Draft Help-to-Save Accounts Regulations 2018

Alison Thewliss Excerpts

Monday 22nd January 2018 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Austin. My starting point is that saving is a good thing and it ought to be encouraged. Broadly, the Scottish National Party supports the measure.

The scheme has been a painfully long time in the making—it was announced by some guy called George Osborne in the 2016 Budget—so I am glad to finally see it making its way into regulations. It remains to be seen if the Help-to-Save account will achieve an increase in people’s savings and how many people will take it up. I understand that the scheme is open to 3.5 million people. It would be interesting to hear from the Minister whether there has been any change to the 2016 planning assumptions that half a million people would sign up.

The wider context, as identified on Second Reading of the Finance Act 2016 by my hon. Friend the Member for Aberdeen North (Kirsty Blackman), still stands. She said:

“Folk who are earning the Chancellor’s pretendy living wage, which is not recognised as being enough to live on, struggle to make it to the end of the month, let alone to have spare money to save for the future. The help to save scheme included in the Budget is welcome, but folk working the minimum 16 hours a week on the pretendy living wage will be earning only £500 a month, and they are hardly likely to be able to spend 10% of that income on savings rather than on immediate concerns.”—[Official Report, 11 April 2016; Vol. 608, c. 132.]

Many households struggling to get by would love to be saving. StepChange Debt Charity suggests that 21.8 million adults across these islands believe that they are not putting enough by. That is more challenging still in parts of rural Scotland where the cost of living is higher. Most reasonable people understand the concept of putting money away for a rainy day, but the reality they face is not the rainy day in the future but the flood of debt that they are living with day to day and are trying to bail themselves out of with a leaky bucket.

The Institute for Fiscal Studies published a pretty stark report last week, “Problem debt and low-income households”, which says:

“Around half of households in Great Britain in 2012–14 had some unsecured consumer debt, with 10% of households holding over £10,000 of such debt… Those with lower incomes are less likely to hold any unsecured debt, but are more likely to be in ‘net debt’, with unsecured debts of greater value than their financial assets. 35% of those in the lowest income decile have debts of greater value than their financial assets. This compares with 10% in the highest income decile.”

The Government ought to be attracting those households with the scheme, because they would see the most benefit from it, but there is just not enough money at the end of the month to do it. The IFS also found that people stay in debt for many years, so there is no prospect of their being able to participate in the Help-to-Save scheme for many years until that debt is cleared.

On indebtedness, StepChange Debt Charity responded to the consultation with concerns about the implications for people who sign up for the scheme but find themselves under third-party debt orders or insolvency proceedings—that has not been entirely dealt with so far. Can the Minister explain how that would be resolved? Would that money be called on by debtors or will their savings be safe?

I am concerned about the implications for workers under 25 years old. From responses to the consultation, I understand that they do not qualify for the scheme. I am sure that we would all like to encourage people to get into a savings habit from a young age. Some of us might have had Bank of Scotland’s “Super Squirrel” accounts. I still have the “Route 21” account that I opened with the Royal Bank of Scotland while still at school—although that bank has not shown much loyalty to my home town, because it has shut the branch there. There are excellent financial education schemes in schools, but the UK Government do not follow up on that in the Help-to-Save scheme.

In its response to the consultation, StepChange Debt Charity points out that the Government’s Help-to-Save scheme deliberately excludes those under 25 years old. It says:

“We are concerned, that if eligibility is based on current criteria for claiming Working Tax Credits (WTC) this might discriminate against those under 25. Currently those under 25 only qualify for WTC if they work at least 16 hours a week and qualify for a disabled worker element, or are responsible for a child.

This means that it would not be possible for anybody under 25 who does not qualify for a disabled worker element, or is not responsible for a child, to have a HTS account.”

I am not dying of surprise, because this is a Government who, after all, already engage in age discrimination by staging the minimum wage, leaving 16 and 17-year-olds with a full £3.63 less for an hour’s work than a 25-year-old in the same job, a pretendy living wage and no access to the HTS scheme. Will the Government give some thought to how this unfairness might be rectified before the full roll-out?

On the single provider issue, we are content enough with NS&I but according to the Government’s response to the consultation, a downside is that there will not be branch access to the account, which will be conducted online and via phone services. This could well present a problem for those who have disabilities, literacy issues, mental health issues, deafness and whose first language is not English. In paragraph 10 of the explanatory memorandum, the Government say that there has not been an impact assessment—I do not know whether they mean an equality impact assessment, but it would be worthwhile to have one to ensure that people do not lose out through not being able to access the scheme.

My hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) raised a pertinent point at Prime Minister’s questions last week about women, domestic abuse and access to accounts. Will the Government clarify whether, should there be coercive financial control when a relationship breaks down and savings have been put in as a household— the Minister referred to households and individuals—the woman will still be able to access her account and her savings even though her circumstances may have changed? That is a very important protection to build into the scheme to ensure that women do not lose out, as women suffer more financial exclusion and have more financial abuse perpetrated against them.

Will the Government take action to ensure that people who might not qualify for this HTS scheme are encouraged to save in other ways, through credit unions, as the hon. Member for Oxford East said, which are of huge value in local communities, and traditional banks? That has been made even more difficult by a roll-back of branch networks, with those living furthest away becoming even more marginalised. Jonathan Morduch, professor of policy and economics at New York University, has carried out research which makes it clear that we all make mistakes with our finances but that the poorest pay the heaviest price and, I would argue, need the most protection and support in accessing finance. What is needed is to raise people’s wages, to improve their productivity and to ensure that the social security system does not leave people perilously close to the edge and in debt. Until the Government do that, savings will continue to be out of reach for many.