Help to Save Scheme

Lord Ashton of Hyde Excerpts

Thursday 17th March 2016 Lords Chamber

[Lord Young of Cookham]

To ask Her Majesty’s Government, following their announcement concerning the Help to Save scheme, how many people in work and receiving either Working Tax Credit or Universal Credit are expected to benefit from that scheme.

[Lord Ashton of Hyde (Con)]

My Lords, 3.5 million people on the lowest incomes will be eligible to open a Help to Save account when the scheme is launched, which will be no later than April 2018.

[Lord Young of Cookham (Con)]

I am grateful to my noble friend for that reply. As nearly half the adult population have savings of less than £500, it is clearly sensible to have a scheme like this to encourage them to put money on one side for a rainy day. As by definition these savers are on low incomes, can my noble friend give an assurance that these accounts will be easy to access and accessible without penalty?

[Lord Ashton of Hyde]

My noble friend is correct. This is designed specifically for those on low incomes. In fact, we think that 95% of the eligible population from households will have total incomes of less than £30,000. The idea is that people will be able to withdraw at any time without penalty to cover urgent costs. The Government will consult shortly on how exactly the bonus should work. We want to avoid disincentivising people from making withdrawals when they need to. The whole point is to get households saving a bit so that they can cope with unexpected shocks.

[Lord Sharkey (LD)]

My Lords, Martin Lewis of MoneySavingExpert.com said that,

“there is a risk ‘Help to Save’ could substantially mis-prioritize people’s finances. Already, many people make the mistake of trying to save when they are in debt, and yet the cost of debt for most usually vastly outweighs the gain of saving”.

Can the Minister say what percentage of those eligible are in debt and what guidance in this area will accompany the scheme?

[Lord Ashton of Hyde]

To take the last bit of the noble Lord’s question first, there will be a consultation as I said, and these details will have to be gone into, not least with the providers of these accounts. This is to help prevent people getting into debt in the first place. I take the point the noble Lord raised. There are potential dangers, but at the same time I return the quote. The chief executive of StepChange Debt Charity 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”.

[Lord Morgan (Lab)]

Is this not a replication of the Labour Government’s excellent Saving Gateway scheme, which was so foolishly abolished by the coalition Government?

--- Later in debate ---

[Lord Ashton of Hyde]

The Saving Gateway, which had cross-party support, is similar. This scheme is improved. The fact is that at the time the Saving Gateway was unaffordable in the context of the financial position that the Government inherited. I do not think it matters whether this scheme is as successful or not as the Saving Gateway; the point is that it is achieving a good end.

[Baroness Sherlock (Lab)]

I welcome the scheme, but is it not being paid for by the very workers at whom it is aimed—those on universal credit and tax credits? The Government are cutting £1,600 a year from the universal credit payments of these very low-paid workers. Perhaps if the Government had let them keep their universal credit they could have saved on their own. In reality, is it not, as my honourable friend Owen Smith put it,

“like stealing someone’s car and offering them a lift to the bus stop”?

[Lord Ashton of Hyde]

The difference in what the noble Baroness has said is that they would not have the 50% government bonus after two years.

[Lord Scriven (LD)]

My Lords, the New Economics Foundation report by Sarah Lyall notes that 15% of people in the UK—approximately 7.4 million people—have turned to debt for essential day-to-day spending. It also notes that 6% of people in the UK—approximately 3 million—use credit as a safety net on a weekly basis. Will the Minister please explain how those people will be able to save?

[Lord Ashton of Hyde]

We want to prevent people getting into debt. Half the people on low incomes do not have one week’s wages spare. If we get people into the habit of saving—in the scheme they have to save only £1 pound a month to start with; it can go up to £50 a month—it will prevent people getting into debt in the first place. The Government are subsidising that to incentivise people to do that.

[Lord Foulkes of Cumnock (Lab)]

Notwithstanding that this is a good scheme, did the Minister hear the “Today” programme this morning, on which John Humphrys tore the Chancellor apart for failing to deliver on his promises? Does the Minister agree on the importance of the independence of the BBC—even though it may not be in his brief?

[Lord Ashton of Hyde]

I did not hear the “Today” programme. The reason this is not in my brief is that the noble Lord’s question has nothing to do with the Question on the Order Paper.

[The Lord Bishop of St Albans]

My Lords, will the Minister affirm the importance, in addition to the Help to Save scheme, of the increasing number of credit unions which routinely go into schools to try and create a culture of saving from the very earliest age, to address the endemic problem of a presupposition of debt?

[Lord Ashton of Hyde]

I agree with the right reverend Prelate. As I said, we want to increase saving, and we have taken measures to support credit unions.

[Lord Cormack (Con)]

My Lords, as one who did hear the “Today” programme, I ask if my noble friend agrees that interpretation is in the ear of the listener.

[Lord Ashton of Hyde]

I agree with my noble friend.