income, jobseeker’s allowance individuals, who are not in any of the other categories. So, only 1,237 in Congleton on JSA, but I am sure there would have been more people in due course on all the other things. They are being denied this benefit, disproportionately more even than those in the constituency of my hon. Friend the Member for Bristol East.

In passing, let me refer to my own constituency of Delyn. I have 1,380 people in my constituency on jobseeker’s allowance, which is pretty much on a par with the hon. Member for Congleton, except that my constituency is smaller than hers and I have a large number of people unemployed. They would have benefited. In my own patch, the Flintshire credit union would have been happy to help develop the scheme. Still in my constituency, there are some 15 or 16 post offices that would have been happy to participate in the scheme. I know that many of my wards, including the Flint Castle ward in the town I live in, are among the most deprived wards in Wales. They would have benefited—poorer people in my constituency, who are unemployed and need the support of the state, would have been able to access the scheme and to put money aside for the problems that they face.

Photo of Claire Perry Claire Perry Conservative, Devizes

I believe that the number in my constituency is something like 923, but I might be out of date. If the right hon. Gentleman really believes that having access to a saving gateway for people on JSA is the best way to promote a savings habit and financial inclusion, rather than for example getting those people into work through the extensive Work programme that we will be implementing, then I imagine that he might have something to justify to his own unemployed constituents. I think that simply justifying that these people should be left on unemployment benefit and given various rather meaningless pieces of money such as this rather than getting them into sustainable work is the sort of new Labour gimmickry that my unemployed constituents were very keen to vote away in the last election.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I do not wish to see anybody stay on jobseeker’s allowance and if the hon. Lady asserts that I do she is completely wrong, because we want to try to secure full employment. I am simply saying to her that, as of today, the 957 people—she was almost right—in her constituency who were on jobseeker’s allowance in September would have qualified for this scheme and would now be able to put money aside. Moreover, if they came off JSA and they went into a low-paid job, paying less than £16,000 a year, as they may do initially, they could still continue that saving gateway.

The saving gateway was a way in which we could help people to save even when they were on incapacity benefit, on JSA, on income support, on disability allowance and indeed if they were going to work at lower levels of pay. It particularly applied to part-time women workers who might take a job and come off jobseeker’s allowance, but they would have been able to maintain that savings culture accordingly.

Photo of Claire Perry Claire Perry Conservative, Devizes

That is a fascinating point and I am grateful to the right hon. Gentleman for actually keeping us awake in this extended sitting. However, the point that I am trying to make—perhaps I am not making it very well—is that we have heard a lot of evidence that low income and unemployment is associated with poor savings habits, and I think that all of us have grave concerns about that. Therefore, if we are suggesting the opposite, which is that earning more is a way to stimulate saving, surely the best way to help people to save is to get them into better-paid, sustainable work, as our Government are proposing to do and as the last Government failed so dismally to do.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I pay tribute to the hon. Lady for wanting to create employment opportunities and I will support her in those efforts. However, the fact of the matter is that at the moment there are 957 people in her own constituency on JSA and they could have qualified, however temporarily, for the saving gateway scheme that would have operated from July and people on JSA could have qualified in the future for the same scheme. If they had come off JSA and gone into low-paid employment, they could still have qualified for that scheme. It is important to keep that savings culture going.

I mentioned Devizes, but equally I could go on—as I will do—to my hon. Friend the Member for Edinburgh East, who is next in the alphabet. In her constituency, there are 2,375 people on JSA. As a relatively small constituency, it has a much higher proportion of people on JSA than is the case in the constituencies of the hon. Members for Congleton and for Devizes.

Again, I hope that we will be able to develop further employment opportunities in Edinburgh, but at the same time that we are doing that this saving gateway scheme would have been available and the Minister has an opportunity during the next three years to keep it available.

Let me look at Fareham—how could I possibly avoid Fareham in this round-robin review of the Committee? In Fareham, there are currently 978 people on JSA. That number has fallen during the last year. In every other constituency that I have talked about to date, the number of people on JSA has risen, but in the last year in Fareham the number of people on JSA has gone from 1,291 to 978. So it is no wonder that the Minister is not too worried about what happens to people on JSA and the savings culture, because the number of people on JSA in his constituency is falling. I accept that there are still 978 people in his constituency on JSA, but there has been a fall over the past 12 months and the Minister is now denying those 978 people the opportunity to be considered for that particular scheme.

Let me look next at Makerfield. Currently, there are 2,182 people in Makerfield on JSA. There is a pattern here, Mr Howarth, and the pattern is that those areas that have greater deprivation have a higher level of JSA  and therefore this measure is disproportionately hitting those constituencies, such as those of my hon. Friends the Member for Makerfield, for Edinburgh East and for Bristol East.

Photo of George Howarth George Howarth Labour, Knowsley

Order. Before the right hon. Gentleman gives way, I will help him to reflect on the fact that, if he thinks that he has established a pattern, perhaps he is stretching his argument a little too far.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

It is important, Mr Howarth, that we reflect upon the impact of this measure on individual constituencies. I was simply trying to say that before Members vote on these matters, they need to consider that.

I have received some news from my hon. Friend the Member for West Ham, which will relate to the comments that I am able to make in the Committee and the new strictures, Mr Howarth, may indeed be of help in coming to a conclusion on this matter very shortly. For the sake of accuracy and so we do not think they have missed out on these matters, I will just say that the hon. Member for Reading West has 2,323 people on jobseeker’s allowance; in the constituency of the hon. Member for Scarborough and Whitby, the Government Whip, that number is currently 2,188; and in the constituency of my hon. Friend the Member for South Down a very disturbing level of 3,655 people are on jobseeker’s allowance. Again, that backs up the points I have made today.

I say to the hon. Member for Truro and Falmouth that one of the benefits of being a ‘T’ is that it takes a while to get around to her constituency. I did not want to miss her out; it is just that she is quite low down in the alphabet—although not as low as Wirral West and West Ham. In Truro and Falmouth, she has 1,208 people on jobseeker’s allowance.

Photo of Kate Green Kate Green Labour, Stretford and Urmston

In the alphabetic run on which my right hon. Friend is taking us, I am eager to hear where Stretford and Urmston is.

Photo of David Hanson David Hanson Shadow Minister (Treasury) 8:45, 9 November 2010

I shot past Stretford and Urmston— I am sorry. My hon. Friend will have to excuse me, but I put this together in haste during the half hour between half-past 7 and 8 o’clock. I have been rushing through it. Stretford and Urmston has 2,625 people on jobseeker’s allowance. On the last three—I do not wish to test your patience any further, Mr Howarth—I say to my hon. Friend that West Ham has 5,931 people on jobseeker’s allowance. Again, the pattern is that hon. Members who represent Labour seats, where there is a higher level of people claiming jobseeker’s allowance, will be disproportionately hit by the measure. In Wirral South the number of people claiming jobseeker’s allowance is 1,188 and in West Worcestershire the figure is 1,235. I am grateful to you, Mr Howarth, for your patience in allowing me to run through those figures. The point I am trying to make is that there are some key issues here.

In conclusion, I understand that progress is being made on the matter, so I ask the Financial Secretary to reflect on what has been said here today. He should consider the issues surrounding the impact of the measure on constituents and the fact that the saving gateway was  a successful scheme that generated savings. Its maintenance or non-abolition will not cost the Minister or the state any resource over the next three years. I have moved a long way in giving up the £115 million next year, the year after and the year after. I hope that the Minister will accept the amendment and will revise and listen to the representations made in evidence sessions by my hon. Friends. In due course, I hope that he will also reflect on the scheme as a whole in clause 2.

Question put, That the amendment be made.

The Committee divided: Ayes 8, Noes 10.

Division number 11 Decision Time — Clause 2

Aye: 8 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I beg to move amendment 37, in clause 2, page 2, line 21, at end add—

The amendment is similar to amendment 36 to clause 1 in that it calls for an equality impact assessment to be carried out before steps are taken not to proceed with the saving gateway scheme pilots—I would not use the word “axe.”

My right hon. Friend the Member for Delyn has, of course, already described what the purpose of the saving gateway scheme was and mentioned that it promoted saving among working age people on lower incomes. In discussing the amendment, I want to tease out how many people who qualified for that scheme could fall into minority categories not just because they are from particularly low incomes, but because they may well fall into other groups. We know, for example, that women are far more likely to be on low incomes, and, as the Budget has shown, they are being hit particularly hard by some of the financial measures introduced by the Government.

On nurturing and fostering a saving habit among women on low incomes, I think that it is particularly important to note that, generally, women are in charge of household finances, and they live in areas where they are perhaps more vulnerable to pressure from loan sharks, doorstep lenders, and all of the other issues that my right hon. Friend raised when he talked about the importance of the saving gateway scheme. Endless research by child poverty groups—I am sure that my hon. Friend the Member for Stretford and Urmston could back me up on this—shows that having some money set aside, a little lump sum in reserve, for difficult times is incredibly important and incredibly useful for those struggling to get by and struggling to make ends meet on a low income. Usually people in such situations, who are used  to coping on a very low income, are very careful and know exactly how much they have to get by on and have to eke out. They know when they are getting towards the end, before the next money comes in, and there are often examples of women going without food so that they can feed their children.

When something goes wrong, it really hits hard: if, for example, they have just about managed to get the money together for a car, and then suddenly the car breaks down and needs major repair—without that car they cannot get the kids to school and they cannot go to their part-time job—or if the fridge stops working; or if the heating breaks down and the boiler needs repairing. Those are the things that knock people completely off course. Although that is not specific to women on low incomes, it tends to be women—90% of lone parents, for example, are women—who are much more likely to find themselves in such a vulnerable position. As I said, they are also far more vulnerable to people who prey on them and force them down other routes, such as the loan sharks, the doorstep lenders or the people who charge absolutely phenomenal interest rates. They are also far more likely to be in sporadic employment, partly because of having to take maternity leave and so on, but also because women tend to be in part-time jobs that do not have the same job security.

The purpose of the saving gateway is to promote a saving habit among people on lower incomes, and, because of that, the Bill is very disappointing. We have already debated whether equality impact assessments were carried out prior to previous legislation, but in some ways that is not relevant to what we are talking about today. Moving forward, now that we have the Equality Act 2010 legislation and the framework for carrying out equality impact assessments, we should be looking at the specific impact of these measures on people from excluded communities.

We took evidence from the Association of British Credit Unions Limited during the evidence session, and my right hon. Friend the Member for Delyn has talked in some detail about the credit union movement. I know that there is cross-party support for the credit union movement, because I set up the all-party group on credit unions. My successor as chair of the group when I was appointed to the Whips Office was Ian McCartney, who was the previous Member for the constituency of my hon. Friend the Member for Makerfield. The current chair of the group is a Conservative Member, and I certainly know that when I was drumming up support it was one of the best subscribed all-party groups.

There are people who really appreciate the role of the credit unions, and we have already heard that the credit union movement is very disappointed that the saving gateway is not going to be rolled out. The reason I refer again to the credit union movement, as my right hon. Friend the Member for Delyn has done, is because I asked ABCUL for statistics on who its client base would be, assuming that the saving gateway would be rolled out in part through the credit union movement. ABCUL has said that women make up more than two thirds of its membership. So 67% of credit union customers are women, and 19% of its customers—that is nearly one in five—are from BME backgrounds. Considering that many credit unions are located in rural areas, there is quite a substantial take up from the BME community in those areas that have a high BME population.

On figures for the number of people in social housing, who do not own their own homes, who are in part-time employment or who are unemployed, the Bristol credit union found that—based on the people who gave them statistics about their background—25% are from the BME community and 52% live in social housing. It is clear that the demographics of some of those affected by the Bill are disproportionately likely to be women and from BME groups, because the credit union will not be able to roll out the saving gateway or to encourage a savings habit among them.

We have been told that the credit union movement will be reluctant to venture into new financial products in future, so there will be other knock-on effects. We have also heard powerful evidence from Marc Bush of Scope about the importance of the saving gateway for people with disabilities. Members are probably anxious to get home or to attend the end of the debate in the Chamber, so I will not quote him at length, but he said that the saving gateway pilots

“were a good thing in that they gave people an opportunity to save without penalty at a reasonable rate of return, which is really important, because those products just do not exist for disabled adults. The national roll-out would have pushed that forward to a whole group of disabled people who are financially excluded from the products that are on the market at the moment.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 69, Q187.]

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

Will the hon. Lady explain to the Committee what would have happened in areas where there was no coverage of credit unions and the only suppliers were Lloyds and RBS?

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

The Government were looking at the idea of using the post office network, with the credit unions working in partnership with it. From today’s news about the Post Office bank having its plug pulled, that looks less likely to happen. I do not think that just because the service would not be available to everybody across the board—credit unions are actually well established in some of the most deprived areas—that one should say it is not a good thing. The way forward should be to aim to have more credit unions or similar facilities in the areas that are not currently served.

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

Does the hon. Lady recognise that she would create geographical inequality in areas without credit unions and that there would be people who wanted to take part in this project but who could not do so, because there was no outlet or distribution channel? One of her hon. Friends made the point earlier that closeness to an access point is important for encouraging savings.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

That is a negative way of looking at the issue. It works well if people, who would otherwise be financially excluded, are able to access financial services because there is a good credit union in their neighbourhood. We have such a credit union in Bristol with Money Go Round, which is five credit unions merged into one and which reaches out to communities. As I have said, 25% of its clients are from a BME background and 52% are in social housing. It reaches out to people who were not previously served by financial services.

When the Treasury Committee had an inquiry into financial inclusion, we looked at basic bank accounts and the reluctance of high street lenders to offer them to people from poorer backgrounds, partly on the basis of postcodes and partly because they were not seen as good customers from a commercial point of view. If one says that the system works well, but because some people cannot benefit from it at the moment, we should scrap it, that is showing a very defeatist attitude. I would also say that communities without credit unions are often those that do not need them, because they are better served by mainstream banking services. The focus should be on those who are financially excluded, who tend to be in urban areas, many of which are well served by the credit union movement. As I have said, I have had long conversations with ABCUL, so I am well versed in that movement. I appreciate that there are plenty of parts of the country that would benefit from having a credit union.

One cannot say that there is a geographical disadvantage, without looking at the problem in relation to income levels and whether people belong to an excluded group, have disabilities or are from the BME background. That helps to make our point that unless there is an equality impact assessment, how does one know which people will be affected by the proposed changes—that is the whole nub of it. A comprehensive equality impact assessment would show whether the geographical variances had an impact on minority groups or those who are financially excluded, or whether that was less of a problem.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

I am interested in my hon. Friend’s argument. Is she saying that the equality impact assessment and other amendments tabled for discussion tonight would give clarity, research and more background for the purposes of the Bill, which seems rushed overall?

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury) 9:00, 9 November 2010

I think that that is true of the Bill generally. We are rushing into axing child trust funds and the health in pregnancy grant, and not proceeding with the saving gateway, when all those schemes are in their early stages. As my right hon. Friend the Member for Delyn said when debating his amendments, we are not necessarily saying that money must be pumped into the schemes now; we are only saying, “Let’s look into the impact that axing them would have and whether it’s possible to keep them going.” Perhaps as far as the child trust funds are concerned, we could keep the framework. Then, when the economy recovers, we might be able to put some money into the scheme, rather than throwing the baby out with the bathwater and axing everything completely.

To return to the evidence, Mr Bush from Scope identified three aggravating features that affect disabled people’s access to mainstream financial services: inadequate financial capability and skills, lack of financial information and advice and the absence of appropriate financial products. He said that because people with disabilities often live on a mixture of benefits and income, mainstream financial services do not cope well with trying to analyse  their household income. Sometimes they do not take the benefits into account, will not accept gaps in employment and so on.

Mr Bush thought that the saving gateway, tied as it is to advice on financial capability issues, offered people with disabilities an opportunity. As he pointed out, through the personalisation programme, which I know the Government are keen on, disabled people are now being given significant lump sums of money of their own—up to £50,000—to manage and to buy in services. That is quite a step for someone who has relied on fairly small amounts of weekly income. He thought that it was important that people should be given financial advice and support to manage that income. He also highlighted the fact that people with disabilities are vulnerable to less reputable lenders and loan sharks.

To conclude on the general issue of the equality impact assessment, we know that although no equality impact assessment was done on the Budget, a fairly half-hearted impact assessment was carried out on the comprehensive spending review.

Photo of Claire Perry Claire Perry Conservative, Devizes

The hon. Lady and I often share a media platform. She talks a great deal of sense, particularly about credit unions. I commend her for that; it is a huge all-party parliamentary initiative. However, she has strayed into the sticky territory of equality impact assessments. She sat on the Government Benches during the last Government. If she felt so strongly about equality impact assessments, why did she not ask for them to be carried out on some fairly significant measures, such as the abolition of the 10p tax rate, which arguably had a far greater impact on more people in this country than the proposed measures?

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

The Equalities Act is a fairly new initiative. It came into force in—

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

So some of the mechanisms and processes available are new initiatives. Perhaps the reason why we are so exercised comes down to the fact that as a Labour party in Government, we trusted ourselves rather more to bear the impact in mind whenever we introduced policy—[ Laughter. ] Let me finish my point. I compare what this Government have done with the analysis that had to be done, because the Government were not doing it, by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) when she was shadow Secretary of State for Work and Pensions. She said that of the £16 billion in cuts proposed by the Government, £11 billion would come from women.

Photo of Claire Perry Claire Perry Conservative, Devizes

The hon. Lady is gracious in giving way. We could perhaps do a bit better than to say that the last Labour Government trusted themselves to do the right thing by disadvantaged people. If the former Government believed so strongly in the importance of equality impact assessments—they put them into legislation, as the hon. Member for West Ham pointed out, in 2010—surely she, as a member of the Government, should have been arguing those very points. Will she assure me that she at least made those points robustly to  the Treasury? Would she trust me if I said I believed that our Government had plans to lift millions of people out of poverty?

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I think that one has to judge the parties by their respective records. The Chair is being very patient with us straying off the topic, but when it comes to equalities—whether in terms of gender, disability, sexual orientation or anything else one can imagine—the previous Government made huge strides over their 13 years. It was something that was neglected during the 18 years before that. I am not prepared to take any lectures on that.

Photo of George Howarth George Howarth Labour, Knowsley

Order. The hon. Lady kindly said that I have been very patient, and indeed I have. This is not a debate about the respective merits of the previous Government and the current Government. This is a debate about a particular amendment to a particular clause of the Bill. The hon. Lady, and those who are considering intervening on her, might want to bear that in mind for the rest of the debate.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

Thank you for that guidance, Mr Howarth. Regardless of the history relating to whether there should have been more equality impact assessments, I would argue that the initial impact assessment was half-hearted. A long time ago, I was about to quote the chief executive of the Fawcett Society. She said that the assessment that was carried out was

“only partial and almost flippant in its lack of detail. The Treasury has explicitly chosen not to undertake any detailed consideration of the impact of benefit cuts, job losses or the slashed local authority budget – the three areas the Fawcett Society identified as particularly harmful to women's future economic independence and financial security.”

When the Minister for Women and Equalities was pressed on whether she planned to publish equality impact assessments as part of the CSR, a vague, fudged answer was given. At one point, she said that she had no plans to commission separate work on how the provisions in the Budget would affect women. During an Adjournment debate on the impact of the Budget on women, the issue was again fudged, despite my hon. Friend the Member for Slough (Fiona Mactaggart) trying to get an answer. Given that the saving gateway project is targeted at particular groups, the removal of that scheme will have, at least potentially, a disproportionate impact on people from black and minority ethnic backgrounds and on people with disabilities in particular. I think that we would all agree that Marc Bush from Scope gave particularly powerful evidence highlighting the problems that people with disabilities have in accessing any financial services, but particularly in trying to get on to the savings ladder and in trying to access financial advice.

Finally, on the impact that the measures would have on women, it is absolutely crucial that before the Government go ahead with axing the scheme—as my right hon. Friend the Member for Delyn has said, there is no need to rush into this; they could postpone the end date—a detailed equality impact assessment is carried out. We could then see whether some of those harder-to-reach groups and groups that are more disadvantaged could be helped, perhaps through other measures, or perhaps through the continuation of the scheme. I urge the Minister to think again and consider supporting the amendment.

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

I will not repeat the extensive arguments that I made on amendment 36 about why we went down this route and why we went for an initial assessment rather than the full equality impact assessment; I do not want to test the patience of the Committee. In the initial assessment, we went through the impact on various groups, and we acknowledged that our decision not to launch the saving gateway could have a greater impact on people with disabilities. They are disproportionally affected, in the sense that two of the passported benefits relate to disability and incapacity benefit. The measures will affect people in particular age groups, which we bear in mind. However, the impact on women is not significant, as they only made up slightly more than half of the eligible population.

The hon. Member for Bristol East referred to the points raised by Scope and mentioned access to financial information. She makes an important point. Access to such information is an important way of encouraging people to save, enabling them to manage their money; that way, they can try to avoid the clutches of loan sharks and try to understand some of the issues about pay-day loans. That is why, to tackle some of the issues, we support the roll-out of a national financial advice service and the provision of an annual financial health check, available to all families for free; that will be funded by industry but organised by the Consumer Financial Education Body. It will ensure that some of the difficult-to-reach groups have access to information. That goes alongside the national roll-out of pilot projects that were started last year, with face-to-face advice for difficult-to-reach groups.

While we may not be pursuing the saving gateway, our commitment to the national roll-out of the financial advice service and the annual financial health check will help to tackle some of the issues that hon. Members have raised.

Photo of Alison McGovern Alison McGovern Labour, Wirral South

Will the Minister be so good as to put on record his commitment to try to tackle some of the issues that were raised with us by the representative from Scope in his evidence? I was particularly concerned about the attitude of some financial services providers towards those with severe physical disabilities. If he would be so good as to put on record his and the Government’s commitment to tackling those issues, I would be very grateful.

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

I am happy to put on record my commitment to that. I do not believe that anyone should be discriminated against when it comes to the provision of financial services. We must ensure that proper steps are taken, so that there is widespread availability of financial services products. One of the downfalls, unfortunately, of the saving gateway scheme is that there would not have been such availability, and there would not have been enough outlets to enable us to spread the scheme across the whole country. Some groups would have been excluded, on a geographical basis, from experiencing the advantages of the scheme. There is more work to be done in this area, and I do not believe that the saving gateway product would have delivered the benefits that we would have liked, which is why we have decided to scrap it. However, I think we have tried to identify some of the issues relating to the equalities impact, and tried to look at how we could mitigate some of those effects.

I would like the hon. Member for Bristol East to withdraw her amendment. I think we have made progress. She acknowledges that we have done so, compared with the previous Government, in tabling the reports, and I think she should welcome that.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

I am not sure that I concur with the Minister’s summary when it comes to my approval, or non-approval, of what the Government have done so far with regard to equality impact assessments. I think I have made it quite clear that I feel that a lot of what the Government have done since they were elected in May, particularly in economic terms—in the Budget and the spending review—has completely disregarded any concerns for the disproportionate impact on certain groups, particularly women and people from poorer backgrounds.

If one looks at what the Government have done in their initial assessment, one has to conclude that the summaries that they have come up with are so vague as to be virtually worthless. The assessment of the impact of the saving gateway on different racial groups says that

“no detailed breakdown of eligibility for the SG by different racial groups was possible.”

Earlier, I tried to point out that in my own city, if there was involvement of 25% of the clients of a credit union, which would offer the saving gateway if it was allowed to, one could argue that the number of people eligible for the saving gateway project would be high among particular ethnic groups.

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

The hon. Lady must recognise that arguing from the customer base of one credit union in Bristol does not provide the qualitative analysis that is needed for a report of the kind that we are discussing.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

That is exactly why I am arguing for a detailed equality impact assessment. I was at a meeting in south London the other day, and I know that there is a good credit union there. It has a big customer base that again includes a large number of people from black and ethnic minority backgrounds. That is obviously not the case across the country, but that is why the issue is important. At the moment, all the Government know is that there is no detailed breakdown of eligibility for the saving gateway by different racial groups.

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

Part of the problem, as I am sure the hon. Lady recognises, is of course that we do not collect data on benefits by racial group.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury) 9:15, 9 November 2010

I appreciate that, but the whole concept of an equality impact assessment is to try to dig as deep as we can. The information available is obviously not 100% accurate, and it would be going too far to put in place the bureaucracy and expense necessary to collect all that information. However, it seems that the Government have so far done very little that would allow even the most rudimentary research on which racial groups would be affected and whether it would have a disproportionate impact on people from BME backgrounds.

I move on to what the Government say about people with disabilities. With regard to the saving gateway, the impact assessment again states:  

“Information is not available on the proportion of the eligible population that would have been disabled, as this data is not collected for all of the ‘passporting’ benefits. However, as incapacity benefit and severe disablement allowance would have been passporting benefits, the eligible population was expected to include a higher proportion of people with a disability than the general population.”

Therefore, it is accepted that more people with disabilities might be affected by the measure being introduced than people from the general population. For mitigating action, however, it states, “No specific mitigation appropriate”. The Government seem to be flagging up the fact that people with disabilities will be disproportionately affected, but they do not seem to think that that is a problem worth doing something about.

Finally, on different gender groups, the impact assessment states that women would have made up about 55% of the eligible population. I would argue that one cannot look at it strictly in numerical terms and conclude that 55% of the people who would qualify for it are women; one has to look at the circumstances of women’s lives. In particular, they are more likely to go in and out of employment, to be trying to juggle many different things, such as part-time work and child care, and to be moving from being totally reliant on wages to being totally reliant on benefits, and sometimes a mixture in between.

I think that there would have been a higher take-up by women of the service that the saving gateway product would have offered, but I am again speculating because the Government have not done the work in determining whether that would be the case. That is a real opportunity missed, because even if the Bill is passed and we end up without a saving gateway scheme, I hope that the Government will take financial inclusion and the idea of promoting a savings culture seriously enough to look at putting something else in its place. We could have used that opportunity to do a worthwhile assessment, so that we knew what should be brought in to replace it.

Question put, That the amendment be made.

The Committee divided: Ayes 8, Noes 9.

Division number 12 Decision Time — Clause 2

Aye: 8 MPs

No: 9 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Question put, that the clause stand part of the Bill.

The Committee divided: Ayes 9, Noes 8.

Division number 13 Decision Time — Clause 2

Aye: 9 MPs

No: 8 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly agreed to.  

Clause 2 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mr Goodwill.)

Adjourned till Thursday 11 November at Nine o’clock.