Savings (Government Contributions) Bill

Gareth Thomas Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 17th October 2016 Commons Chamber

[Jane Ellison]

Obviously, we have the Government bonus, which I mentioned, but I go back to the point about this not being an either/or choice; this is about people having potentially complementary products that are for different purposes. This product is not about replacing a pension; it is about giving people a complementary product to help them save for later in life, while keeping open the option of building up money to put towards a house. As we have seen, many hundreds of thousands of people have taken that opportunity with the previous ISA product.

The lifetime ISA can be used by people to get on to the property ladder for the first time and can be put towards a home worth less than £450,000. Through this Bill, from April next year a new, more flexible way to save will be available to people, as one of a number of options.

The Bill also introduces Help to Save, which is about finding a better way to support families who are just about managing but are struggling to build up their savings. All Members will be aware of the research carried out by a number of bodies, particularly the excellent Centre for Social Justice, which estimates that 3 million low-income households have no savings at all. That is not a nice position for anyone to be in: living without having any kind of financial safety net in place and knowing that if they lose their job, they have barely got enough money to pay next month’s rent.

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

Will the Minister acknowledge the concern of some that the two-year qualifying period for Help to Save is lengthy for people on very low incomes? Will she also acknowledge the credit union movement’s concern that as a result of the Government response to the consultation on Help to Save—this is how I understand it—it is going to be excluded from offering Help to Save products?

[Jane Ellison]

We have announced that we will be going with a single provider, National Savings & Investments, at the outset, but the primary legislation does not preclude more people providing the product in future; it was essential that we got national coverage for offering this product, but, like all of us in this House, I have huge respect for the credit union movement and we certainly see a role for it going forward, not least in respect of advice and support, a point referred to a moment ago. Perhaps we will tease more of that out in this debate, but I hope that gives the hon. Gentleman some reassurance.

The two-year period comes from looking at the advice and research that has been done by groups that deal with people in this category, and trying to capture the moment at which a savings habit is ingrained. This does not mean people cannot take money out; there is no penalty for taking money out earlier if they want to access it, but the bonus comes at the two-year point, and I will come on to deal with that. This is based on research by groups and charities that work with people in the target market for the product, so there is a robust reasoning for that two-year period.

If someone is trying to put some of that hard-earned money aside in an effort to be more financially secure, we want them to have the full support of their Government as they do so. That is why, through this Bill, we want to introduce the new Help to Save accounts by no later than April 2018. They will be open to any adult who is getting working tax credits or universal credit and working enough to earn the equivalent of at least 16 hours’ pay at the national living wage. That means about 3.5 million people are likely to be eligible.

As has been mentioned, people can save up to £50 a month for two years—we are talking about £1,200 in total—and the Government will give them a 50% bonus. If after those two years someone wants to do that again for the next two years, they will be able to do so. This way to save also offers complete flexibility. What people want to do with the money they have saved and with the Government bonus they have earned is completely up to them, and if they want to take their money out at any time, they can; there will not be any charge or penalty for doing so.

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[Rebecca Long Bailey (Salford and Eccles) (Lab)]

It is a pleasure, as always, to debate opposite the Minister. I thank her for outlining the overarching principles of the Bill, which will introduce the new lifetime ISA and the Help to Save scheme. As we have heard, the lifetime ISA is a new savings product that will be available from April 2017 in which people under 40 may deposit up to £4,000 a year. The Government will then top up those savings by 25%. The savings accumulated in the LISA can be used as a deposit towards a first home, or can be accessed once a person is 60 to “complement”, to use the Government’s word, their retirement income. In the absence of using the product to save for a house deposit, it will be possible for a person to remove funds from the LISA before they are 60, but there will be a charge of 25%, effectively to remove the Government top-up from the funds withdrawn.

The Help to Save scheme will be available for people in receipt of either universal credit or working tax credit. If they receive working tax credit, they must have minimum weekly earnings equivalent to 16 hours at the so-called national living wage.

[Mr Gareth Thomas]

I was grateful to the Minister for her response to my question. Will my hon. Friend commit our Front-Bench team to probing the Government further on whether there should be a two-year qualifying period, or if the period should be reduced to 12 months? Similarly, will she commit our Front-Bench team to exploring in Committee whether credit unions can be allowed to take part alongside National Savings and Investments? NS&I already offers national coverage, so there is no reason why credit unions should be excluded.

[Rebecca Long Bailey]

My hon. Friend makes important points and we would support him in pushing the Government to respond to those questions. I will highlight some of the concerns of our Front-Bench team about the Help to Save scheme in particular. Credit unions are vital for the roll-out of any savings scheme that targets the most deprived communities.

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[Rebecca Long Bailey]

No, that is not what I am saying at all. It is important that we address this issue, but we have to be clear about how we do so. Dealing with the root causes of poverty and people’s inability to save is the first important thing that the Government need to look at, and then the second element they need to consider when rolling out the measures in the Bill is the specific groups they intend to target. If they do not target the 3.5 million people who are eligible to take part in the scheme, how will they help those who do not take part in it?

There is considerable unease about the lifetime ISA policy across the pensions industry, the trade union movement, the Office for Budget Responsibility and Select Committees of this House. The Opposition support the idea of incentivising people to save for the future, especially for retirement income, but we are concerned that the scheme could create a diversion from saving in traditional pension products, rather than being an add-on to one’s main pension plan. Even a former Pensions Minister stated that the LISA “could even destroy pensions”. The UK faces a pensions time bomb. Eleven million people are signed up to defined benefit schemes in 6,000 pension funds in the UK, but PricewaterhouseCoopers recently produced data showing that the collective deficit in those 6,000 schemes had risen by £100 billion in just one month so that it stood at £710 billion at the end of August. Earlier this year, the OECD reported that we were facing a “global pension crisis” in which a person buying an annuity today who had saved 10% of their wages into a pension for 40 years could expect just over half the earnings of someone who had saved the same amount but retired 15 years ago.

This situation is very worrying, especially when the state pension in its current form certainly cannot be relied on to plug the gap. Last week, the OBR published a report concluding that recent pensions and savings measures introduced or announced by the Government would create a £5 billion a year black hole in the public finances. The report states:

“The net effect on the public finances is positive in the early years, peaking at £2.3 billion in 2018-19 before turning negative from 2021-22—the year after our March 2016 forecast horizon…But the small net gain to the public finances from these measures over the medium-term is reversed in the long term as the net cost continues to rise, reaching £5 billion by 2034-35. Expressed as a share of GDP—a more relevant metric when considering fiscal sustainability—the net cost builds up until it reaches a steady state toward the end of the period of just over 0.1 per cent of GDP. If that steady-state effect was to continue to the end of our usual long-term projection horizon of 50 years, that seemingly small cost would add 3.7 per cent of GDP to public sector net debt.”

The report also said that these measures

“shifted incentives in a way that makes pensions saving less attractive—particularly for higher earners—and non-pension savings more attractive—often in ways that can most readily be taken up by the same higher earners.”

That is a pretty worrying assessment of the Government’s pensions and savings policy, in which the LISA will play a large part.

I am also worried about the level of assessment that the Government have carried out about the impact that the LISA could have on pension savings, and, more specifically, their auto-enrolment scheme. The Work and Pensions Committee has outlined its concerns about the threat to automatic enrolment in workplace pensions, the roll-out of which is having a great deal of success. The Committee was particularly worried about the risk of people opting out of a workplace pension in order to save in a LISA, thinking that it will be more of a beneficial pension savings product when it is not. The Committee highlighted extreme ambiguity about whether the LISA is intended to be a pension replacement.

As the House will recall, the previous Chancellor stated in his Budget speech that the LISA was for

“those under 40, many of whom have not had such a good deal from the pension system”.—[Official Report, 16 March 2016; Vol. 607, c. 966.]

That was something of an indication that this was a new-generation pensions product. On the other hand, the Department for Work and Pensions has stated that the LISA is

“not a part of the pension system but an additional flexible savings product”.

I am pleased that the Minister has, once and for all, clarified this point and stated that it is a complementary product. None the less, many witnesses who gave evidence to the Select Committee said that all indications so far suggested that the LISA was being interpreted as a pension product, including those from the Centre for Policy Studies, which actually developed the LISA and stated that many employees not already in a pension scheme would have to decide whether to save through a LISA or enrol in the pension scheme. Royal London stated that many people could in fact opt out of workplace pensions.

Will the Minister therefore confirm whether she has made any assessment of the impact of the LISA on automatic enrolment into workplace pensions? Will she confirm what safeguards will be put in place to ensure that people do not opt out of auto-enrolment? Will the Government mount a detailed advertising campaign, as suggested by the Select Committee, to ensure that people do not wrongly view the LISA as their main pension product? The Pensions Regulator has argued that by 2017, when the LISA is available, thousands of small and micro-businesses will not have rolled out auto-enrolment. Have the Government considered timing the LISA roll-out to coincide with the full completion of auto-enrolment to avoid the risks I have outlined?

It is acknowledged that LISAs will be successful among those who have savings elsewhere. There might simply be a case of them transferring those savings into LISAs, but will the Government provide the distributional analysis of the income groups who will specifically benefit the most? Will they confirm what impact the scheme will have on women and minority groups, especially, and therefore provide a much more detailed impact assessment, as the Work and Pensions Committee suggested? Will the Minister confirm what the Government will do to assess those groups that are not currently saving or unable to save, and what will they do to ensure that these people will be able to avail themselves of the scheme? The Select Committee has suggested that those who might benefit most from the scheme could be those who can afford to contribute to a pension scheme and deposit additional savings in a LISA to complement their retirement savings—higher earners, in other words. In these difficult economic times, Opposition Members question whether the scheme is an effective use of up to £2 billion of public funds.

Another concern is not simply that people will use the LISA as an alternative pension product, but that there will be nothing to stop them from taking the money early for other purposes, aside from as a deposit for a house. The Bill enforces a 25% charge for the early withdrawal of funds, which effectively removes the Government bonus, but people will not lose anything from their savings. That will therefore not be a significant deterrent from removing money early, so there is a significant risk for those who use the product as their sole pension income.

LISA funds may be used towards a deposit for a first home. That is not a bad thing, but the Government are failing to address the wider problems that are causing the housing crisis. There is no point having a deposit if there are no houses to buy. We need a significant private and social house building programme supported by the Government, not populist policy making. It is a shame that fewer new homes were built during the previous Parliament than under any peacetime Government since the 1920s. Labour has committed to build more than 1 million new homes over the next Parliament, and that is the level of intervention that is required of any Government who truly want to ensure that everyone can live in a decent and secure home.

[Mr Gareth Thomas]

Before my hon. Friend concludes her speech, may I suggest one further area on which Labour Front Benchers could press the Government in Committee? The Bill does not include a requirement that any employer should offer payroll deduction services, but that could help all savers, especially those on low and middle incomes. In that way, people could, if they wanted, have money deducted from their pay at source by their employer. Ideally that would go into a credit union, but it could go into any other source of savings. I suspect that that would create a significant boost to savings in this country.

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[Robert Jenrick]

I am interested in the point that the hon. Gentleman makes, and I will say more about the lifetime ISA in a moment. The point of it is that many of us in our 20s and 30s—I am just about in that category—are more preoccupied with getting on the housing ladder than we are with looking out for our retirement, and that is a major worry for the Government and for future Governments. The lifetime ISA is flexible, however, because it enables people to spend money in the early years to try to get on the housing ladder, and later to convert the product into something else with a view to retirement. The hon. Gentleman raises a major problem, and we need to look at many solutions; this, I am afraid, is only one.

There needs to be a fundamental change in all our attitudes. We should not purely seek instant gratification; we, as individuals, and the Government must promote ways in which to defer gratification through saving, in contrast to our present, quite corrosive, consumer attitude.

I warmly welcome the lifetime ISA. It is an extremely popular product and there has been a lot of interest in it. I do not represent a particularly wealthy constituency— the average wage is just below the national average—but many of my constituents have said to me that they would like to take up the lifetime ISA. Clearly, offering a 25% top-up as well as the usual tax advantages of an ISA gives us all a strong incentive to save. ISAs are popular, as we know from the millions of people who have taken them up over the years. Contrary to some of the comments that we have heard today and comments in the press, ISAs are simple. We all understand them, and they are part of our saving culture.

I welcomed the news in April that the limit would be raised on the standard ISA from £15,000 to £20,000 a year. That might sound like a great deal of money to many people, but as the problem of insufficient saving affects all income levels, it is an important measure. This is an exciting development for those of us—particularly the younger generation—who will not benefit from generous final salary pension schemes. Although the scheme is not intended to take over from pensions, it creates more flexibility in the sector. Under the previous Chancellor, we saw that across a whole range of issues to do with pensions, flexibility is key.

The lifetime ISA will help younger people to save for a deposit, which is, as we all know, the primary preoccupation of every young person with more than a basic level of income. If this vehicle allows us to help any of them to get on to the housing ladder and then to convert to a product that will help them to save for the rest of their working lives, it will be very useful.

Help to Save explicitly does the same job for those on very low incomes. I appreciate that there are many people, including many in my own constituency, for whom saving seems like another country; it is extremely difficult for them to do. But the alternative is to do nothing and to accept that we live in a country where people cannot save in that jam jar, and where the Government cannot create mechanisms to incentivise them to do so and top up what they have saved. The 50% contribution rate is clearly a great incentive, which we should all appreciate and welcome.

Rather as the IFS has said, it would be helpful for the Government to do more work on understanding which groups are the most critical in terms of saving, and to develop more products that specifically target the core group that we are most worried about—the people who have only £100 or £1000 in the bank as a rainy day fund. That is a very worrying state of affairs.

What else should I raise? One area we should look at is savings interest tax. I am in favour of simple and bold tax reforms that will not complicate the already far too complicated tax code even further, but send everyone in society the extremely clear message that the Government believe we need to save more and will back that up with action. I would strongly welcome a further move to take more people out of paying savings interest tax. The announcement in April, creating a £1,000 threshold for those on the basic rate and a £500 threshold for higher rate taxpayers—was excellent, and we should look at more changes, not least because current levels of interest rates are so pitifully low that the Government are receiving very little, and rapidly declining, tax revenues from savings income. In 2013-14, the income to the Treasury was £2.8 billion, but it is estimated to be £1.1 billion this year and to continue to decline further. Those are obviously large sums, but what would create a greater incentive and give a stronger signal than to say that we will no longer charge tax on savings interest?

My last point is simply to reiterate the one made in debates in recent weeks, which is that interest rates are too low in this country. That has had a very corrosive impact on pensioners and anyone trying to save in this country, on the gap between the rich and the poor, and on the wider economy. I, like many others, was delighted to hear the Prime Minister imply in her speech in Birmingham that she would like to take action on this matter.

[Mr Gareth Thomas]

The hon. Gentleman is making a very powerful application to serve on the Public Bill Committee. Given his point about low interest rates, does he not share the concern of many outside the House—indeed, it is a concern of mine—about the fact that the qualifying period to get the Government’s bonus payment under the Help to Save scheme is two years, rather than just 12 months? Would not a shorter period be a further and more sensible incentive to get people saving more quickly?

[Robert Jenrick]

I listened to the hon. Gentleman’s intervention earlier, and I would be interested to hear the Minister’s views on that. We want to create as many incentives as possible for everybody—from the rich to the poor, from the young to the old—to save because, as I hope I have made the principal point of my remarks, this country is facing a crisis and we all need to take responsibility for it.

On interest rates, the Bank of England now needs to take action. I did not believe there was any real cause to lower interest rates earlier this summer. It misread the initial signals after the referendum and acted too soon. We have already seen that the consequences of the referendum, at least in the short term, will not be as severe as it imagined. I hope the Bank of England—of course, it is independent—does not reduce interest rates further, and that we can now move away from the policy of quantitative easing as soon as possible for many reasons, but particularly for the sake of pensioners and savers.

I want the Government to create a long-term strategy on saving that tries to change the culture in this country towards looking to the future and putting money aside. The Government need to back that in many ways, some of which will involve extremely difficult decisions. One of those decisions will, of course, be to continue to raise the state pension age to protect the triple lock, which I would like to happen as soon as possible. The two schemes we are considering today are excellent. I fully support them, and I hope that they will be the first of many from the new Administration.

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[Kit Malthouse]

The hon. Gentleman will not be surprised to know that I disagree with him. I hesitate to get into a bit of economic argy-bargy in this debate—I was hoping to keep my comments short—but inflation is currently running at 0.6%, and as a result we have extremely low interest rates. The Bank of England’s target is 2%. I am pleased that the low pound may help it to get to that level because there is no doubt that low inflation, or a deflationary environment in real terms, is extremely damaging to the economy. The hon. Gentleman will be pleased to hear that the effect he desires of the drop in the pound has happened: my wife and I decided just this week that this February half-term we would go to Scotland on holiday rather than overseas. We would like to explore the glorious land of his birth. I hope that more and more British consumers will do the same. We may even see the rejuvenation of the tourism industry in lovely places such as Blackpool.

[Mr Gareth Thomas]

The hon. Gentleman has set out three concerns, if I remember rightly, about Help to Save. I wonder whether he shares my view and that of the hon. Member for Newark (Robert Jenrick) that the Government need to do more to explain why they think there should be a two-year qualifying period for the Government bonus for Help to Save, as opposed to just 12 months.

[Kit Malthouse]

I completely agree with the hon. Gentleman. The Government should look at exactly that. The barriers to saving that are in the way of people on low incomes should be removed as much as possible. I like his suggestion that people should be able opt to save out of their payroll—that employers should make the deduction. I like anything that makes it painless. The Government opt for PAYE because it takes our taxes away from us painlessly; we do not actually have to give them over. Doing the same with savings would be a good idea.

Throughout my life, my granny, until she sadly died when she was 94, put £5 every month in a post office savings account for me. She gave the savings to me on my 21st birthday. I have always been grateful for that money. I still have it sitting in that savings account. I hope and believe that I will be able to pass it on to my three children as a sign of what can be done by putting £5 away every month—a sign of the change that is possible from the first generation, from the back streets of Harrogate, to me now as a Member of Parliament.

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

It is a pleasure—on this occasion anyway—to follow the hon. Member for North West Hampshire (Kit Malthouse). I rise in particular to support the remarks of my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey) and to dwell on a number of the points that I have made in interventions.

The hon. Member for Ross, Skye and Lochaber (Ian Blackford), who speaks for the Scottish National party, the hon. Member for Newark (Robert Jenrick) and my hon. Friend, in particular, addressed the scale of the savings crisis. In their own different ways, they underlined the need to do a lot more to encourage those on low and modest incomes to save. It is in that spirit that I gently underline, in this, I hope, more substantive contribution, the need for the Government to look afresh at their decision on Help to Save.

The Government have decided that they will make their bonus payment after two years, as opposed to 12 months. The hon. Member for Newark talked about the person who has only £100 in their bank account and dwelt on the difficulties they have saving. Two years is a long time. I think of a constituent of mine who does the right thing and is working. She is a teaching assistant and therefore on a low income. She has faced, given the scale of the housing crisis, to which my hon. Friend the Member for Salford and Eccles rightly alluded, significant increases in rent, and she struggles to manage her income and to pay all her bills. She is surely exactly the sort of person we would want to benefit from a scheme such as Help to Save, but I suspect that, if she thought that she was not going to get any benefit from her savings for two years, the struggle to make ends meet in the intervening period would be a significant disincentive to her setting even small amounts of money aside in a savings account. I share the concern of others that the scheme will benefit only those on in-work benefits. Again, I encourage the Government to be a little more imaginative on the scheme.

I understand and see the logic of the Government’s need to have a Help to Save implementer with national coverage. Clearly, the Government have failed to persuade traditional banks or big financial players to offer the scheme, so I can see the attraction of NS&I. What I fail to understand is why credit unions cannot be allowed to offer the service to communities in their areas alongside NS&I. I hope that the Government will reconsider that point.

I have the great privilege of chairing the all-party group on mutuals. I commend the contribution of the Building Societies Association which, in its comments on the lifetime ISA and its briefing for the debate, shares the concern that others have expressed about the risk of the lifetime ISA conflating savings for a house deposit and savings for retirement in one product. Again, there are concerns that the scale of withdrawal charges will be punitive. I hope that the Minister will pick up those two points.

I welcome the support of the hon. Member for North West Hampshire for the idea of making payroll deduction a statutory right. He is right to say that the Government have a statutory right to take tax through PAYE, so why should they not also support a statutory right to allow people, with their employers, to save through a credit union, a standard mutual or a mainstream bank product?

Giving people the right to payroll deduction would be of huge long-term benefit. Many of the credit unions that are highly successful underline regularly how important the facility of payroll deduction is to their ability to offer financial services, particularly in the savings context, to their members. For a while, one issue prevented an armed forces credit union from being established. When one considers that before credit unions came along often the only products that were available for those serving in our armed forces on comparatively low incomes were those offered by legal loan sharks—the payday lenders charging huge sums of interest—one understands the scale of the benefit that credit unions are beginning to offer to armed forces personnel.

The Financial Secretary to the Treasury has a reputation as a shrewd and effective operator around Whitehall. Now that she is in the Treasury, she has even more power at her disposal. Many parts of government, whether Whitehall directly, agencies outside Whitehall, the NHS, individual academies, academy chains or indeed some parts of local government, still do not offer payroll deduction services for credit unions that want to serve their employees. One thing the Minister could do if she is not immediately persuaded—I hope she will be by the time the Bill completes its passage—would be to use the weight of the Treasury to encourage all Whitehall Departments to check that every bit of government for which they are responsible allows payroll deduction and lets credit unions offer savings and other financial services to their employees. If the police can offer payroll deduction services—many police officers and other police staff are signed up to credit unions—and if our armed forces can do it, why cannot all of government offer this service? I therefore hope the Minister will not only lead a drive on allowing payroll deduction, but will be willing to contemplate amending the Bill to make payroll deduction a statutory right.

It is worth reflecting briefly on the appetite across the House for more diverse financial markets. Arguably, one of the reasons why organisations within the financial services community can sometimes make high charges for their services is that there is not enough competition. Encouraging more savings through building societies, and in particular trying to build up the credit union sector, is surely something that every Treasury Bill, and indeed every Government Bill, should have at the back of its mind. Might there be an opportunity to encourage more tax incentives for savers? The armed forces credit union has been established. Why should there not be tax incentives to encourage more of our soldiers, sailors and air force personnel to sign up and support that credit union, and benefit from its services?

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

I thank my fellow Co-operative MP for giving way and apologise for not being able to be in the Chamber to hear the whole debate—I was at another debate in Westminster Hall. I wholeheartedly agree with my hon. Friend’s remarks and pay tribute to his work on the armed forces credit union. I will certainly support the amendment that he suggests tabling. Does he agree that we should also look at countries such as Canada and Germany, where there is diversity in savings, and where much stronger credit unions are available to a much wider group of the population?

[Mr Thomas]

My hon. Friend makes an important point. Many financial services markets around the world are far more diverse than the UK’s, and therefore far more competitive. We need to build up our building societies and other mutuals such as credit unions, and further tax incentives that encourage saving and taking up other financial services through mutuals can only be a good thing.

I have no intention of voting against the Bill, but I share the concerns of my hon. Friend the Member for Salford and Eccles. I hope that both Front-Bench teams will reflect on my suggested amendments and that we will see progress on the concerns that they address during the Bill’s passage.

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[Simon Kirby]

I thank the hon. Gentleman so much for that intervention, but the Government are not doing what he suggests. We are offering people a choice, and these two schemes are complementary and serve very different purposes. The genuine choice and flexibility to which I alluded are at the core of this Bill, but now let me deal with the specific points raised today.

The hon. Members for Salford and Eccles (Rebecca Long Bailey) and for Harrow West (Mr Thomas) mentioned credit unions. The Government recognise that many credit unions were interested in offering accounts, but it was not clear that a multiple provider model would guarantee national coverage for the scheme. We will continue to explore further options for credit unions to support delivery of the scheme, and I am sure that we will have that conversation in more detail as the Bill progresses.

The hon. Member for Salford and Eccles talked of this scheme being a substitute for benefits, but it is about increasing the financial resilience of low-income families so that if they are hit with an unexpected bill or if someone loses their job, they will have money for a rainy day. If something unexpected happens to their income, they will have savings to bridge the gap. She also asked why two years was chosen. This is the period of time needed to encourage account holders to develop a regular savings habit—a habit all too lacking in many people, especially younger people. I reiterate that the amount is up to £50 a month. People may not be able to afford that amount, but any regular saving is something that all of us should encourage.

I wish to clarify one point. The hon. Lady mentioned that there would be an additional penalty if people took money out of a lifetime ISA. An additional charge will be applied to reflect the long-term nature of the account, and that will act as a disincentive to people removing money unless it is essential or if there is a very important change in circumstances to be taken into account.

I wish to thank my hon. Friend the Member for Newark (Robert Jenrick) for his contribution. Our constituents are looking forward to the introduction of these products, and I agree with him that they contain significant incentives. He also mentioned the abolition of savings tax. It is worth putting it on the record that 95% of people have no savings tax to pay thanks to the new personal savings allowance.

The hon. Member for Ross, Skye and Lochaber (Ian Blackford) mentioned a smorgasbord of issues, a few of which I shall pick up on. He said that women were disadvantaged by automatic enrolment. Before it began, 65% of women employed full time in the private sector did not have a workplace pension; as of 2015, that had fallen to 35%. He said that a lifetime ISA was just for the rich, but it is for anyone between the ages of 18 and 40. They can open it and save into it until they are 50. The maximum annual contribution that an individual can make is £4,000. People can pay less than that and still enjoy the Government bonus. We expect that a large majority of those who use the lifetime ISA will be basic rate taxpayers.

The hon. Gentleman mentioned StepChange. Well, this is what StepChange has said:

“We welcome Government recognition of the need for a savings scheme aimed at those on low incomes. Our research shows that if every household in the UK had £1,000 in rainy day savings, 500,000 would be protected from falling into problem debt.”

He also mentioned the Association of British Insurers, which said in August:

“The industry supports the Lifetime ISA as a vehicle to help people save, in addition to a workplace pension.”

I hope that is fairly clear.

My hon. Friend the Member for North West Hampshire (Kit Malthouse) asked very sensible questions and made some thoughtful points. In particular, he asked about the limit of £50 a month. Individuals saving £50 a month for four years will earn a generous bonus of £1,200. It is probably an appropriate limit for people on low incomes, at whom the scheme is targeted. There has to be a ceiling.

The hon. Member for Harrow West asked about payroll deduction. I have to thank him for a very sensible and measured contribution. There is no reason why payroll deduction cannot take place. I cannot make a commitment to him today, but I can confirm that I am happy to see whether there is more that we can do in that area.

[Mr Gareth Thomas]

I am grateful to the Minister for his considered response to my request for payroll deduction. Would he be willing to meet me and the Association of British Credit Unions Ltd to discuss this issue further?

[Simon Kirby]

Yes, I would be very happy to do that.

I thank my hon. Friend the Member for Gloucester (Richard Graham) for his thoughtful contribution. Clearly, he feels very strongly about a vast number of issues. I respectfully disagree with some of his opinions, but I hope that he continues to contribute to this important debate, as it is important that we get it right. At the end of the day, this is about helping younger people and poorer people get into the habit of saving.