Debates — Saving Gateway Accounts Act

Committee stage in the Lords

21 Apr 200951 speechesView in Hansard ↗

The Deputy Chairman of Committees (Lord Brougham and Vaux)Welcome to the second day of the Committee stage of the Saving Gateway Accounts Bill. If there is a Division in the Cha…
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The Deputy Chairman of Committees (Lord Brougham and Vaux)Conservative
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Welcome to the second day of the Committee stage of the Saving Gateway Accounts Bill. If there is a Division in the Chamber while we are sitting, the Committee will adjourn for 10 minutes as soon as the Division Bell rings. Clause 7 : Transfers Amendment 33
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Baroness NoakesI shall speak also to Amendment 34. These amendments concern transfers under Clause 7, which allows regulations to spec…
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Baroness NoakesConservative
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I shall speak also to Amendment 34. These amendments concern transfers under Clause 7, which allows regulations to specify when an account may be transferred. In fact, draft regulations give a complete free-for-all on transfers, which account providers have to make whenever requested and at no cost to the account holder. The Minister will be aware that this remains a source of contention with the British Bankers’ Association, acting on behalf of the banks. It has asked us to raise this issue again with the Government, despite the fact that it was discussed at length in another place. The BBA is obviously not opposed to savers having access to their money and is committed to ensuring that account holders can withdraw their money easily, but transfers to other approved providers raise particular issues of cost, which derive from the fact that the transfer process will probably not be automated and will be reliant on paper-based systems. I cannot think of anything more unsatisfactory in relation to these small-value accounts. In addition, there would be problems with the production of statements, as that would require the transfer of an account history to the new provider for the new provider to calculate the maturity payment, which requires knowledge of the account history. The BBA has also referred to identification verification of the account with the new provider, which also causes a problem. I do not believe that the problems are confined to the banking sector. In the Public Bill Committee in another place, similar concerns were expressed by building societies and credit unions or, rather, the representative bodies acting for them that gave evidence to that committee. My Amendment 33 would allow transfers to be made only if approval of a provider was withdrawn or if the provider was within the special resolution regime set out in the Banking Act 2009, which the Minister and I had so much pleasure working on earlier this year. Regulations should be made only in this context, which is what Amendment 34 provides for. The Government should be aware that this is still a big issue, which may strike at the heart of whether there will be any voluntary participation in saving gateway accounts. That is why I have raised the matter again in Committee. I beg to move.
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The Financial Services Secretary to the Treasury (Lord Myners)Amendments 33 and 34 would limit the circumstances in which the transfer of a saving gateway account could take place.…
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The Financial Services Secretary to the Treasury (Lord Myners)Crossbench
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Amendments 33 and 34 would limit the circumstances in which the transfer of a saving gateway account could take place. It may help if I explain the position on transfers in general, and our intentions, before coming to the amendments themselves. As noble Lords may know, we have said that we are attracted to the idea of saving gateway accounts being transferable between providers—for example, for an account holder who moves and who finds that their current provider is no longer accessible. However, we do not expect transfers to be frequent. Unlike child trust funds and ISAs, these are short-term accounts and it is not likely that account holders will want to change providers regularly to obtain, for instance, a better interest rate. The match payment will be the same with any provider and will be significantly larger than any other return offered by the provider. We also recognise that this remains a considerable concern for potential account providers, as the Public Bill Committee in the other place heard during its evidence sessions, particularly from Ms Helen Banks of the British Bankers’ Association. This is an issue that we will continue to discuss in detail with potential providers and their representative bodies. Whatever the outcome of those discussions, a mechanism will be necessary for transfers to cater for cases where the transfer is triggered by the account provider rather than the account holder. The amendment caters for a couple of specific cases: where a provider’s approval is withdrawn or where a provider is subject to the special resolution regime provided for by the Banking Act 2009. However, the amendment would not allow transfers to be made in a number of other situations triggered by the account provider. It would not, for example, permit transfers to be made where a provider ceased to act as a saving gateway provider by choice, nor would it permit transfers to be made where a provider ceased to qualify for account provider status. In such cases, the amendment would mean that account holders would be stranded and unable to transfer their account elsewhere. I am sure that noble Lords would agree that that would not be a desirable state of affairs. We continue to believe that this is an area that requires further attention and a degree of flexibility. We shall continue to talk with account providers as the Bill proceeds through Parliament. I have again put on the record our continuing commitment to have discussions and to come back to the House in due course. For those reasons, we believe that the amendments are unnecessary and I hope that the noble Baroness will not press them.
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Baroness NoakesI thank the Minister for that response. He is fully aware of my reasons for raising these issues. He is saying, “Trust…
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Baroness NoakesConservative
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I thank the Minister for that response. He is fully aware of my reasons for raising these issues. He is saying, “Trust us and we will get it right”, whereas the British Bankers’ Association is saying, “We’d rather have it sorted out on the face of the Bill”. I will need to consider this matter carefully with the association before Report stage. The Minister pointed out some technical deficiencies in my amendment. I take the point entirely, but he will understand that I drafted it as a probing amendment in effect, as we cannot make amendments except by agreement in Grand Committee. As I say, I will discuss this further with the British Bankers’ Association, but he should be aware that this is one of the sticking points, which is why I think it important that we should make progress before the Bill moves to its Report stage in your Lordships’ House. I do not think that we have a date for that yet, but there is some urgency behind the Government making progress on this. I beg leave to withdraw the amendment.
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Baroness NoakesAmendment 35 would amend Clause 8(1), which deals with the amount that may be paid as a maturity payment, so that the m…
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Baroness NoakesConservative
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Amendment 35 would amend Clause 8(1), which deals with the amount that may be paid as a maturity payment, so that the maximum matching rate, which is to be set by regulations, does not exceed £1. That would represent a rate of matching of 100 per cent. The Government have stated that they intend the matching payment to be at the rate of 50p per qualifying £1 balance. We have no problem with that, but inevitably they are taking a power in the name of flexibility to set the amount in regulations and have put no maximum on it. We can see that flexibility might be desirable and are aware that the affirmative procedure is required for an order under Clause 8(1). Nevertheless, we feel that there should be some overall constraint on the amount that could be paid, otherwise we will be legislating for a power that could be subverted to pay ridiculous multiples of saving, perhaps as a way of channelling tax-free amounts to certain categories of individual without proper parliamentary consideration. The affirmative procedure is clearly better than the negative procedure but, as we have pointed out in many debates on Bills, it gives relatively little influence to Parliament over the Executive, since the option of voting down a statutory instrument is wisely not followed except in the most exceptional cases. That is why I have proposed an additional restraint in primary legislation. The Bill allows for a subsidised savings mechanism through the saving gateway. I do not believe that we should use that to create a legislative framework that could stray beyond that noble cause; we should restrict it to what could reasonably be regarded as an incentive to save and not leave an open-ended power on the face of the Bill. I beg to move.
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Lord MynersThis amendment would limit the flexibility of regulations. Specifically, it would prevent regulations from setting a ma…
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Lord MynersCrossbench
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This amendment would limit the flexibility of regulations. Specifically, it would prevent regulations from setting a match rate for the scheme of higher than pound for pound. Noble Lords will know that the Government announced in the 2008 Pre-Budget Report that they would match each pound saved with 50p. Leaving the details of the accounts to secondary legislation provides the flexibility to make alterations in the future. This might be necessary if, for example, experience of the national scheme suggests that a different match rate would better achieve the aims of the saving gateway. The noble Baroness has tabled a later amendment that speaks to the need for Parliament to review the performance of the saving gateway scheme. It is precisely as a consequence of such a review, although not the review that the noble Baroness will be proposing, that we wish to retain the flexibility to make changes through regulation. I agree that too high a match rate may not represent good value for money for the taxpayer. However, it is important that we are able to respond to any lessons that we learn from operating the national saving gateway and that we do not place restrictions on the match rate that regulations can prescribe. Of course, any changes to the match rate would, as the noble Baroness has acknowledged, be subject to the affirmative procedure. I therefore hope that the noble Baroness will withdraw her amendment.
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Baroness NoakesThe Minister’s response that the Government would like as much flexibility as possible was entirely predictable. Howeve…
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Baroness NoakesConservative
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The Minister’s response that the Government would like as much flexibility as possible was entirely predictable. However, in the context of a savings incentive, it is reasonable for the Government to accept that there should be some provision that restricts the power to something that looks like saving. Once you get beyond a 100 per cent match, which I hope the Government will never get to, it is not an incentive to save any more; it is some other kind of channel of money flowing to particular recipients. I am not convinced by the argument that unfettered flexibility is necessary to respond to the aims of the saving gateway scheme. It might be desirable for all kinds of other things, but not for the saving gateway scheme, because once you go beyond a pound you will be in ludicrous territory. If you had to induce someone to save by giving them pound for pound—or more than pound for pound, because my limit would allow you to go up to £1—you could not say that we were in the business of incentivising savings. I put the noble Lord on notice that I am not satisfied by his response in this instance and I will probably return to the issue on Report. For now, I beg leave to withdraw the amendment.
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Baroness NoakesI can be brief on Amendment 36, which seeks to amend Clause 9 so that the regulation-making power in relation to statem…
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Baroness NoakesConservative
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I can be brief on Amendment 36, which seeks to amend Clause 9 so that the regulation-making power in relation to statements has to provide that statements are not to be provided more frequently than six monthly unless an account is closed. This was debated in another place and again goes to the heart of an issue on which we have touched several times: the costs that the saving gateway scheme might impose on providers and the impact that that would have on the willingness of providers to get involved. The Government have wisely provided for six-monthly statements in their draft regulations—we welcome that—but there can be no certainty for providers that the rules of the game will not be changed once they have signed up to be saving gateway providers. If the economics of saving gateway accounts are finely balanced with six-monthly accounts, the business case could be wrecked by a subsequent decision by the Government, perhaps under pressure from consumer groups, to increase statement frequency. If banks and other potential providers have to make their business case with this risk embedded in the calculations, they may not proceed. It is not only the banks that are concerned about costs. As we touched on during our first day in Committee, the evidence to the Public Bill Committee in another place showed that the building societies also had concerns about costs. Even the managing director of the Post Office, while undoubtedly optimistic and enthusiastic about getting involved in saving gateway accounts, gave equivocal evidence about the economic viability of the saving gateway scheme. The amendment would provide a small protection, which would cost the Government nothing to concede. If there ever were a competitive landscape for saving gateway accounts, the frequency of statements might well increase if account holders valued them and that provided a competitive advantage. No one would need to legislate for powers to achieve that; it could just happen. But to leave open the possibility that the Government could tighten the terms of the scheme at a later stage is simply not helpful. I beg to move.
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Lord MynersThe amendment would put in the Bill a requirement that is already contained in the draft regulations for statements to…
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Lord MynersCrossbench
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The amendment would put in the Bill a requirement that is already contained in the draft regulations for statements to be issued on a six-monthly basis and at the point of account closure or transfer. We believe that this level of detailed requirement is more appropriate for secondary legislation. It is an area where we believe there should be some flexibility to enable us to respond to any lessons learnt from operating the scheme, as well as to keep pace with any future changes in banking practice. The noble Baroness does, however, make a good case. I recognise that the success of the saving gateway is importantly dependent on the availability of a significant number of account providers. While I urge the noble Baroness to withdraw the amendment, I will go away and take account of her comments.
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Baroness NoakesI thank the Minister for that response. I hope that the Government will take away a lot of these issues. There has been…
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Baroness NoakesConservative
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I thank the Minister for that response. I hope that the Government will take away a lot of these issues. There has been an assumption that drafting a Bill with huge regulation-making powers is the most satisfactory way to proceed and, from the Government’s perspective, clearly it is. But from the perspective of the potential account providers, the more flexibility the Government have, the greater their ability to change the terms of business after people have made an initial decision. That may prevent people from making a decision if there is too much uncertainty or it may cause a lot of difficulty after the scheme has started. I hope that the Minister will look again at this and at some of the other issues that we discussed at our first Committee sitting. I beg leave to withdraw the amendment.
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Baroness NoakesAmendment 37 would amend Clause 9 so that the regulations about statements have to provide that hard-copy statements ar…
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Baroness NoakesConservative
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Amendment 37 would amend Clause 9 so that the regulations about statements have to provide that hard-copy statements are available unless account holders consent to receiving them electronically. Clause 10 is silent on how statements are to be made available to account holders and so, too, are the draft regulations. In another place, my honourable friend Mr Ed Timpson moved an amendment that was permissive on electronic statements. The Minister said in response that the Government, “do not intend to specify the form that statements have to take, but simply that they must be issued. This would permit them to be issued electronically and it would be a matter for the account provider to decide”.—[Official Report, Commons, Saving Gateway Account Bill Committee, 3/2/09; col. 114.] That rang alarm bells because I do not think that this issue should be left to the account provider. The cost advantages of doing away with paper, printing, postage and so on are so overwhelming that, left to their own devices, account providers would rush to electronic provision as rapidly as possible. I am normally one to argue for sensitivity to the costs of business, but this is one area where I think that business would like to go further than most consumers actually want. Let us take the parallel case of the Companies Act 2006, which allows companies to move to electronic delivery of notices of meetings and documents such as annual reports. Once companies have changed their articles to permit it, they are still not allowed to implement it and force electronic delivery on their shareholder base. Each shareholder has to be asked if he wants to stick with hard copy or default to electronic delivery, but there is no similar protection in these regulations. I am a great enthusiast of the internet, but I still tend to opt for a hard copy of annual reports. Indeed, I have refused the blandishment of my bank to take soft-copy bank statements. In each case, I am given the choice. I wish to preserve choice for those who are drawn into the saving gateway and I think that the Government ought to share that ambition. I beg to move.
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Lord MynersClause 9 already provides a power enabling regulations to specify the form and content of a statement. This would allow…
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Lord MynersCrossbench
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Clause 9 already provides a power enabling regulations to specify the form and content of a statement. This would allow regulations to specify that providers should supply statements on paper unless an account holder requests otherwise, should we wish to go down that route, so the amendment would not add anything to the Bill. However, this is an area where we think it sensible to be permissive rather than prescriptive. We expect that providers will supply statements in paper form as a default, but we do not see that it is necessary to impose a requirement to this effect in the regulations. For a provider to supply statements electronically, it is likely, as noble Lords will appreciate, that the account holder will be required to set themselves up with an internet banking service and at least to supply an e-mail address. It is hard to see how this could be done without the consent of the account holder. I hope, therefore, that the noble Baroness will seek leave to withdraw the amendment.
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Baroness NoakesI thank the Minister for that reply. His argument depends on whether the regulation-making power can ensure that electr…
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Baroness NoakesConservative
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I thank the Minister for that reply. His argument depends on whether the regulation-making power can ensure that electronic provision is not forced on individuals. I shall look carefully at what he has said to see whether this is adequately dealt with. It is not covered in the existing regulations; the issue is whether the regulations ought to be looked at again. Providers have all sorts of ways of getting details such as e-mail addresses; for example, small print may say, “By giving us your e-mail address, you have allowed us to use your e-mail address”. We cannot necessarily rely on providers to be reasonable about the way in which they do this, because the cost advantages are so great. One has only to look at how devious companies are at slipping in a tiny piece of paper with the annual report package that says, “Are you really sure you want to carry on having hard copy?”. You have to find that little bit of paper to make sure that you carry on having hard copy. We have to recognise that the corporate world loves electronic communication and that the consumer world is not necessarily ready for it. It is that which needs to be protected. I leave the Minister to contemplate that. In the mean time, I shall read his comments carefully before Report. I beg leave to withdraw the amendment.
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Baroness NoakesThe amendment would add an extra subsection to Clause 10, which deals with accounts ceasing to be saving gateway accoun…
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Baroness NoakesConservative
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The amendment would add an extra subsection to Clause 10, which deals with accounts ceasing to be saving gateway accounts. In fact, Clause 10 is merely a regulation-making power and contains no substance. My amendment, which is probing, says that an account will cease to be a saving gateway account if the account holder sells it, transfers it or charges it as security. My aim is to prevent a saving gateway account holder from cashing in on the maturity bonus by selling it for cash or borrowing against it. I do not think that the Government want to encourage a secondary market in saving gateway accounts, since that would go against the spirit of trying to encourage savings. I drafted transferring the account into the amendment, but, in hindsight, I do not think that that is what I meant to do, because I did not intend to cover transfers to an alternative provider, which we covered in an earlier amendment. However, I wanted to cover other kinds of transfer such as sales or possibly gifts. My concern is that the kinds of organisation that facilitate pay-day borrowing, for example, and other uneconomic forms of lending should not be allowed to manipulate saving gateway account holders. It would be all too easy for a person with a saving gateway account, perhaps 18 months in and wanting some ready cash, to borrow against the account or to sell the account, with the lender cashing in the maturity amount. I could not find anything in the regulations that dealt with this and so, as I said, my amendment is probing to find out the Government’s approach to saving gateway account holders using their account as a way of raising money prior to maturity. The Child Trust Funds Act 2004, which is from the same stable as the saving gateway account, contains specific provisions about inalienability. I should perhaps have used that as a template for this amendment, but I rediscovered it too late in the day. If a bar on alienability is good enough for child trust funds, we should have some similar restriction for saving gateway accounts. I beg to move.
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Lord MynersI understand the noble Baroness’s concerns, but we do not think that the situation referred to in the amendment will be…
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Lord MynersCrossbench
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I understand the noble Baroness’s concerns, but we do not think that the situation referred to in the amendment will be common. I hope that I can provide the noble Baroness with some reassurance. As noble Lords may be aware, we intend to provide in regulations that a saving gateway account can be held only by a person who is or has been an eligible person and must not be held on behalf of any person other than the account holder. That is covered by draft Regulations 10(1)(b) and 10(1)(g). The effect of these provisions would be that, should the account holder sell or transfer an account, it will cease to be a saving gateway account and any right to a maturity payment would be lost. Beyond those safeguards, we do not consider it appropriate to further regulate the purpose to which eligible account holders put their savings, as to do so risks overregulation and could act to deter eligible people from opening an account. For those reasons, I hope that the noble Baroness will withdraw her amendment. When she has read and studied my remarks, if she feels that my response to her point is inadequate and that her concerns have not been fully addressed, I would be happy to meet her and discuss the matter further before the Bill returns to the House.
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Baroness NoakesI thank the Minister for that response. I shall of course need to go back to the draft regulations to see what they say…
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Baroness NoakesConservative
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I thank the Minister for that response. I shall of course need to go back to the draft regulations to see what they say. The Minister’s remarks covered sale or transfer but did not cover charging by way of security, which would be one obvious way in which to do it, because selling or making a transfer may be too complicated.
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Lord MynersI recognise the noble Baroness’s point. There are scoundrels operating in the margin in the unbanked community that we…
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Lord MynersCrossbench
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I recognise the noble Baroness’s point. There are scoundrels operating in the margin in the unbanked community that we are trying to draw into the formal banking community and one needs to be alert to minimising opportunities for mischief in that area. However, it is worth bearing in mind that the value of the saving gateway account will be small—up to £600 plus entitlement to any match payment earned. Therefore it is unlikely that the account will be used for security by the account holder for, say, a loan or acquisition of another asset, particularly as the option is already there to remove funds from the account. However, in my comments about the scope for mischief and bad behaviour, I am alert to the noble Baroness’s point. We come back to an issue of proportionality. I am much reminded, as I look across the Committee Room to the noble Lord, Lord Newby, that this piece of legislation requires us to strike some compromises. There is certainly an important one here in ensuring that the saving gateway is not so onerous or beset by regulation and control as to make it unattractive either to prospective account providers or to account holders.
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Baroness NoakesI completely understand what the Minister is saying. I need to reflect on why the 2004 Child Trust Funds Act had a spec…
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Baroness NoakesConservative
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I completely understand what the Minister is saying. I need to reflect on why the 2004 Child Trust Funds Act had a specific provision on alienation and why this Bill does not. That is something that we should look at again. Alternatively, we can look at whether regulations could be made at a later stage to cover the points that I have raised in my amendment, which are intended to deal with the very vice that we know is out there and is potentially capable of being involved in this process. To put this in context, the child trust fund accounts do not necessarily amount to very much more money, so we are talking about the kinds of controls that we would want to put in small savings accounts. I beg leave to withdraw the amendment.
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Baroness NoakesAmendment 39 would insert a new clause before Clause 11 to require the Treasury to lay a report each year setting out i…
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Baroness NoakesConservative
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Amendment 39 would insert a new clause before Clause 11 to require the Treasury to lay a report each year setting out information about the operation of the saving gateway scheme. That would ensure that Parliament received regular reports on key indicators about saving gateway accounts. Subsection (2) of my new clause sets out the information that must be contained in the annual report; it essentially asks for take-up rates, drop-out rates and the costs of the scheme in terms of maturity payments to be set out. It also covers the number of providers offering saving gateway accounts, which will show whether genuine consumer choice has been available to account holders. Other information may well be useful to Parliament—for example, age or gender analyses of take-up or drop-out rates or the provision of material designed to deliver on a financial education agenda. Another area of information that would be desirable, but not necessarily easy to collect, is the persistency of saving after the maturity date. My amendment does not try to specify every possible item of data that might be useful but simply specifies the minimum amount of data. The amendment could no doubt benefit from a catch-all phrase calling for such information as the Treasury considers would aid an understanding of the saving gateway scheme. The saving gateway scheme has been designed with the benefit of the two pilots, especially the larger one. Nevertheless, I think that the Minister would agree that a national rollout will take place in a different environment and may well show different characteristics. There is the issue of the cost of the scheme, which at £100 million for the first three years, falling to £60 million per annum thereafter, is not completely insignificant. Every year Parliament will be voting that money and it seems to me that it will be important for Parliament to have some basic information on which it can judge the success or otherwise of the scheme and from which further questions or debates could flow. In another place, the Minister said that HMRC would provide some information, which would be considered in due course. That is not sufficient assurance that HMRC will provide adequate information, which is why I have tabled my amendment. I beg to move.
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Lord Williamson of HortonIn principle, I always hesitate about demanding too many reports from the public service and government, as that is a v…
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Lord Williamson of HortonCrossbench
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In principle, I always hesitate about demanding too many reports from the public service and government, as that is a very easy thing to do. However, I support the amendment for two reasons. The first is that the information requested in subsection (2) is very simple. If I had oversight of this scheme in the public service, I would expect to have that information. I once was a senior civil servant. If I was in that position and did not have this information, I would feel that I was not doing my duty. The information is easily obtainable; the providers themselves must surely have it. We are not dealing with a complicated request in this case. For that reason, it is not unreasonable that the information should be in the public domain. The second reason why I support the amendment is that this is not a savings scheme like the sort of schemes that National Savings & Investments put out from time to time. It is a different type of savings scheme. It has a policy objective, which the Government have stated: to promote a saving habit among working-age people on lower incomes and to promote financial inclusion by encouraging people to engage with mainstream financial services. Those are legitimate objectives, which I strongly support. However, they differentiate this scheme, which is why I think that we should have the information in the public domain. In my view, this will apply with even more impact to the next amendment, Amendment 40, which, as the Minister will remember, in the days before he set off for Cornwall I stated that I would be supporting. However, it also applies with some force to the current amendment.
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Lord NewbyI, too, support the amendment, albeit for a slightly different reason. I am particularly concerned, as I mentioned at S…
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Lord NewbyLiberal Democrat
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I, too, support the amendment, albeit for a slightly different reason. I am particularly concerned, as I mentioned at Second Reading, about the issues raised in paragraph (f), which concerns the, “number of approved account providers”. When listening to the debate this afternoon about the need to have hard copies of statements every six months, I was doodling some figures. I suspect that when this scheme begins its operation, most people who subscribe to it will not be subscribing £25 per month; they will probably be prescribing, say, £10 per month. In year one, therefore, they will subscribe £120—if they do it every month, which not all of them will—so that the average amount held in the account during the period will be £60. I believe that today LIBOR is 1.5 per cent, so I reckon that the bank will make 90p on such an account. It will have to send out two written statements, which will take up all of, if not more than, the 90p. I am concerned that the scheme will simply not be viable for any account provider. It will be extremely interesting at the end of the first year to have a report that, among other things, will tell us how many account providers there are.
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Lord MynersThis short debate has been most well informed. I agree with the noble Baroness about the importance of publishing data…
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Lord MynersCrossbench
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This short debate has been most well informed. I agree with the noble Baroness about the importance of publishing data on the operation of the scheme and I agree with the contributions from noble Lords that that evaluation has to be set against the core purpose of the saving gateway as presented to Parliament. I confirm that, as is currently the case for ISAs and child trust funds, we intend that HMRC will collect and publish data on the operation of the scheme. We want to ensure that the content of the data that are published is sufficient to allow as far as possible an evaluation of the operation of the scheme against the clear objectives that we have set. This will require careful consideration of the matters to be covered, in particular whether the matters specified in the noble Baroness’s amendment would be sufficient or whether some variation or addition to that list might be appropriate. In addition, we will wish to consider whether annual publication for the period specified in the amendment would be appropriate or whether, as is the case with data for child trust fund account openings, more frequent publication would be in order. As noble Lords may be aware, the legislation for other government-supported savings accounts, such as ISAs or the child trust funds, contains no such reporting requirement. Despite that, HMRC publishes detailed data on the operation of these schemes. To take one example, noble Lords may well be aware that data are published annually on ISA account subscriptions and valuations. As the Economic Secretary made clear in the other place, it may be that a similar approach is appropriate for the saving gateway. Alternatively, a broader or different range of data might be appropriate. We think that it is too early to put in place any requirements on the data that should be published. We want the data that are published to be sufficient to contribute to an evaluation of the operation of the scheme. While it is likely that this will include at least some of the data specified in the amendment, it may well require considerably more detail and data, and we do not wish the Bill to lock us into an incomplete or inflexible reporting requirement. As experience of ISAs and child trust funds demonstrate, legislation is not required to ensure that appropriate data are published. The noble Lord, Lord Newby, makes an interesting point about the economics of the scheme for the account provider, to which we referred at various points in earlier discussion in Committee. Of course, he uses LIBOR as the benchmark for determining the revenue. Most banks are willing to pay well above LIBOR for secure retail deposit funds and for the opportunity to develop a new customer franchise, so I suspect that the economic advantage will be greater than the 90p that he suggests. But that would be for the banks to determine. On the central thrust of the amendment, it is too early to be prescriptive about the precise detail of reporting, although I fully acknowledge the importance of ensuring that reports are made. As the noble Baroness suggests, there is a cost to this scheme. It is not an insignificant amount and Parliament will need to satisfy itself that the public are getting value for money from the scheme and that the accounts deliver their objective. With that, I hope that the noble Baroness will withdraw her amendment.
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Baroness NoakesFirst, I am delighted that the noble Lord, Lord Williamson, has chipped in. I knew that he was here to help on the next…
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Baroness NoakesConservative
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First, I am delighted that the noble Lord, Lord Williamson, has chipped in. I knew that he was here to help on the next amendment, but he is most welcome to comment on Amendment 39. The support of the noble Lord, Lord Newby, is welcome, for whatever reason it is given. The Minister says that there is no requirement in the child trust fund or ISA legislation and that HMRC publishes information anyway. That is true, but it is not always the case that the information is there for those trying to look at child trust funds. Indeed, when Parliamentary Questions are tabled to try to find out more information, we are often told that it is not available or cannot be provided without disproportionate cost. HMRC has a bit of a track record, too, of providing what it wants to provide; it often provides information on operational matters that it likes to do and not necessarily on policy matters. I do not think that I am being unfair about HMRC in this regard, which is why I was trying in this amendment to get some basic information, as the noble Lord, Lord Williamson, said, which would support a review in the context of the policy objectives of saving gateway accounts. I shall consider the Minister’s comments carefully. I do not think that the amendment is perfect, but I am not at all convinced that we should simply leave HMRC to decide what it wants to put into the public domain and then consistently bat away any further Parliamentary Questions on the grounds that the information can be provided only at disproportionate cost. If there are clear areas in which information is important to be provided to Parliament, we have an obligation to specify them, which does not preclude the Government and HMRC from giving additional information if they wish. However, there is a bare minimum data set that it might be reasonable to impose for the benefit of Parliament. I shall think carefully about what the Minister has said today and before we come to our consideration at Report, but at this stage I am not convinced. I beg leave to withdraw the amendment.
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Baroness NoakesThe amendment would insert a new clause before Clause 11. My previous amendment focused on information on some basic fa…
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Baroness NoakesConservative
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The amendment would insert a new clause before Clause 11. My previous amendment focused on information on some basic facts being provided to Parliament annually. This amendment is rather different, although the provision of information to Parliament is a common theme. Amendment 40 would require the Treasury to appoint an independent person to carry out a review of the effectiveness of saving gateway accounts and to prepare a report, which would be laid before Parliament and published. The report is intended to cover much more territory than the previous amendment, and the two amendments are not mutually exclusive. In subsection (2) of the proposed new clause, I have listed the matters that should be included in the review, which includes a catch-all for, “any other matters which the independent reviewer considers relevant to a consideration of the effectiveness of Saving Gateway accounts”. The specific requirements are listed in subsection (2) and include take-up, the extent of regular savings both before and after maturity and, importantly, what happens when the two years are up. Here we need more information than has been available from the limited data provided by the early pilots. Subsection (2)(c) refers to the, “barriers to the wide use of Saving Gateway accounts”. That is predicated on there being not a high enough take-up, which may prove to be incorrect. My assumption is that there is some further learning to do about what will entice lower-income people into regular saving. The average for child trust funds is that only 75 per cent are opened by the parent, while 25 per cent are not opened. There is quite a lot of variation within that, but it is quite simple to open such a fund. It does not even require you to go and put money in; it requires you only to open the account. So it is quite likely on the basis of the child trust fund experience that take-up will be somewhat lower. If we are genuinely trying to kick-start this process, it is important to keep a view of what prevents people from opening saving gateway accounts. Paragraph (d) deals with the need for the provision of financial education. This was touched on in the first day of Committee and is one issue that was not resolved during the pilots. It is unclear to what extent the saving gateway scheme will stand or fall by the financial education that is hard-wired into it. The Thoresen review, which we discussed on our first day in Committee, is still only at its pre-large-scale pilot stage. By the time this review would take place, there might well be some important information from those pilots. Indeed, there may be other sources of information to draw on. As to timing, I have suggested in subsection (3) of my new clause that the review should be carried out four years after the saving gateway scheme gets going and should be completed within one year. I am flexible on timing, but that seemed to be a good sighting shot at the sort of period in which it would be reasonable to take a look at what had actually happened. Post-legislative scrutiny should be an important aspect of our approach to any new legislation that charts new territory, which saving gateway accounts qualify as. There probably ought to be a default position that all Bills with new policy requirements—anything other than tidying-up Bills—should have some form of post-legislative scrutiny, unless a case is made that that would be unnecessary. The default position should be that post-legislative scrutiny is embedded in any Bill that comes forward. I accept that that is part of a bigger proposition and is a debate for another day, but in the context of this scheme it would be wise of the Government to ensure that post-legislative scrutiny was provided for. I have set out one way in which that could be achieved. I beg to move.
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Lord Williamson of HortonI have already indicated my support for this amendment. It needs to be distinguished completely from Amendment 39, whic…
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Lord Williamson of HortonCrossbench
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I have already indicated my support for this amendment. It needs to be distinguished completely from Amendment 39, which concerns the annual report. This is a proposal for a report on the effectiveness of the saving gateway accounts. The argument that I advanced earlier that these are a rather special type of saving does apply, but none the less there are further reasons why it would be useful to have a report on the effectiveness of the accounts. One reason relates to the potential benefits of the scheme, which lie, as the Government have stated in the notes on the Bill, in encouraging people to acquire a saving habit, to build a stock of savings and to be brought into contact with mainstream financial services. Those benefits exist but, according to the Government’s documentation, they are difficult to quantify. I agree with the Government that that was the situation when the document was issued at the end of February this year. The scheme has not started and the benefits are difficult to quantify, but it would be a good idea to try to quantify them and to see how effective the scheme is. I support this scheme but, when it has been running for some time, we need to know whether it is working or not. For that reason, I support the amendment.
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Lord NewbyI support this amendment, but with one caveat. The principal reason for my support is that if there is, as I suspect th…
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Lord NewbyLiberal Democrat
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I support this amendment, but with one caveat. The principal reason for my support is that if there is, as I suspect there will be, a paucity of providers, one of the things that this review could look at is whether there are any ways in which the scheme’s mechanism could be changed to make it more attractive to providers. That aspect will potentially be valuable. My preference would be for the review to take place significantly earlier than the noble Baroness suggests, because this legislation is slightly different from other Bills that we have considered when we have looked for a review after a certain period. For example, in the Banking Act, the expectation was, and I hope still is, that it will not be regularly used and, therefore, one could specify a certain period. In this case, my concern is that there will be a very small number of providers and that, at the end of year one or two, the whole scheme could be, if not in disarray, far less effective than we all want, for that reason if no other. If we are to have such a review, I would prefer that we brought it forward, possibly to the end of year two. Equally, I would give the reviewer less than a year to produce his results.
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Lord MynersI agree with the sentiments expressed by the noble Baroness, Lady Noakes, and the noble Lords, Lord Williamson and Lord…
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Lord MynersCrossbench
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I agree with the sentiments expressed by the noble Baroness, Lady Noakes, and the noble Lords, Lord Williamson and Lord Newby, that in due course we will need a review of the effectiveness of the scheme. This must be carried out carefully and evaluated against the objectives that have been set. In my business career, I was always in favour of post-implementation reviews and I think that there is much to be said for the need to hard-wire into practice post-legislative scrutiny. However, as the noble Baroness said, that is a bigger proposition, and one, perhaps, for another day. I also found myself nodding in agreement with the noble Lord, Lord Williamson, when he said that the fact that it was difficult to quantify the benefit was not an excuse for not going through the exercise. As noble Lords may be aware, we have already published detailed independent evaluations of the two saving gateway pilots. The Public Bill Committee in the other place heard from researchers from the Institute for Fiscal Studies and Bristol University about how these evaluations were conducted. Building on these evaluations, we are already considering how we can most effectively test and measure the success of the scheme once it is up and running. The noble Baroness’s amendment would require us to ensure that the review was carried out on the fourth anniversary of the first issue of notices of eligibility and specifies some of the matters that would be considered in the review. The noble Lord, Lord Newby, suggests that the review be held rather earlier. I agree with the comments that have been made in this short debate that an evaluation of the success of the policy needs to take into account participants’ savings behaviour during and after the account and any barriers to participation in the scheme. Because we wish to review behaviours after the account, we tend to support the noble Baroness’s contention that a period of four years or even slightly longer is appropriate. Yet the noble Lord, Lord Newby, says that we need to be looking at impediments on the account provider side where one might argue that the review should be rather earlier. That leads me to conclude that a review is necessary and important; it will address the issues of value for money and the achievement of the declared policy objective and, importantly, it will flush out any learnings that can inform any further changes or refinement made to the saving gateway scheme. However, I am reluctant to see too much specificity about the timing and form of any review or reviews that might be required, because those might be better informed by our observed experience as saving gateway accounts are introduced. I therefore believe that the form, detail, content and timing of any review would be best finalised later, once the scheme is up and running and after further discussion with researchers, account providers, intermediaries and, in particular, financial inclusion experts. That will ensure that the design and focus of any review can take into account the experience of participants and any issues that have arisen from the operation of the scheme. On that basis, I ask the noble Baroness to withdraw the amendment. However, I acknowledge the importance of having proper evaluation to address the issues that have been raised by noble Lords. If I can find a way of conceding that point in a further amendment but allowing breadth and flexibility about timing and content, I would be happy to come back with an amendment on Report.
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Baroness NoakesThat is a handsome offer, for which I am grateful. I thank both noble Lords for taking part in the debate. The noble Lo…
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Baroness NoakesConservative
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That is a handsome offer, for which I am grateful. I thank both noble Lords for taking part in the debate. The noble Lord, Lord Williamson, is right: this clause is quite different because it is about effectiveness rather than just routine information to Parliament. I should point out to the noble Lord, Lord Newby, who sought an earlier report, that I outlined to the noble Lord, Lord Myners, the reason why I had gone for the timing contained in the amendment. That is why I separated this amendment from the previous amendment. Some information can just flow and does not need any independent person to look at it. I accept that information on how many account providers there are is very important and should be kept in mind, but you do not need an independent review to achieve that; you need only an information flow to Parliament. This is an important issue and the Minister has undertaken to take it away. There is no point in my restating why I believe that a requirement for an effective review should ideally be placed in the Bill. Perhaps the Minister, the noble Lord, Lord Newby, and I can discuss between now and Report how best to proceed. However, in one way or another, we will return to this issue on Report. I beg leave to withdraw the amendment.
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Baroness NoakesAmendment 41 seeks to add a new subsection to Clause 12, which deals with HMRC recovering payments, and, as with practi…
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Baroness NoakesConservative
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Amendment 41 seeks to add a new subsection to Clause 12, which deals with HMRC recovering payments, and, as with practically the whole of the Bill, is a regulation-making power. We can see that HMRC needs powers to get back money which has been incorrectly paid; the issue is whether any limits should be placed on this regulation-making power. Amendment 41 seeks to constrain these regulations. It states that where HMRC has made an error or mistake, recovery should be permitted only if the person required to account for it contributed to the error or mistake. This is very similar to the definition of official error which I believe is used by HMRC for tax credits, which constrains HMRC’s ability to pursue overpayments due to errors of its own officers. The draft regulations contain provisions which are much more draconian than this and specifically allow recovery in the case of official mistake whether or not the account provider or the account holder had anything to do with the error. That is the effect of paragraph 2(b) of regulation 20 of the draft regulations. While HMRC might have no mercy for account providers, the position of account holders is different and, as a minimum, they should not be pursued for HMRC’s own errors where they have not contributed to them. My amendment does not differentiate between account providers and account holders and I would be open to a more restricted amendment. Alternatively, the Government might wish to reconsider their draft regulations. It seems to me that HMRC should adopt the same kind of rule it adopts for tax credits and not the most draconian rule it can find in its toolbox back at headquarters. I beg to move.
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Lord MynersAmendment 41 seeks to limit HMRC’s powers so that it would be able to recover sums that had been incorrectly paid as a…
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Lord MynersCrossbench
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Amendment 41 seeks to limit HMRC’s powers so that it would be able to recover sums that had been incorrectly paid as a result of its error or mistake only where the person from whom the sum is recovered has materially contributed to the error or mistake. It would prevent HMRC taking recovery action where one of its officers made a genuine mistake to which the person from whom recovery is being sought has not materially contributed. I can give a couple of hypothetical examples of where this might be the case; for instance, where a keying error means that a provider is reimbursed £11,000 rather than the £10,000 actually claimed, or where a computer error leads to a duplicate payment being issued in response to a claim. HMRC will have checks in place to ensure that such errors do not occur, but it would be unwise to rule out completely the possibility of mistakes being made. This amendment would prevent HMRC recovering money if they were. That would mean that any payment made in error by HMRC would effectively become a windfall at the taxpayers’ expense, from which the provider, using the examples I have quoted, would benefit, unless HMRC could show that the provider materially contributed to the error. HMRC payments under the scheme, including any made in error, will be made to an account provider, rather than directly to an individual. It is reasonable for any account provider to check the payments that they receive from HMRC under the scheme and to discuss any incorrect or unexpected payments from HMRC, rather than passing on an incorrect amount to an account holder. Where recovery of a sum paid by HMRC in error is appropriate therefore, it is most likely that this will be from the account provider that received the payment, rather than from any individual. However, in all cases in which an overpayment has been made, HMRC will consider the facts and circumstances of the particular case to assess whether it is appropriate to take recovery action. HMRC will, as part of this process, take into account the reason for the overpayment, including whether it was due to a mistake on the part of the Government or some other person. However, it is right that HMRC should be able to take action to recover public funds on behalf of the taxpayer in those cases where it judges it appropriate. In light of this explanation, I hope that the noble Baroness will withdraw the amendment.
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Baroness NoakesI thank the Minister for that response. His officials have given him the most ludicrous examples to illustrate why HMRC…
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Baroness NoakesConservative
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I thank the Minister for that response. His officials have given him the most ludicrous examples to illustrate why HMRC should be allowed to use the full powers to go after individuals. The Minister was not around when tax credits went wrong. HMRC was devoid of any humanity or understanding in relation to the overpayments that were made under the tax credits scheme. That was due fundamentally to the design of the scheme; the scheme is now being fixed with a £25,000 disregard, precisely because it just does not work. However, there were at the time hundreds of thousands of cases of both overpayment and underpayment where HMRC went straight into its most aggressive recovery routine. The Minister said that it will use its judgment where appropriate; I have to tell the Minister that it does not. The rule that I read out was, I believe, inserted after the issue in relation to HMRC’s overzealous protection of public funds, which caused great distress to individuals, blew up. One can postulate an error whereby an account should not have been opened, but people have saved into it and are not entitled to the maturity bonus for one technical reason or another which has nothing to do with them. Are we to leave that to HMRC’s judgment, or are we to put a constraint on it, as I believe exists in relation to tax credits? That is the nature of this proposal. The Minister has not really answered that point. For that reason, I am not very happy with what he has said in response and would like to think further about whether the mechanism that I have raised in the amendment, or some other mechanism, is the right way forward. However, I have to say to him that HMRC’s track record in dealing with individuals when things go wrong, especially at the smaller end of business, which is not where its tradition is—it is much more used to dealing with people with more money flowing through their personal finances, and not with people at the end of the benefits spectrum—is simply not good. It is for that reason that I proposed the amendment, and I am disappointed by the Minister’s response. I shall therefore consider it further. I beg leave to withdraw the amendment.
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Baroness NoakesI move Amendment 42, which would add a new subsection to Clause 12, to debate a further issue relating to the regulatio…
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Baroness NoakesConservative
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I move Amendment 42, which would add a new subsection to Clause 12, to debate a further issue relating to the regulations on recovery of payments that will be issued under this clause. The draft regulations allow HMRC to recover money from an account provider, an account holder or someone who is entitled to receive a maturity payment. But paragraph (3) of Regulation 20 of the draft regulations says that these persons are jointly and severally liable. That means that HMRC can pursue the deepest pocket available, which will almost certainly be the account provider. My amendment says that an account provider need not account to HMRC for an amount which it has paid in good faith to an account holder or other person entitled in law to receive the amount. For example, if a saving gateway account has been opened incorrectly so that a maturity payment should not be made, and if the account provider has in good faith paid that over to the account holder, why should that provider be pursued for the amount? The draft regulations seem to restrict the liability of the account provider but are drafted as to the extent that the account holder has assets in its possession or control. It would be very surprising if the account provider did not have any assets in its possession or control because there is no restriction in the regulations to assets relating to the saving gateway account. If a provider has anything in its books, the regulations allow HMRC to recover it from the account provider. I hope that the Minister can explain how those recovery provisions are expected to work and how the draft regulations achieve that. I may have misunderstood them, but, if not, some amendment is required to protect those who have paid out in good faith. I beg to move.
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Lord MynersAmendment 42 would limit HMRC’s power to recover payments wrongly made. I rise with some trepidation as I believe that…
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Lord MynersCrossbench
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Amendment 42 would limit HMRC’s power to recover payments wrongly made. I rise with some trepidation as I believe that the issues the noble Baroness raises around HMRC go well beyond anything limited to the saving gateway account, but are a rather more fundamental concern about the way in which HMRC conducts its relationships. The amendment would qualify the regulation-making power in Clause 12 so that HMRC could not recover an overpayment from a provider where the provider had paid the money to another person in good faith and the recipient had a legal entitlement to the money. I hope that I can give the noble Baroness some reassurance that the amendment as presented is unnecessary. Paragraph (3) of Regulation 20 sets out the persons from whom HMRC can recover amounts claimed by and paid to account providers which it transpires were not properly due. These persons are, first, the account provider, to the extent that the provider has the funds in its possession or control. If that were not the case and the provider has paid the amount it claimed from HMRC to the account holder, HMRC would pursue the individual account holder. Failing that, HMRC could pursue any other person in whom the overpaid amount is vested. In practice, it means that HMRC would generally seek to recover the amount from the person who is holding it. If an account provider has paid a sum over to an account holder in good faith and correctly on the basis of the facts available, it would not be liable and HMRC would seek to recover the sum from the account holder. In the light of that explanation, I hope that the noble Baroness will withdraw her amendment.
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Baroness NoakesIt sounds from the Minister’s response as if we are on the same page but I want to take him back to the regulations, to…
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Baroness NoakesConservative
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It sounds from the Minister’s response as if we are on the same page but I want to take him back to the regulations, to which there are two aspects. First, there are the persons from whom repayment can be taken. Paragraph (3) of Regulation 20 refers to the account provider. The Minister referred to the extent to which the account provider has the funds in its possession and control, but that is not what the regulations say. The regulations refer to the account provider and, “to the extent that it has assets in its possession or control”— not assets of any particular account, just assets. The Minister said, “the funds”. That is not what the draft regulations say. A reading of the regulations means that if the provider has anything on its balance sheet it is there for the taking.
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Lord MynersI think that I should look again at the regulations and ensure that they are perfectly aligned with my earlier comment,…
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Lord MynersCrossbench
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I think that I should look again at the regulations and ensure that they are perfectly aligned with my earlier comment, which reflects our intention.
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Baroness NoakesI thank the Minister for that. He might also like to reflect on why joint and several liability is therefore required.…
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Baroness NoakesConservative
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I thank the Minister for that. He might also like to reflect on why joint and several liability is therefore required. If the money has not been paid in and is in one place, that is the place you are trying to get the money from. I have no problem with trying to get the money from where the money has gone, I think that I am challenging whether it should come from any other place. If the Minister will take the issue away and look at it I will be happy to withdraw the amendment. I beg leave to withdraw the amendment.
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Baroness NoakesI shall speak also to Amendments 48 and 49. These deal with the tax regulation-making powers in Clause 14, which allow…
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Baroness NoakesConservative
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I shall speak also to Amendments 48 and 49. These deal with the tax regulation-making powers in Clause 14, which allow regulations to give relief for income tax and capital gains tax. Would income or capital gains tax be involved in respect of the maturity payment if no regulations were passed under the clause? Would it be treated as interest, some form of income or as a capital payment? If it is a capital payment, I doubt whether there is any need for regulations, given the annual exemption from capital gains tax. It would be interesting to know what the Government’s view is of the taxable status of the maturity amount. The Government’s clearly stated intention is that saving gateway accounts will attract neither income tax nor capital gains tax. We fully support that. The Bill is permissive on that score, which is why I have tabled the customary “may/shall” amendment into Clause 14, so that the Government must create these regulations to ensure that the funds stay outside the ambit of the tax system. Can the Minister explain why there should be any optionality for the Government? Amendments 48 and 49 together ensure that if the Government make regulations under Clause 14, which deals with the relief from income and capital gains tax, the affirmative procedure must always be used. Clause 27 requires only the first regulations to be subject to the affirmative procedure. The relevant approval is only for the other place, about which we always have some regrets, but that is a debate for another time. However, it must surely be right that Parliament in one form or another has to take the positive step of approving tax-related regulations. In practice, I think that there will be no issue with the first regulations, but suppose the Government then changed their mind about total exemption and narrowed the exemption. That is exactly the kind of issue that the Government should be required to come to Parliament for to explain and to seek approval. That is what the affirmative procedure does, which is a modest requirement. If the Government wish to make the equivalent change in the Finance Bill, that would have to be processed as part of the Finance Bill itself. If we are going to allow it to be done by regulation, as a minimum we believe that it should be done using the affirmative procedure, so that the Government have to come and explain why they wish to make the change. I beg to move.
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Lord MynersThe noble Baroness began her comments on these amendments by asking a question about the match payment and whether it w…
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Lord MynersCrossbench
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The noble Baroness began her comments on these amendments by asking a question about the match payment and whether it was liable to income tax or capital gains tax. I am advised that it would be taxable as capital in the absence of legislation relieving it from tax. These amendments relate to the saving gateway accounts being tax-free. It might be helpful for me to start by confirming again, as the Economic Secretary did in the other place, that saving gateway accounts will be free of both income tax and capital gains tax and that we have no intention of changing that position. I am pleased that the noble Baroness agrees with that position. Amendment 43 seeks to ensure that regulations concerning tax relief must be made, whereas current Clause 14(1) allows the flexibility for this and future Governments not to make such regulations. We believe it is right that the Bill should allow some flexibility on this matter for this and future Governments and, in any case, the noble Baroness will know from our discussions on previous amendments that it is simply normal drafting practice for legislation to say that regulations “may” do something, rather than that they “shall” do so. Amendments 48 and 49 seek to ensure that all regulations on the tax relief applying to saving gateway accounts should be subject to the affirmative procedure. I can understand the noble Baroness’s point and clearly it would be a major decision for any future Government—it would have to be a future Government as we will not do this—to remove the saving gateway’s tax-free status. However, it is much more likely that regulations will be needed in future to reflect technical changes in the income tax or capital gains tax systems. It would not be an appropriate use of parliamentary time for such regulations to be subject to the affirmative procedure. There are precedents for this approach. For example, Section 13 of the Child Trust Funds Act 2004 provides for regulations subject to the negative resolution procedure to be made for, and in connection with, the tax treatment of investments under child trust funds. I realise that the noble Baroness has tabled other amendments relating to the balance between the affirmative and negative procedures, which my noble friend Lord Davies responded to earlier this month. Specifically, she aimed to make every use of the powers to set the maturity period, the monthly deposit limit and the number of accounts that a person can hold subject to the affirmative procedure. As my noble friend said, we will consider her points on these amendments carefully. However, I believe that the arguments are less strong in this case. It is far more likely that any future legislation that relates to tax relief after the first set of regulations have made saving gateway accounts tax-free will be required for technical reasons rather than to change the tax-free status of these accounts. I therefore hope that the noble Baroness will seek leave to withdraw these amendments.
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Baroness NoakesI thank the Minister for that reply. On the issue of “may” or “shall”, I am aware that Governments always draft “may”,…
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Baroness NoakesConservative
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I thank the Minister for that reply. On the issue of “may” or “shall”, I am aware that Governments always draft “may”, but we have occasionally changed that to “shall” during our consideration of Bills. It is one of my specialities, along with reports. I shall consider carefully what the Minister has said. I am not sure that we can assume that all future Governments would simply make technical changes, although I accept the likelihood that that might be the case. It is also possible that a future Government might make a change that ought to come back to Parliament, which is why the two later amendments are possibly more relevant here. I had forgotten the precedent of the Child Trust Funds Act, which I shall look at carefully before Report. I thank the Minister for his response and I shall consider it before the next stage. I beg leave to withdraw the amendment.
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Baroness NoakesThe amendment seeks to add a new subsection to Clause 16, which deals with the transfer of funds when an account ceases…
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Baroness NoakesConservative
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The amendment seeks to add a new subsection to Clause 16, which deals with the transfer of funds when an account ceases to be a saving gateway account. Clause 16 sets out a rather narrow regulation-making power which will, in effect, allow a saving gateway account to be transferred into an ISA. It is welcome to that extent but the Government need to go beyond this. When a saving gateway account reaches maturity after two years, there could be as much as £900 in the account, or possibly more if any interest is paid on it, and something has to be done with the account at that stage. Our strong preference is for the account to be transferred into a savings-type account, for which the obvious choice is a cash ISA. We recognise that not all providers may offer cash ISAs and, hence, it would not be right to specify a cash ISA as a default option. Our concern is that banks may well default a matured saving gateway account into a deposit account which pays little or no interest. This is what happened in the pilot scheme. We all know that banks and building societies rely on their customers not taking the trouble to seek maximum returns. I have rarely encountered a bank which proactively ensured that savings earned the best possible interest return. Banks may even set up a default of transferring the saving gateway money to a current account, which would clearly be the least desirable outcome. In another place, the Minister argued that the Government want competition and a marketplace. That was a rather naïve view because it seemed to assume that not only would there be competition between providers as to the terms of a saving gateway package, which would include the competitiveness or otherwise of a default option, but that potential saving gateway customers would be capable of differentiating between the competing offers. I put it to the Minister that both of those propositions are unlikely. My honourable friend Mr Mark Hoban in another place sought to require in the Bill that the default option had to be a cash ISA or the provider’s best instant-access savings account. My amendment does not seek to be prescriptive about where the money should go; it merely creates a regulation-making power to allow the Government to set default rules if the need arises. If the Minister in another place is right about there being a competitive marketplace in which saving gateway customers genuinely exercise choice, no regulations would be needed; but if my fears are correct, there will be a need to act. It is not clear that the suite of regulation-making powers in this Bill is up to the task of providing what should happen to money after it leaves a saving gateway account at maturity. My amendment is, therefore, offered as an improvement to the Bill to provide reserve powers should they be necessary. On that basis, I hope the Government will welcome my amendment. I beg to move.
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Lord MynersThe amendment would give regulations additional power to make provisions regarding the rollover account that providers…
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Lord MynersCrossbench
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The amendment would give regulations additional power to make provisions regarding the rollover account that providers will put in place for saving gateway funds to move into, once they mature. We have very carefully considered whether to take powers in the Bill to make regulations regarding default rollover accounts. This would have advantages, as the noble Baroness has said. Default rollover accounts should be interest-bearing, cash-based rather than equity-based, and should give account holders access to their money. We have made this clear to potential account providers and will be discussing these characteristics with providers to ensure that account holders will be offered the most appropriate rollover accounts. However, we do not think that it would be appropriate to legislate in this area. We expect that providers will want to help their customers access the option most suitable to their needs. The representatives of potential providers, from whom the Public Bill Committee in the other place heard in its evidence sessions, stressed that providers will want to offer the most suitable rollover accounts. We want account holders to understand the implications of default rollover accounts and to have access to support and information in deciding what to do with their money at the end of their saving gateway account. The Government are engaging with a range of third sector and intermediary bodies to design and deliver support on the saving gateway. We are considering a range of options around informal guidelines for account providers on rollover accounts and are finding the industry very receptive to the discussions that we have initiated in that respect. On that basis, I hope that the noble Baroness will withdraw her amendment.
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Baroness NoakesI thank the Minister for that response. I understand why the Government might not want to make regulations now, but I a…
Speaker
Baroness NoakesConservative
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I thank the Minister for that response. I understand why the Government might not want to make regulations now, but I am mystified as to why they would not want to have a reserve power to make regulations if the need arose. The Minister said that the evidence was that providers will want to offer the most suitable account at the rollover time. I may be cynical but I am not sure that banks, by their actions, have demonstrated that they proactively seek to put their customers into the most suitable accounts on a routine basis. I do not believe that my experience is unique in this respect, so, whatever fine words were offered during the evidence session, I am not sure that they can necessarily be relied on, and relied on for all time. My proposition is that the Government need a reserve power if the market does not work—that is, if informal guidelines do not work and the banks do not do what they say and ensure that these accounts are provided. It may be nice in theory to have intermediary bodies helping people but in practical terms we need to be sure that the default provisions operate successfully because people will not be making detailed choices. I am disappointed that the Minister will not consider taking a power to do something which the Government may need to do if guidelines do not prove right in practice. I was not suggesting placing in the Bill a requirement other than the ability of the Government to flex this in due course. I hope that the Minister will think further about that before Report, because that would allow the Government to achieve the right result for saving gateway holders if the market did not produce the right solution. I may be cynical, but I am not sure that it will. I hope that the Minister will think about that again. I will think again before Report about whether to bring this proposal back. I beg leave to withdraw the amendment.
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Baroness NoakesAmendment 45 adds a provision to Clause 18 and seeks to protect information obtained by HMRC under the Bill. This is a…
Speaker
Baroness NoakesConservative
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Amendment 45 adds a provision to Clause 18 and seeks to protect information obtained by HMRC under the Bill. This is a probing amendment that takes us into the area of information-sharing and seeks to ascertain what HMRC can do and intends to do with this information. We are generally sceptical about information-sharing within government because it carries great potential for harm to individuals if information is improperly used or disclosed. The key issue is what safeguards exist to protect the individuals whose data are shared. Will the Minister set out what HMRC can do with the information obtained from DWP under the Bill? Can the information be used for an HMRC purpose other than the saving gateway scheme? If so, what can it do and are there any constraints? Furthermore, once HMRC obtains data from DWP, can HMRC transfer them to another government department under any other information gateway provisions, and are there any constraints there? What controls will exist to protect data from inappropriate onward transfer? Lastly, can HMRC transfer the data outside government or outside the UK and, if so, under what powers? What constraints and controls operate there? As I said, this is a probing amendment designed to ascertain the position. I hope that the Minister can set that out clearly. I beg to move.
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Lord MynersAmendment 45 is presented as a probing amendment. It concerns the disclosure of information by HMRC to the Department f…
Speaker
Lord MynersCrossbench
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Amendment 45 is presented as a probing amendment. It concerns the disclosure of information by HMRC to the Department for Work and Pensions in relation to England, Scotland and Wales, and to the Department for Social Development in relation to Northern Ireland, so that HMRC can establish who is eligible for the saving gateway. The clause extends the existing information gateways between HMRC and the DWP and the Department for Social Development to cover the supply of information to HMRC by these departments for saving gateway purposes. The amendment seeks to impose a restriction so that information supplied can be used only in connection with administration of saving gateway accounts. I am sure that we can all agree that the collection, use and sharing of personal information must be lawful and proportionate. I hope that I can offer the noble Baroness reassurance that the use of information by HMRC in relation to the saving gateway will be proportionate and will be, quite rightly, strictly regulated without the need for such an amendment. The information that will be supplied to HMRC will be the minimum necessary to enable it to establish a person’s eligibility for the saving gateway and to establish whether a person has any specific needs. For example, they may have an appointee looking after their affairs or they may require documents sent to them to be in large print or in Braille. It is appropriate that HMRC knows this so that it can communicate in a way that is sensitive to a person’s circumstances. The data transfer will take place by means of a secure electronic transfer. Once these data reach HMRC, there are no plans for them to be routinely used for other HMRC functions. I say “routinely” because there are some circumstances where it might be beneficial for data to be used for reasons that would not fall within the purposes of administering saving gateway accounts. For example, the Bill makes provision for a death payment to be made where an account holder dies before the account reaches maturity. DWP will inform HMRC where a person on a qualifying benefit has died. If the amendment were accepted, HMRC would not be able to update any of its other systems to note this fact. Similar cases may arise where information supplied by DWP in relation to the saving gateway contains more up-to-date contact details than are held elsewhere in the HMRC systems. It makes sense, both for more efficient and effective public administration and in enabling HMRC to provide better customer service, for HMRC to be able to update records on other systems if they are out of date or inaccurate. The amendment would prevent that kind of sensible and wholly benign reuse of information. I therefore believe that the amendment is too restrictive. I share the noble Baroness’s concerns that safeguarding personal information is paramount. The Bill, by placing the saving gateway under the management of the Commissioners for Revenue and Customs, will ensure that the provisions of the Commissioners for Revenue and Customs Act 2005, which strictly regulate the use of information by officers of HMRC, will apply to any information held by HMRC in relation to the saving gateway, including the information supplied by DWP that we have been discussing. Under Section 19 of that Act, it is an offence for any Revenue and Customs official to wrongfully disclose information held by HMRC in connection with any of its functions. A wrongful disclosure may be a criminal offence, punishable on conviction by a fine, imprisonment of up to two years or both. So there are already provisions in place which regulate the use of information by HMRC and which protect the interests of the individual by safeguarding against the misuse of information by HMRC officers. The amendment would not add anything to that, but it would constrain HMRC from using information across its other functions in a way that would be beneficial to customers and enhance its economic efficiency. In the light of the assurances I have given, I hope the noble Baroness will withdraw the amendment.
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Baroness NoakesBefore I consider what to do with my amendment, which I said was probing and so shall withdraw in due course, I remind…
Speaker
Baroness NoakesConservative
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Before I consider what to do with my amendment, which I said was probing and so shall withdraw in due course, I remind the Minister that I asked him not only about use within HMRC but whether HMRC had any ability to transfer any information obtained by this route—that is, coming into HMRC—out of it, be it to other government departments, private sector bodies or outside the UK. I did not hear a response to that.
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Lord MynersOnce the information is held by HMRC in relation to its functions, it is possible for it to be transferred to another g…
Speaker
Lord MynersCrossbench
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Once the information is held by HMRC in relation to its functions, it is possible for it to be transferred to another government department, but only if there is a special legal power allowing such a transfer. Each case would have to depend on its facts. There are no plans for any of this to be done regularly. If the noble Baroness feels that a more detailed response to that question would be helpful, I will commit to ensure that it is provided in writing to her and others who have participated in this debate.
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Baroness NoakesThat is a helpful offer. We often debate information gateway provisions, and there is obviously a tension between the e…
Speaker
Baroness NoakesConservative
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That is a helpful offer. We often debate information gateway provisions, and there is obviously a tension between the efficiency of government and the rights of individuals. One of the problems is that information can flow through one gateway and then flow onward in various forms. I was trying to ascertain what could happen in this instance. If the Minister could provide chapter and verse between now and Report, I would be more than grateful. I beg leave to withdraw the amendment.
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Baroness NoakesThe end is in sight; this is the last amendment that I shall move—in Committee. Clause 19 deals with penalties for the…
Speaker
Baroness NoakesConservative
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The end is in sight; this is the last amendment that I shall move—in Committee. Clause 19 deals with penalties for the provision of incorrect information. Subsection (1) imposes a penalty if a person deliberately makes an incorrect declaration when they open a saving gateway account. Subsection (2) allows the imposition of penalties on both account providers and account holders if they make incorrect statements or provide incorrect information, either deliberately or carelessly. My amendment adds the words “or carelessly” to subsection (1) on a probing basis to find out why the Government have framed the penalty clauses differently. I could not see the rationale for the difference between the subsection (1) and subsection (2) penalties, so I invite the Minister to explain it to the Committee. I beg to move.
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Lord MynersThe amendment concerns the penalty chargeable on an account holder whose declaration made at the point of opening a sav…
Speaker
Lord MynersCrossbench
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The amendment concerns the penalty chargeable on an account holder whose declaration made at the point of opening a saving gateway account was incorrect. As noble Lords may be aware from the draft regulations that we have published, we intend that this declaration will include confirmation from the account applicant that they meet the “connection with the UK” conditions, set out in regulations made under Clause 3(1)(b), and that they have not previously opened a saving gateway account, other than an account closed within a “cooling-off” period offered by the account provider. Where HMRC becomes aware that a person has made an incorrect declaration at account opening and is not eligible for a saving gateway account, action will be taken to withdraw the saving gateway status of their account and any right to match payment. We do not therefore propose that a person should be permitted to benefit as a result of an incorrect declaration. In certain circumstances, where an incorrect declaration was made deliberately, HMRC can also impose a fixed penalty of £300. The noble Baroness’s amendment would go further, by extending the circumstances in which the penalty would be applied to include those cases in which an account-opening declaration had been made incorrectly through carelessness. We intend that this penalty, which can be imposed only on individual account holders rather than financial institutions, should be reserved only for the most serious cases in which a person has deliberately sought to exploit the system. That is reflected in the amount charged and the fact that this penalty cannot be mitigated or reduced when chargeable. We do not consider that it would be proportionate or appropriate to apply this penalty to any mistakes that might have been made simply through carelessness. In the context of people with little experience of mainstream financial services, who may be concerned about the account-opening process anyway, the threat of a wide-ranging penalty could easily be a deterrent to applications to the scheme. For those reasons, I hope that the noble Baroness will withdraw her amendment.
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Baroness NoakesI am grateful to the Minister for setting that out. I shall carefully consider what he has said when I read it in Hansa…
Speaker
Baroness NoakesConservative
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I am grateful to the Minister for setting that out. I shall carefully consider what he has said when I read it in Hansard and consider whether the differences between the two ways in which to treat an individual—because there can be a penalty on an individual under either subsection (1) or subsection (2)—is adequately dealt with by his response. For the time being, I shall take it on trust that it is adequate and I beg leave to withdraw the amendment.
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Lord MynersThis amendment is designed to correct a minor error in the Bill’s drafting. It concerns the definition of the Northern…
Speaker
Lord MynersCrossbench
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This amendment is designed to correct a minor error in the Bill’s drafting. It concerns the definition of the Northern Ireland Social Security Commissioner in Clause 25(7). This is the body that will hear onward appeals in Northern Ireland against decisions of the appeal tribunal referred to in Clause 25(1)(b). Clause 25(7)(b) currently provides that a tribunal of three or more commissioners constituted under the relevant Northern Ireland social security legislation would fall within the definition of a Northern Ireland Social Security Commissioner for the purposes of this Bill. A requirement that a tribunal should consist of at least three commissioners would be unnecessarily restrictive compared with the position for appeals on comparable matters, such as the child trust fund, where a quorum of only two such commissioners is sufficient. An amendment is therefore required to make this clause in the Bill consistent with the position for the child trust fund, as well as the relevant Northern Ireland social security legislation, which refers to, “a tribunal consisting of any two or more of the Commissioners”. This amendment will ensure that properly constituted Northern Ireland appeal tribunals consisting of only two social security commissioners can hear onward appeals on saving gateway matters. It does so by replacing the reference at Clause 25(7)(b) to “three or more Commissioners”, with a reference to “two or more Commissioners”. The amendment would not alter any provision in the Bill affecting rights of appeal, the range of appealable matters, or the powers of any tribunal authorised to hear appeals, and I hope that noble Lords will support it. I beg to move.
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EnactedSaving Gateway Accounts Act