Savings (Government Contributions) Bill (Second sitting)

Kelvin Hopkins Excerpts

Tuesday 25th October 2016 Public Bill Committees

[James Cartlidge]

Q In respect of Help to Save, it seems to me that there is a real crisis of people who are living week to week, who are often using payday lenders or other forms of debt which are not sustainable for them and who are near the precipice all the time. I take your point that some may not have any spare income at all, but if a savings product such as this, which is so generous, is not going to help them save for those emergency funds that give them greater independence and less reliance on the lenders, which is important, what possibly could?

Bryn Davies: You are right. The work done by StepChange and the Centre for Social Justice very much endorses much of the evidence that you received in the previous session. There is no doubt that it can help people. How targeted it is on people who do not already have a rainy-day fund is unclear. The first point is that many of those people who would take it up already have their rainy-day fund. In that sense, the extra money is not solving that problem.

The other problem is the sheer difficulty of operating on limited budgets. It is not a case of saying, “Let’s give everyone the opportunity to save for a rainy-day fund and that will solve the problem.” I think that underrates the difficulty people face in running their day-to-day budgets and the competing demands that they have. I think that reflects the point that was made here earlier.

[Kelvin Hopkins (Luton North) (Lab)]

Q We are old colleagues from the TUC, so I have to say that I have great sympathy with everything you have said so far. It has always struck me that these alleged savings schemes—tax-exempt special savings accounts, personal equity plans and ISAs—help at the margin with people who are relatively comfortably off, but do not help those people who cannot save anything at all because they are too poor. Is this another of those schemes, which will help some people but not those in the most desperate need? They will be the people who are slightly better off and can afford to save something. Would it not be better to have some sort of universal state scheme for pensions, for one thing, but also, on the other hand, to have an emergency scheme where you can give more money to poor people one way or another? Raising their incomes is what the problem really is.

Bryn Davies: Yes, absolutely. These people do not save because they are poor. A hyped-up social fund would do much more directly to help people with these crisis problems. As was mentioned, it is the day-to-day grind of being poor that is the problem. It is not just crises—people are not just poor in crises; they are poor all the time. In those circumstances, there are very tough decisions to be made about how people use their money. Saving is sometimes seen by those people themselves as a luxury. They would rather run the risk than go without some relatively innocuous discretionary spending. We should, in a sense, respect their decisions. We may warn them that they are heading to a crisis but, ultimately, we need to trust people to make their decisions.

On the broader issue, you well know my views on state provision. I think that the market does fail and that it fails, in terms of saving and pension provision, for a much larger proportion of the population. There are very few people who could get by with just the new state pension. Everyone needs to save something for retirement but the market is a bad way of saving for a large proportion of the working population. I could speak on that at length.

[Kelvin Hopkins]

I would like to ask several more questions, but I will not.

[Maria Caulfield]

Q In your professional capacity, do you advise your clients to have pensions or savings or do you advise them to have both?

Bryn Davies: I do not give independent financial advice. I have to be very careful on that. I always promote the advantages of collective schemes and point out the advantages of having occupational schemes, and support unions when they are negotiating the best possible collective provision. I do not advise individuals about how to use their money.

--- Later in debate ---

[Melanie Onn]

Not in isolation.

Calum Bennie: No.

[Kelvin Hopkins]

Q I am somewhat sceptical about the myriad private savings schemes and have argued the case for a much more comprehensive compulsory state savings scheme for everyone, on top of which people could save in other ways as well as in stocks and shares. What would be the case against having a universal state earnings-related system with defined contributions and defined benefits, which would be extremely efficient to operate, easy to administrate and which everybody would know they were going to get a good deal from? What would be the argument against that?

Calum Bennie: I don’t think there is an argument against that.

[Maria Caulfield]

Q I want to get to the bottom of the evidence that we were given earlier, especially from the experts and professionals in this sector, that these schemes—whether it is Help to Save or the LISA—are too complicated for those on a lower income really to grapple with, and therefore won’t be taken up and won’t be of use. What’s your experience? Do you think the way that these schemes are being set up is easily understandable and will encourage those on a low income to save?

Calum Bennie: We certainly don’t see any issue with that. If it’s us who are going to be promoting these schemes, then we will certainly make sure that our communications are clear and that they are researched in the first place. For instance, our ISAs—that is the basis of this product; it’s an ISA, with various add-ons—are as complicated or as non-complicated as you want them to be, and they are understood extremely well by our customers.