Savings (Government Contributions) Bill

Gareth Thomas Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 12th December 2016 Commons Chamber

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 2—Impact review: automatic enrolment and pensions savings—

‘(1) The Treasury must review the impact of Lifetime ISAs on workplace pensions automatic enrolment and pensions savings within one year of this Act coming into force and every year thereafter.

(2) The conclusions of the review must be made publicly available and laid before Parliament.’

This new clause would place a duty on HMRC to review annually the impact of Lifetime ISAs on automatic enrolment.

New clause 3—Lifetime ISAs: Advice for applicants—

‘(1) The Treasury must, by regulations, make provision for all applicants for a Lifetime ISA to have independent financial advice made available to them regarding the decision whether or not to save in a Lifetime ISA.

(2) Any applicant that opts in to the services offered under subsection (1) shall be given a signed declaration by that service provider outlining the financial advice that the applicant has received.

(3) Any provider of a Lifetime ISA must confirm whether an applicant—

(a) intends to use the Lifetime ISA for the purposes of paragraph 7(1)(b) of Schedule 1,

(b) has a signed declaration of financial advice under subsection (2), or

(c) is enrolled on a workplace pension scheme or is self-employed.

(4) Where the provider determines that the applicant is—

(a) self-employed and does not participate in a pension scheme,

(b) not enrolled on a workplace pension scheme,

(c) does not intend to use the Lifetime ISA for the purposes of paragraph 7(1)(b) of Schedule 1, or

(d) does not have a signed declaration of financial advice under subsection (2),

the provider must inform the applicant about the independent financial advice available to them under subsection (1).’

This new clause would place a duty on the Treasury to make regulations that ensure all applicants for a Lifetime ISA have independent financial advice made available to them.

New clause 4—First-time residential purchase: research and impact assessment—

‘(1) Within one year of this Act coming into force the Treasury must conduct a review into the potential impact of provisions within paragraph 7(1)(b) of Schedule 1 on—

(a) house prices in the UK, and

(b) the operation of the housing market.

(2) The findings of the review must be made publicly available and laid before Parliament.’

This new clause would require a review of the Bill’s effect on the UK housing market/house prices.

New clause 5—Distributional analysis of the impact of the Lifetime ISA and Help to Save—

‘(1) Within six months of this Act coming into force the Treasury must conduct an analysis of the distribution of benefits of Lifetime ISAs and Help-to-Save accounts including between—

(a) households at different levels of income,

(b) people of different genders,

(c) people with disabilities, and

(d) black and minority ethnic groups.

(2) The findings of the analysis conducted under subsection (1) must be laid before Parliament.’

New clause 6—Lifetime ISA and Help-to-Save: value for money—

‘(1) Within six months of this Act coming into force the Treasury must assess the value for money provided by the Lifetime ISA and Help-to-Save scheme.

(2) The assessment must in particular include—

(a) the cost to the Exchequer of the measures,

(b) the number of individuals who have benefited from the measures, and

(c) the average tax deduction received by an individual as a result of the measures.

(3) The findings of the assessment must be made publicly available.’

New clause 7—Advice for applicants—

‘The Treasury must make provision by regulations to ensure all providers of Lifetime ISAs or Help-to-Save accounts provide applicants, at the point of application, with advice about the suitability of the product in question for each individual applicant.’

This new clause would require advice to be provided to applicants for LISAs or Help-to-Save accounts which must include information on automatic enrolment and workplace saving schemes.

Amendment 15, in clause 1, page 1, line 1, leave out clause 1.

See explanatory statement for amendment 16.

Amendment 17, in clause 3, page 2, line 17, leave out “1 or”.

Amendment 18, page 2, line 19, leave out “Lifetime ISA or”.

Amendment 19, page 2, line 23, leave out “Lifetime ISA or”.

Amendment 20, in clause 4, page 2, leave out lines 32 to 36.

Amendment 21, page 3, leave out lines 9 to 11.

Amendment 22, in clause 5, page 3, leave out line 23.

Amendment 6, in clause 6, page 3, line 36, leave out from “on” to end of line 37 and insert “30 April 2019”.

This amendment would delay the commencement of the Bill until the end of April 2019, when all firms will be auto-enrolled and the increase in minimum contributions to eight per cent. will be completed.

Amendment 16, page 5, line 1, leave out schedule 1.

This amendment, together with amendments 15 and 17 to 22, would remove provisions for the Lifetime ISA from the Bill.

Government amendment 3.

Amendment 1, in schedule 2, page 16, line 3, leave out “48” and insert “24”.

Amendment 12, page 16, line 31, at end insert—

“(1A) The conditions specified under subsection (1) shall not include the condition that the individual be over 25 years old if that individual meets all other specified conditions relating to the working tax credit.”

Currently those aged under 25 only qualify for Working Tax Credits if they work at least 16 hours a week. This amendment would ensure any individual aged under 25 would qualify for a Help-to-Save account if they met other specified criteria.

Amendment 2, page 17, line 36, at end insert—

“(d) a credit union.”

Amendment 8, page 18, line 16, leave out “maximum” and insert “average”.

See explanatory statement for amendment 11.

Amendment 9, page 18, line 19, leave out “maximum” and insert “average”.

See explanatory statement for amendment 11.

Amendment 10, page 18, line 19, after “means”, insert “an average of”.

See explanatory statement for amendment 11.

Amendment 11, page 18, line 19, after “£50”, insert

“across every two month period within the maturity period”.

Together with amendments 8, 9 and 10, this amendment would allow HTS to provide for “top-up” monthly payments above £50 so long as the average payment for every two months is £50.

Government amendment 4.

Amendment 14, page 19, line 2, at end insert—

“(e) provision for eligible persons to be auto-enrolled into Help-to-Save accounts through deductions from salaries or benefit entitlements unless the individual chooses to opt-out.”

This amendment would enable an ‘auto-enrolment’ workplace saving scheme which would see an individual automatically signed up to a Help-to-Save account. He or she must opt-out to stop money being deducted from their pay or benefits into a savings account.

Government amendment 5.

Amendment 13, page 19, line 31, at end insert—

“(3A) Where a bankruptcy order is made against a person with a Help-to-Save account any bonus paid into the Help-to-Save account will not form part of a debtor’s estate during insolvency proceedings.

(3B) Any bonus paid into a Help-to-Save account shall not be liable to be taken as repayment via third party debt orders.”

Amendment 7, page 20, line 23, at end insert—

“(ba) for a bonus in respect of a Help-to-Save account to be paid after six calendar months beginning with the calendar month in which the account is opened and at six month intervals thereafter;”.

This amendment would reduce the time before the holder of a Help to Save account would receive a government bonus to six months.

[Mr Thomas]

I am grateful for the opportunity to speak not only to new clause 1, but to amendments 1 and 2. I should declare an interest as a member of the M4Money credit union and as chair of the all-party group on mutuals.

New clause 1 seeks to give a statutory right to anyone wanting to save with a credit union via payroll deduction. Amendment 1 would reduce to one year the two years that those who are just about managing will wait before getting the Government top-up under Help to Save, to better incentivise saving under the scheme. Amendment 2, about which I shall speak a little more first, seeks to allow credit unions to offer the Help to Save product.

I took part in the Second Reading debate and raised the concern that credit unions would not be allowed to offer the Help to Save product. I have read through the transcripts of that debate and of the Committee proceedings and I can still see no good reason for the Government’s resistance to allowing credit unions to offer the Help to Save scheme. I recognise that Ministers want to ensure national coverage of Help to Save so that everyone who meets the criteria—the potentially 3.5 million people across the UK who Ministers think might do so—regardless of where they live can access the scheme. That clearly makes sense. I have no objection to the choice of National Savings & Investments as that national provider of choice. What I cannot see is any valid reason why credit unions cannot be allowed to complement the NS&I offer.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

I too declare an interest as a member of the Cardiff and Vale credit union and I am also pleased to be, like my hon. Friend, a member of the Co-operative party. Does he agree that the Government need to be far more ambitious as regards credit unions playing a full part in financial services, and that, as I mentioned on Second Reading, we need to be heading in the direction of other countries, such as Canada, that have a much bigger credit union sector?

[Mr Thomas]

My hon. Friend makes an important point. We need much more ambition for credit unions and for financial mutuals and co-operatives more generally. I am thankful for his intervention.

Ministers claimed in Committee that a multiple provider model for Help to Save would not offer value for money, yet as far as I can see they have produced no costings to justify that claim. It is not as if Ministers are dealing in the case of NS&I with a private company demanding an exclusive arrangement as it feels threatened by the competition that credit unions can offer. NS&I is a state-owned bank, effectively, and is responsible to the Treasury. Indeed, I understand that the Minister responsible is the Economic Secretary to the Treasury, who is also responsible for policy on credit unions. NS&I has some 25 million customers and £135 billion in assets. By comparison, credit unions across the UK have £1.37 billion in assets, less than 1% of the value of NS&I’s investments. In short, credit unions are no threat to NS&I.

NS&I is under the control of the Treasury, as I have said, and it is in Ministers’ hands, or it was until the start of the House’s proceedings on this issue. The House now has the opportunity to decide whether credit unions should be allowed to offer the Help to Save scheme.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I thank my hon. Friend for giving way, and I am delighted to serve as a Labour and Co-operative MP alongside him. Does he agree that allowing such diversity is important in helping to change behaviour? Many of the issues with savings are about cultural attitudes, and having ways to reach out to communities that might not have engaged in such behaviour is an important part of changing the savings culture in this country.

[Mr Thomas]

My hon. Friend makes a good point, and I hope to deal with it a little more in due course. She is right that credit unions have scope to reach out to more of the 3.5 million people Ministers want to assist through the Help to Save scheme, whom NS&I might not be best placed to help.

Credit unions are not-for-profit financial co-operatives, owned and controlled by their members. They are, I would argue, more uniquely exposed to low and middle- income financial services markets and are used to offering financial services to those who are often excluded from other better known sources of finance. They provide safe savings and affordable loans, with some credit unions offering other products, such as current accounts, individual savings accounts and mortgages.

[Yvonne Fovargue (Makerfield) (Lab)]

Is it not true that what is key is that credit unions can also provide loans? We know that low-income families have more bumps in the road than the majority of people on a higher income, so that provision, combined with the opportunity to keep saving, is an important service that NS&I cannot offer.

[Mr Thomas]

My hon. Friend has stolen one of my lines from later in my speech. She makes an entirely appropriate point: credit unions can offer access to an affordable loan while encouraging people to save at the same time. When the loan is paid off, the incentive to keep saving is still there.

Credit unions have until now enjoyed the support of Members on both sides of the House. From 2006 to 2007 the growth fund, launched by the Co-op party’s—and now Strictly’s—very own Ed Balls, saw more than 400,000 affordable loans offered and saved recipients between £120 million and £135 million in interest that would otherwise have been paid to high-cost lenders. It is that type of success that, after a long Co-operative party campaign under the last Government, saw Ministers, led by the right hon. Member for Broxtowe (Anna Soubry), agree to allow three credit unions to offer services to our soldiers, sailors and airmen and to their families—in short, to offer an armed forces credit union. Given the funding from the Department for Work and Pensions under the last Government to expand credit unions, it seems odd that Ministers should tonight want to continue to exclude credit unions from offering a product in a market in which they already have significant interest and penetration.

--- Later in debate ---

[Mr Speaker]

The final words in respect of this group of amendments are for the hon. Member for Harrow West (Mr Thomas).

[Mr Gareth Thomas]

This debate has been short but interesting. I hope that Members will forgive me if I confine my brief remarks to the three amendments tabled in my name. My hon. Friend the Member for Walthamstow (Stella Creasy) made a characteristically excellent speech dwelling on the debt tsunami coming our way. She rightly alluded to the challenges that many credit unions face in providing a service through local employers to their employees.

My hon. Friend the Member for Bootle (Peter Dowd) made an excellent speech from the Front Bench—perhaps inspired by listening to the works of Shostakovich, of whom he is a devotee. Given the numbers who might be eligible, he is rightly worried that the number of people who sign up for Help to Save will not be as great if credit unions are not included among the providers that can offer Help to Save.

I was interested by the Minister’s response, and I hear her concerns about new clause 1, which I look forward to exploring more in a meeting with the Economic Secretary to the Treasury. I was grateful to hear the Minister offer some reassurance on amendment 1 and the possible reduction to 12 months from 24 months. As a result, I will not press amendment 1 or new clause 1 to a Division.

I will, however, seek a vote on amendment 2 because I gently suggest to the Minister that she did not make a convincing case as to why credit unions should not be allowed to offer this product. It is clear that NS&I will be a good national provider, but it is unclear why credit unions cannot be given the opportunity to offer the product at the same time. Given all the effort and expense that the Treasury is going to, it seems odd not to take advantage of the opportunity that credit unions can provide to get more people signed up. In that spirit, I intend to press amendment 2 to a vote, but I will not press new clause 1 or amendment 1.

Clause, by leave, withdrawn.

New Clause 2

Impact review: automatic enrolment and pensions savings

‘(1) The Treasury must review the impact of Lifetime ISAs on workplace pensions automatic enrolment and pensions savings within one year of this Act coming into force and every year thereafter.

(2) The conclusions of the review must be made publicly available and laid before Parliament.’—(Peter Dowd.)

This new clause would place a duty on HMRC to review annually the impact of Lifetime ISAs on automatic enrolment.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Mr Gareth Thomas]

It is a pleasure to follow my hon. Friend the Member for Luton North (Kelvin Hopkins). I did not have the privilege of serving on the Bill Committee, but I spoke on Second Reading and on Report. I welcome Ministers’ commitment to continue to engage with credit unions, which was the primary issue I sought to raise.

There is one issue we did not address in relation to Help to Save. With a national provider—National Savings & Investments—it would be relatively easy to disaggregate the data on who is taking advantage of the Help to Save product and to publish them in an anonymised form. We could track the postcodes to see where people are taking advantage of it. I raise that issue in the context of work that the Treasury is doing with the British Bankers Association to encourage banks to publish data about what financial services products are being offered to whom and who is taking advantage of them. The banks have been forced, reluctantly, to reveal where they are lending, but the information being provided is not yet perfect—we are on a journey with the banks.

One thing the Treasury could do once it gets this Bill through both Houses, as it seems likely to, is to require NS&I to publish on a postcode basis where people are taking up the Help to Save product. I commend that point to Ministers, and I hope they will take it up. I also hope that Members of the other House will explore this additional issue in a little more detail.

Question put and agreed to.

Bill accordingly read the Third time and passed.