Draft Help-to-Save Accounts Regulations 2018
(Limited Text - Ministerial Extracts only)
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The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Help-to-Save Accounts Regulations 2018.
It is a pleasure to serve under your chairmanship, Mr Austin. The commitment of the Government in supporting people and promoting aspiration has been consistent, targeted and innovative, and the Savings (Government Contributions) Act 2017 and these regulations mark another milestone in that commitment. Through the measures in the Act, including the Help-to-Save scheme, we have targeted our support to help working people on lower incomes to build savings.
Hon. Members will be aware of the research carried out in 2016 by the Money Advice Service, which shows that four in 10 working people across the UK lack a savings buffer, with less than £100 in savings available to them at any time; one quarter of households have total financial assets of less than £1,100; and, shockingly, almost 26% of working adults have no savings at all. That evidence speaks to a demonstrable lack of a financial safety net for many in our society, leaving households in a state of financial uncertainty, with which comes vulnerability to unexpected bills or income shocks, not to mention vulnerability to less than scrupulous lenders.
We therefore want to provide a strong incentive—and fair reward—for working people on lower incomes to build up a necessary savings buffer, which is exactly what the Help-to-Save scheme will do. It is part of the Government’s wider strategy to tackle poverty and promote life chances for all in the UK.
I shall set out how the scheme will operate and incentivise working families to save for the future. Access to savings will build their financial resilience, and it is not just working families who will reap the benefits; strong household finances have positive knock-on effects. The aim of the Help-to-Save scheme is ambitious: no less than to change the UK’s saving habits, which is something that I am proud to stand behind.
The regulations provide that the Help-to-Save account will be a four-year money savings account aimed at working people with lower incomes. We have already announced that we will be implementing the scheme with a single provider—National Savings & Investments. Using NS&I to build the account will ensure national coverage for the scheme. That is really important to ensure that all low-income working Britons have the chance to access Help-to-Save. Her Majesty’s Revenue and Customs will undertake the eligibility checks, and NS&I will carry out the day-to-day management of Help-to-Save accounts.
The regulations set out the major account rules and features, which include detail on the eligibility criteria, the conditions for opening an account, and the bonus calculation. I shall now discuss those matters in further detail.
The eligibility criteria have been designed to ensure that the scheme targets its support at low-income working families. Accounts will be available to individuals or households in the UK that are in receipt of working tax credit at a rate other than nil or, in certain circumstances, a child tax credit award. Accounts are also available to those who are in receipt of universal credit and have reached a minimum income threshold. Basing eligibility on existing universal credit and working tax credit criteria provides simplicity, while making the consumer journey as smooth and efficient as possible.
Provided that an individual was eligible when their account was opened, they will not lose their right to continue to use the account if their circumstances change, unless their application is discovered to have been based on false information initially. That is of course fair, and provides certainty for all account holders. The eligibility criteria for Help-to-Save, as set out in the regulations, will ensure that the scheme is correctly targeted, so that we can continue to deliver on our commitment. The Government are committed to building financial stability for the people of this country, and especially for those who need it most.
The regulations set out how the Government bonus is calculated. The bonus has been designed in such a way as to encourage a regular savings habit, while allowing for flexibility and circumstances. Eligible individuals will be able to deposit up to £50 each month, and at the end of two years savers will get a 50% Government bonus based on the highest balance achieved in the period. They can then carry on saving for another two years and get another 50% Government bonus on their additional savings.
The four-year length of the scheme supports account holders to build up a savings habit over a period of time, and paying a bonus at the halfway point, after two years, allows savers to see the benefit of their efforts to date, while also providing an incentive to carry on saving for another two years. Individuals can make withdrawals at any time as we recognise that people need to get access to their savings to cope with unexpected bills, although that will affect the balance that they may then carry forward.
Individuals will be able to deposit money into their Help-to-Save account only while they are resident in the UK. That is fair and consistent; the rules on absence periods mirror existing tax credit and universal credit rules. The regulations give HMRC necessary and proportionate powers to ensure compliance through inspecting claims where necessary and recovering any wrongly paid bonuses. Additionally, it will also not be possible for a person to hold a Help-to-Save account for another person’s benefit, except where an individual lacks the capacity to hold the account themselves.
The regulations also provide for a trial of the Help-to-Save scheme. The trial will test the new IT system and ensure that the service provides a smooth experience for everyone. We are confident that the trial and monitoring period will ensure that the scheme is easily accessible and simple to use; that is key in supporting eligible people to save and maximising the benefits of the scheme. The trial will be rolled out to increasing numbers, and the scheme will be available to all those who are eligible from October 2018 at the latest.
We are now close to the start of the Help-to-Save scheme, which I am convinced will be a highly effective incentive for people who want to save responsibly for the future. The regulations implement the policy by setting out the operation of the scheme, which is fair and simple, and an important way of promoting life chances. We want the UK’s working families to know that the Government stand behind them and will support their efforts to secure financial stability.
I was pleased that there was support from both sides of the House for the 2017 Act during its passage through the House, and I hope that we shall continue in the same vein today, as we consider the regulations.
John Glen
Today’s debate has been an interesting one, and I am grateful to hon. Members who have contributed. Before I deal with the detailed points that have been raised, I want to thank the many groups of individuals who have given their views on the proposals, including hon. Members, many of whom are here, who participated in debates during the passage of the Savings (Government Contributions) Act 2017.
On eligibility, the hon. Member for Oxford East suggested broadly that the passporting of eligibility rules excludes many people who could benefit from the scheme. I think the hon. Member for Glasgow Central mentioned people under 25, carers, and those who support themselves without claiming benefits. In essence, she was asking why we did not have bespoke rules. The eligibility rules balance simplicity and certainty for individuals and the aim of supporting low-income working families to become regular savers. Passporting the scheme in this way will ensure that it targets effectively those on low incomes, and is a well-established means of targeting Government support across a range of policies. There is a five-year window to enter the Help-to-Save scheme and applicants need to meet the eligibility criteria only at the time they register.
The hon. Lady mentioned eligibility rules in regulation 3(3), which refers to each date, and regulation 3(3)(b), which mentions the first date. The point is that the condition remains satisfied on each eligibility reference date. Respondents to the consultation were overwhelmingly in favour of keeping the eligibility criteria as simple as possible. Keeping in line with eligibility for other benefits and credits will keep the administrative burden on the customer to a minimum, therefore encouraging take-up and maximising the benefit of the scheme. Adding different thresholds for different groups would greatly complicate the scheme. The scheme has been designed in this way to create equality between applicants claiming working tax credits and universal credit.
In response to the point about different providers and the incentivisation of credit unions, using NS&I to build the accounts ensures national coverage of the scheme, as I said in my opening remarks. That is necessary for there to be confidence in the scheme when it starts. NS&I has a proven record in delivering a range of savings products. The hon. Member for Oxford East referenced our exchange last week on the performance of the voucher scheme.
John Glen
Tax-free childcare; I am sorry. I met with NS&I this morning to discuss the need to get things right and the improvements that have been made, but the hon. Lady raised a legitimate point. During the trial period, we will try to draw out any errors before the scheme is fully rolled out in October. We will use our expertise and what we have learned from the introduction of tax-free childcare to ensure that we provide a service that meets customers’ needs. We are always looking for opportunities to partner with others and we are open to ideas surrounding how we best ensure that as many people as possible benefit from the scheme.
The hon. Member for Glasgow Central referred to the number of people who might sign up. I thought it would be helpful for her to know that based on the take-up of previous schemes, our estimate is that 400,000 people will sign up to the accounts. I welcome the question on how customers will access the Help-to-Save accounts and our plans for the digitally excluded. Help-to-Save is an online savings account. All transactions, including checking the balance and paying in savings, can be managed online through gov.uk. Digitally excluded customers and people with particular needs will be able to manage their accounts through telephone banking. I offer reassurance that that will be through a 03000 number at the standard rate. That will also apply to calls that are transferred to NS&I. Paper statements will be issued to digitally excluded customers.
In terms of the future of the single provider, the regulations would need to be changed to provide for more than one provider. At this point, it would be sensible to monitor things as the scheme goes on. If there is evidence to suggest that additional providers would be helpful and would assist in the take-up, that is certainly something that the Government and I would be willing to look at.
Anneliese Dodds
I am sorry to intervene, but I wanted to double-check something with the Minister. I was encouraged to intervene because I think this is the only chance I will have. On the exact issue of eligibility, it was not totally clear whether applicants currently claiming universal credit will need to have fulfilled the income criterion and earned the equivalent of at least 16 hours a week at the national minimum wage only when they apply, which is what it looks like from paragraph 3(b), or also when their application is accepted. I share the Minister’s concern about having simplicity. I cannot get my head around this, and I have been able to look at all the different debates. Can he confirm that it is paragraph 3(b) that is right and not the introduction to that regulation, which suggests that the criteria will apply at the point of application and at the point of acceptance?
John Glen
I am very sorry for the lack of clarity in my remarks. The criteria will be fulfilled at the point of application. If that is satisfied, that is it for the duration. Many apologies for my ambiguity on that.
I want to deal with Help-to-Save’s impact on entitlement to benefits and credits. Help-to-Save is intended to help people build up a rainy day fund. The Government bonus will not count as income for means-testing purposes when assessing eligibility for housing benefit. The bonus and any savings accumulated in a Help-to-Save account will not affect tax credit awards and would start to impact on universal credit awards only if the customer had savings of £6,000 or over, including the money in their Help-to-Save account.
The hon. Member for Glasgow Central asked about access in the case of broken or abusive relationships. I would be happy to take representations on that issue and to look at it.
I hope that I have dealt with most of the points that have been raised. I acknowledge the broader point that the scheme does not solve every problem. It would be wrong for me to say that it will target everyone, but it is a step in the right direction. It will have a positive effect and it will deliver a change in behaviour with respect to savings that the work by the Money Advice Service two years ago showed is very much needed.
The Government’s vision is to empower working families with the confidence, skills and opportunity to manage their personal finances. The regulations will bolster people’s ability to save by giving a boost to what they manage to put aside each month. Help-to-Save will encourage such families to become regular savers and give them a financial buffer to protect them from income shocks. The ensuing financial resilience will benefit us all. Our economy is the sum of its parts, and the Government are committed to ensuring that every part of it and every person has the support they need. I commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Help-to-Save Accounts Regulations 2018.