Savings (Government Contributions) Bill (Third sitting)

Peter Dowd Excerpts

Thursday 27th October 2016 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

New clause 1—Impact review: automatic enrolment and pensions savings—

“(1) HMRC 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 each House of Parliament.”

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

New clause 2—Lifetime ISAs: Advice for applicants—

“(1) The Secretary of State must make provision by regulations for all applicants for a Lifetime ISA to have independent financial advice regarding the decision to save in a Lifetime ISA or through a pension made available to them.

(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 applicant has received.

(3) Any provider of a Lifetime ISA must confirm whether the 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),

(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 provide information to the applicant about the independent financial advice available to them under subsection (1).”

This new clause would place a duty on the Secretary of State to make regulations that ensure all applicants for a Lifetime ISA receive independent financial advice.

[Peter Dowd (Bootle) (Lab)]

The Opposition’s new clauses 1 and 2 are designed to address the concern expressed across the board, including by the pensions industry, the trade union movement, Select Committees of this House and the Office for Budget Responsibility, that the lifetime individual savings account poses a threat to traditional pension savings, and most significantly to auto-enrolment.

Auto-enrolment has been a success story in the pensions environment. As Members will recall, witnesses who gave evidence to the Committee had one or two things to say about LISAs. For example, some made it clear that there is concern about the LISA interfering with the roll-out of auto-enrolment. Mr Davies suggested that although few object to the LISA, there is concern about

“where it fits within the overall landscape of provision for retirement”.––[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 38, Q65.]

Given that, it is incumbent on us to ensure that any reasonable concerns are assuaged. The cost to the taxpayer, certainly in the longer term, was also of concern, given that for a standard taxpayer, the LISA is tax-free going in and going out, so to speak. Mr Davies of Union Pension Services certainly alluded to that.

New clause 1 would require Her Majesty’s Revenue and Customs to conduct a review of the impact of the lifetime ISA on automatic enrolment in workplace pensions and pension savings within one year of the Act coming into force and every year thereafter. The conclusions of that review would have to be made publicly available and laid before both Houses of Parliament.

It is patently obviously that automatic enrolment, which was brought in by the Labour Government, is an outstanding initiative and is starting to achieve the objectives set for it as the years pass by. It has been rolled out to large businesses and is well on its way into the small business sector. That is clearly good news, as I am sure the Minister will acknowledge. I appreciate that neither she nor other Committee members are partisan on that matter. However, not all employees will be auto-enrolled until February 2018, and the increase in minimum contributions to 8% will not be completed until April 2019. Drop-out is relatively low among younger people. We do not want anything in the meantime to jeopardise the maximum possible number of people enrolling, or to provide an incentive to opt out; that is not an unreasonable position to take.

Auto-enrolment is one of the few success stories in the pension landscape, and is widely acknowledged in all sectors to be right. I fear that the Government’s policy—intentionally or not; I do not point the finger—may put the wider landscape in jeopardy and be a dangerous path, and the history of pensions suggests that that will be recognised only in years to come. By that time, it will be too late to turn back. As my hon. Friend the Member for Salford and Eccles highlighted on Second Reading, the OBR agrees with that assessment, and has reported that the Government’s pensions and savings policies have

“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.”

The Minister may respond that this is not an either/or situation, but of course she would say that. I respectfully suggest that that demonstrates a potential lack of appreciation that many people out there cannot afford to pay into both a pension and a LISA. In fact, many can do neither. The Work and Pensions Committee has warned the Government that

“Opting out of AE to save for retirement in a LISA will leave people worse off. Government messages on this issue have been mixed. While the DWP has been very clear that the LISA is not a pension product, the Treasury has proffered an alternative view.”

Those are not my words, but those of the Work and Pensions Committee. That simply affirms that there is confusion over the matter. At the very least, that is the perception abroad, and as some people say, perception is reality. If we have learned one thing over the years, it is that confusion in the market simply puts people off.

Moreover, we heard in evidence from Ms Lowe of the Women’s Budget Group that making a LISA

“available to everyone does not make it gender-neutral”—[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 51, Q96.]

She said that account had to be taken of people’s capacity to access the LISA, and in that regard, many women would be left out. That is a salutary observation.

Although Mr Bennie from Scottish Friendly supported the LISA, he recognised that people’s experience of pensions was sometime bad, which could be a problem for take up. In response to the hon. Member for Ross, Skye and Lochaber, he said that he recognised that for some, given their experience, pensions are a broken product. He also indicated that he saw LISAs as being complementary to a main pension, as did Ms Knight of the Tax Incentivised Saving Association, hence the Opposition’s caution about pushing on with this product without appropriate review.

It is fair to say that messing about with the pension system over the years has left people sceptical and blaming politicians for the mess. I worry that that we will be seen as messing about again, even with the best intentions. Our proposals today are a form of inoculation against the problem. The Women Against State Pension Inequality campaign is an example of a pension issue, albeit a public pension one, coming back to haunt us—or rather, it is the women concerned who are coming back to haunt us. That has shown the scepticism about pensions in general.

The Work and Pensions Committee recommended that the Government conduct urgent research into any effect of LISA on pension savings through auto-enrolment. That is another sensible bipartisan approach to the issue, which, political banter apart, is worthy of consideration by the Government. After all, the wisdom of Conservative Members on that Committee—and on this Committee—is always welcome on these matters.

Our new clause 1 would require the Government to carry out the review every year after the passing of this Bill. I hope that the Minister will consider accepting the new clause, or at least take it away for consideration.

The purpose of new clause 2 is to ensure that those opening a lifetime ISA for retirement savings receive independent financial advice. Advice is a crucial in purchasing any expensive product, be it a car, house, university education, or holiday. The advice would be offered automatically through an opt-in service, and the service provider would sign a declaration outlining the advice that the applicant received. Any provider would have to confirm the status of the applicant, whether they were enrolled in a workplace pension scheme, whether they had signed a declaration of financial advice, and whether they plan to use the lifetime ISA for a first-time residential purchase. The Opposition believe that it is only right that anyone considering a lifetime ISA is given the opportunity to see its benefits, compared with those of other schemes on the market.

The new clause would: ensure that people make an informed choice, with the benefit of independent financial advice; create parity in the quality of advice for all those entering the scheme; and offer much-needed oversight and education about the benefits of the scheme. The purchase of a pension is perhaps one of the most important purchases a person makes. That issue has exercised the minds of many people in Government, the regulatory sector and the product sector. The history of mis-selling has left a long, deep shadow across the financial product sector, and we must take that into account. It is fair to say that all witnesses made this point, either directly or indirectly.

There was more consensus among the witnesses on the issue of complexity than a first assessment would suggest. Hon. Members may recall me asking Mr McPhail of Hargreaves Lansdown about his assertion that the LISA was a misguided policy. His response was that the product was not complicated—the point that the hon. Member for Bexhill and Battle made to Mr Lewis—but that the pension landscape was complex. Mr McPhail said:

“The product itself is reasonably simple…but you have dropped it…into a complicated landscape.”—[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 20, Q40.]

I repeat that he never said that the product was complicated. The assertion from the hon. Member for Bexhill and Battle that

“this morning we heard from some of the representatives from the financial services industry, who seemed to think that this was a complex product”

was seized on by Mr Lewis, who called that view “palpable balderdash”. However, Mr McPhail did not say that. What Mr Lewis said, which is more than reasonable, is that people need to understand what they are buying. He said of LISA:

“All products are complicated; all products can be explained…They have to be explained and they have to be communicated. They will take time.”

That reinforces the reason for supporting the new clause, and the need for independent robust advice, which, as Mr Lewis advised, should be given in

“nice, easy and real terminology and not jargon”.

[Huw Merriman (Bexhill and Battle) (Con)]

I am grateful to the hon. Gentleman for reading those passages. I was also struck by Mr Lewis’s comment that

“When you contrast these products with the state pension, they are pretty easy products to understand.”

Would the hon. Gentleman like to comment on that section of Mr Lewis’s assessment?

[Peter Dowd]

Yes, I am happy to. The point that we were discussing was that while the products may or may not be complicated, the environment and landscape in which they are being sold is complicated, as there are all sorts of other financial products out there. That was the issue.

The primary point is that if people are to make a decision about something so important in their lives, and especially a pension, they need as much simple advice as they can get, with

“nice, easy and real terminology and not jargon”.

[Huw Merriman]

It may seem a strange analogy, but there are lots of laws passed by this House that could be quite complicated; that does not stop us passing more laws that may help people, though. I find the defeatist attitude somewhat baffling.

[Peter Dowd]

I genuinely do not think that ours is a defeatist attitude. The responsibility of this House when we pass complicated laws, which we do all the time, is to make clear what they mean. I would rather we spent more time in here dealing with these matters, teasing and winkling out the issues, and being clear about what we mean. I would rather spend 10 hours in here dealing with an issue and sorting it out than one hour in here and 10 hours out there trying to unravel it.

[David Rutley (Macclesfield) (Con)]

I understand the hon. Gentleman’s point. However, I agree with my hon. Friend the Member for Bexhill and Battle in his previous comments. In the Hansard of the witness hearings, Martin Lewis is very clear:

“The argument that they are too complicated is just a complete load of palpable balderdash.”––[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 56-7, Q100.]

Those are not my words but his. He went on to say that there might be sections of the industry that think that they have products that could compete with those in the Bill, but if there is a product that is right, we should be getting on with introducing it.

[Peter Dowd]

There is a danger of an “angels dancing on a pinhead” argument here. Mr Lewis said that an assertion had been made—an assertion attributed to Mr McPhail—that this was a complicated product, and that has clouded the issue. I am trying to get clarity that that was not what was said. It is not the product per se that is complicated; it is the landscape in which it is delivered. There are so many products that people may get confused, depending on how much information and simple terminology they are provided with. All I am trying to do is pin this issue down.

If, having been auto-enrolled in a pension, someone opts out of it to go into a LISA, it is important that they have all the boxes ticked and understand exactly what they are doing. I say that only because of the point I made earlier. There have been so many scams and so much mis-selling in the past that when we introduce a product that some see, rightly or wrongly, as being in direct competition with a pension, we must ensure that people make their decision in full knowledge. We are trying to tie independent financial advice into the legislation. The Government may or may not accept that; that is a matter for them. I am trying to put the idea into the mix and get discussion on it.

--- Later in debate ---

[Peter Dowd]

I am grateful to my hon. Friend for bringing that in. I reaffirm the point: we have a responsibility and duty to ensure that we nail this issue down. The last thing any of us wants is, in three, four, five or six years’ time, to have to unravel and unpick a problem we could have avoided in the first place. That is our intention. The new clause is not a spoiler; it is a genuine attempt to get the issue into the open.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

Should we not reflect on what experts in the industry have said? Zurich said there is a danger that the LISA

“would derail auto-enrolment and reverse”

the progress made

“in encouraging…people to save”

for later life. We heard evidence on Tuesday that nobody would be better off coming out of auto-enrolment and investing in a LISA.

Specifically on mis-selling, do we not run the risk of ending up with financial institutions marketing the LISA in a way that is to its detriment? I cannot put it any other way: that is creating the circumstances for mis-selling, and having shaped the Bill in this way, the Government are responsible for that.

[Peter Dowd]

I thank the hon. Gentleman for his intervention. That reinforces the concern out there. If his point was completely off the wall, I would say so, but it is not. Millions of people out there have completely lost confidence in much of the sector. That is partly why, as was alluded to by the witnesses, if people are saving, they are often doing so in cash ISAs—because they are not sure about stocks and shares and other things. They therefore put their savings in products that give them a return of 0%, 0.1%, 0.2%, 0.3%, or 1% if they are lucky. We must create an environment in which people save and feel confident that they will get a reasonable return on their investment, especially if that investment is for their later years. That is perfectly reasonable.

This is not a question of protecting people from themselves. We are saying, “If you want to buy a product, look it over, and we will set up mechanisms to enable that to happen.” In a sense, it is for the Government to decide whether they believe that what they are doing is enough.

The Work and Pensions Committee said:

“We recommend the Government develop a communications campaign that highlights the differences between the LISA and workplace pensions. It should make it clear that the LISA is not a pension and that, for employees who have been automatically enrolled, any decision to opt-out is likely to result in a worse outcome for their retirement.”

It is not just the Labour party, the Scottish Nationalists or anyone else saying that; a bipartisan Committee that includes Government Members is saying it. That is why I said that there is a little wisdom there that we should tap into.

Opposition Members are concerned that the Government are not doing enough to ensure that people who are considering opening a LISA are fully aware of all the pensions savings options available to them. New clause 2 would require the Government to legislate to ensure that all applicants for a lifetime ISA had to prove that they had received independent financial advice if they intended to use the ISA for retirement savings. If they had not received such advice, the provider of the lifetime ISA would have to direct them to independent financial advice.

With so many bodies from across numerous industries outlining concerns that there is a risk that people will save into a lifetime ISA when it is not the most beneficial retirement savings option, I cannot see a reasonable argument against ensuring that applicants receive independent financial advice before opening an account. To paraphrase Mr Lewis, it seems palpably sensible to take that approach. I hope that the Government give careful consideration to our proposal and take on board the concerns that not only I but many people have expressed.

[Ian Blackford]

The Scottish National party welcomes the attempts by Peter Dowd, the hon. Member for Bootle, to ask the UK Government—

--- Later in debate ---

[Jane Ellison]

I think we would all agree on the broad point about wanting people to have access to financial advice whatever their income, but we are dealing with this Bill. The Government will consult and take soundings on the successor to the Money Advice Service and the other advice services that will be brought together, and I am sure that we will have a good debate about that in due course. The hon. Gentleman may wish to contribute those broader thoughts to that debate.

Let me turn to the current regulatory framework around the LISA. It is worth saying that it is not the Government’s role to set that regulatory framework. The hon. Member for Luton North talked about the different regulatory landscape at the time when he was being sold products—not particularly well, apparently. We are all thankful that that landscape has changed greatly since those days, and rightly so, but it is the role of the independent Financial Conduct Authority to regulate the providers of ISAs, and it will likewise set the appropriate framework for the lifetime ISA.

The FCA will consult on the regulatory regime for the lifetime ISA throughout the autumn and will, as is its ordinary remit, ensure that providers are transparent to customers about the products that they are offering and those products are sold with suitable safeguards in place. We heard in some of the evidence sessions on Tuesday about how the industry wants to get advice right. Everyone has been scarred by what has happened in years past. As I said to the hon. Gentleman, we will consult later this year on the scope of the new financial guidance body, as a complement to the industry’s advice. We heard people such as Martin Lewis talk about the common-sense advice that people need to hear, and that is also an important part of the landscape from which people can seek guidance. I am sure that Martin Lewis and others will contribute to the debate about the new advice services.

I reassure the hon. Member for Bootle that information about the lifetime ISA will be available so that potential customers can make informed choices about which financial products to use. We want people to understand what the right choices are for them, but it would not be appropriate for the Government to require advice to be provided, as that would create a significant financial barrier to individuals accessing the lifetime ISA. It is the independent FCA’s role, not the Government’s, to set the regulatory framework for ISAs. For those reasons—not because I disagree with the spirit of his new clause but because I do not think it would work in practice—I encourage him to withdraw new clause 2.

I conclude my remarks about clause 1 by saying that the lifetime ISA will benefit many young people by supporting them to save flexibly for the long term. It is designed to complement the pension system, not replace it. The clause makes provision for the fundamental feature of the lifetime ISA: the Government bonus. We think that is a positive product for young people, and we do not want them to lose out on, for example, a year’s worth of saving and the compound interest on that because of the delay that has been called for. I therefore ask Committee members to support clause 1.

[Peter Dowd]

I welcome some of the Minister’s comments on both new clauses, and the spirit in which she made them. In the spirit of trying to move on, we will not push new clause 1 to a Division. We acknowledge that the Minister has said that there will be reviews of some fashion, though maybe not statutory reviews; we will take that away and consider it, and may come back to the question of reviews. Our concerns in relation to auto-enrolment can be appreciated. It has been a good product, to use the jargon, and we do not want to lose that. However, again, in the spirit of moving on, we will pull away from the new clause.

We will push new clause 2, on independent financial advice, to a vote, because this House has to lay down a marker when it comes to people’s future and making a significant investment in a product. The lifetime ISA is a significant investment, whatever way we look it. Importantly, it is also a significant investment by taxpayers; that has to be taken into account. If somebody wants a lifetime ISA, and rightly understands that the Government will put a lump sum towards it, it is not unreasonable for us to say that we expect that person to take independent financial advice.

[Kelvin Hopkins]

I absolutely support what my hon. Friend says, but is it not important to have that commitment in the Bill, rather than just rely on the apparent sympathy of the Government?

[Peter Dowd]

It is, and that is why I am trying to push that message home. To some extent, we need to draw a line in the sand.

[Jane Ellison]

Given that some of the debate on new clause 2 has been about the concern that the product would be insufficiently attractive to people on lower pay, the practical nature—not the spirit—of what the hon. Gentleman proposes would essentially be regressive, and make the product less attractive to those on lower incomes, whom we wish to attract.

[Peter Dowd]

I completely understand that. The Bill is full of principles: we want people to save and to have pensions, to have the Government cough up towards that, and the individual to put money in personally. There is a whole series of things that we say must be part of the process in principle. For us, there is also the principle at stake of seeking independent financial advice. That is not unreasonable.

[Dr Whiteford]

The hon. Gentleman makes a really important point about independent financial advice. The Minister also made an important point about the cost of that advice. From the evidence we heard, it came across strongly to me that for most people on moderate incomes, this product is a lot less advantageous than putting the money into a pension and attracting employers’ contributions. That is why independent advice is so important, and why this product is not very attractive for anybody on a normal salary.

[Peter Dowd]

That is a reasonable point to make. The question is: what is the reasonableness of the argument? The Minister, again perfectly reasonably, makes her point. I do not necessarily accept the figures that she gave, but I take at face value the point that she makes. On balance, people have found that not taking independent advice on such matters was a little costly in the short term, but in the long term, if they did not get the right advice, it was even more costly. That bill has to be picked up by someone, and we are not talking about a few pounds—we are talking about people’s lives in the future, and it is difficult to put a price on that. We recognise the points that the Minister made, and the spirit in which she made them, but as a matter of principle, we want to press new clause 2 to a Division, just to get it into the mix.

[The Chair]

May I explain the procedure? We will not vote on new clauses yet. We will vote on them after we have finished discussing the amendments and the rest of the Bill. At that stage, it will be open to anyone to press new clause 1 to a vote, if they want to, and then we can have a Division on it, if that is the will of the Committee, and similarly for new clause 2. I have made a note that the hon. Member for Bootle wishes to press new clause 2 to a Division at the appropriate time.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Schedule 1

Lifetime ISAs: further provision

Question proposed, That the schedule be the First schedule to the Bill.

--- Later in debate ---

[Peter Dowd]

New clause 3 would require the Government to conduct a review within a year of the Act coming into force of the potential impact of the lifetime ISA on house prices in the United Kingdom. The review must be made publicly available and laid before both Houses of Parliament. The Opposition recognise that many people want to own their own home. However, we are concerned that the Government’s housing policy will only inflate house prices further. We have concerns that the LISA will make things even more difficult in a housing environment that is already strained because of the limited number of houses being built nationwide, not to mention the huge cost of housing, particularly in London and the south-east; the average figure is £250,000.

Evidence to the Committee on Tuesday was cautionary. Martin Lewis from MoneySavingExpert.com, while acknowledging the potential popularity of the LISA, flagged up its potential impact on the housing market. He highlighted that

“Unintended consequences are possible—the lifetime ISA might pump the housing market, which is a concern”.––[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 50, Q95.]

The Institute for Fiscal Studies, referring to the Office for Budget Responsibility, made a similar point.

I do not want to over-emphasise the point, but it is worth noting—and perhaps assessing, as suggested in the new clause—the effect of the LISA on house prices overall. It is worrying that fewer homes were built in the last Parliament than under any previous peacetime Government since the 1920s. LISA may help—if that is the right word—to overheat a market that is already short of capacity. The Government’s priority should be to try to mitigate that, not to add to the problem. I do not think that is an unreasonable point to make.

The fact is that people are increasingly chasing a product in a market that has low supply levels. It so happens that the product is a house. The facts speak for themselves. Since I sat on the Housing and Planning Bill Committee around this time last year—it may well have been in this very room—the housing market has remained pretty tight, with supply remaining low. The national planning policy framework, which the Government were warned would create confusion, has done so. That all adds to the broth and is creating problems. By now, according to the plan, and the former Housing Minister, the right hon. Member for Great Yarmouth (Brandon Lewis), there have should been a better housing supply. Alas, he was wrong.

The lifetime ISA, which will in effect replace the help to buy ISA in due course, provides a Government bonus that can be used towards a deposit on a house—if one can be found. If I remember correctly, concern was expressed by a witness that the help to buy ISA had been poorly articulated, and that the current one was potentially being poorly articulated as well. There was the impression that an ISA could be used for a deposit. Of course, there was a smorgasbord of consternation, anger, disappointment, frustration and bewilderment when many young people found that that was not the case. The problem is that if people are encouraged to borrow money for a house in a tight market, the more house prices rises, the bigger mortgages they need, and so on. The fact that the Government are helping to do that is not helpful. The problem is exacerbated. When the growth of mortgage lending outpaces the supply of housing, prices just keep rising and rising, making it increasingly difficult for people to access the housing market at a reasonable rate. There is no doubt about that.

The Government have identified the right problem but are coming up with the wrong solution. We need to build more houses. That is the only way to solve the housing crisis. New products are fine, as far as they go. Lots of people welcome the LISA—I cannot argue against that—and many people do not, but the comprehensive solution is to deal with the continuing housing supply problem. It is worth noting that the house shortage is simply a physical manifestation of the shortage of skills in the construction sector in general and the housing market in particular.

The Government are almost two years through their five-year housing plan, not counting the previous five years, and we are still falling badly behind on targets. The question is whether the proposals really deal with the substantive issue of supply, and the answer is no. In that context, it is important to look at whether this policy will have an impact on house prices. If it will, in addition to there being a lack of action on housing policy in general, that is a concern. It is legitimate to ask the Government to review the impact on the housing market of this product.

[Kelvin Hopkins]

I rise to support my hon. Friend’s new clause. Many of us have long been concerned about the massive rise in house prices. I will give a simple example. When I bought my first house in Luton in 1969, house prices were three times average earnings. Now in Luton, they are 12 times average earnings.

Millions of people are seeing the possibility of home ownership disappearing. Owner-occupation is in decline; it is becoming a smaller sector, and we are seeing an opening up of major social divisions between owner-occupiers and renters. For owner-occupiers, equity will cascade down the generations, and their children and grandchildren will stay in the owner-occupied sector because they will inherit the equity. Those who are not in the sector and do not have sufficient income will remain outside the sector, as will successive generations after them—unless they win the lottery or become extremely wealthy for some other reason, but that will apply to only a small number. The great majority of people will find it very difficult to become owner-occupiers if they do not have equity handed down by their forebears.

Adding extra cash to help people who are already likely to be in a position to buy their own home will simply increase house prices further and take home ownership even further away from those who do not have equity and are unlikely to be able to afford a home. We have to see some action by Government over time at least to stabilise house prices, so that more people can get into owner-occupation, and so that those who aspire to be a homeowner have a realistic prospect of becoming one.

I support what my hon. Friend said. We have to build many more houses. The only way to stabilise house prices is to raise supply, not increase demand, which would just push house prices up. It is not the price of houses that is increasing, but the price of the land on which they are built. The cost of building a house does not increase by that amount; it is the land on which it is built. There is a case for land value taxation and doing something about the price of land.

It is a mad world. In 1969, I thought becoming an owner-occupier was a bit of an adventure, but I could afford it on one income—mine, which was not massively high, because I was a trade union research officer. Nevertheless, I could afford to buy a three-bedroom house with a garage and gardens back and front—a nice, typically British home, which we might all aspire to. If I were trying to buy the same house now, with the same sort of income, in the same town, I would have great difficulty. On my generous parliamentary salary, I might stand a better chance, but not on the salary that I had at the time, so I think my hon. Friend the Member for Bootle is absolutely right, and I support his new clause 3.

--- Later in debate ---

We think that the new clause is unnecessary, and I have outlined the practical problems in coming to the definitive picture that the hon. Member for Bootle seeks. I therefore urge him not to press the new clause. In conclusion, schedule 1 sets out some of the important and detailed rules for how the lifetime ISA will operate, and I therefore ask Committee members to support it.

[Peter Dowd]

To start with, I telegraph the fact that we will not pursue this matter. However, it is important to get on the record the fact that where Government policy has an effect on house prices, it is important—given the current state of the housing market, which is overheating due to lack of supply—to have that logged and noted, however marginal the effect appears to be. I am not suggesting that the Minister has brushed that point aside, but it is our responsibility to bring that effect to account.

The Minister quoted some figures on seeking advice for particular products, but 0.3% inflation on housing is a fair old amount of money. If that is 100,000 transactions a year of around £750, that is the best part of £70 million-odd a year added to house prices by this policy alone. If we are to introduce policies that add to an already overheating sector, it is important that as a nation, a Government and a Parliament, we take into account their impact. That additional £750 for that person is £750 not going somewhere else in their budget. I only say that to try to get that issue into the smorgasbord of issues that we have to take into account. I will not be pursuing the matter.

Question put and agreed to.

Schedule 1 accordingly agreed to.

Clause 2

Government contributions to Help-to-Save accounts

Question proposed, That the clause stand part of the Bill.

[Jane Ellison]

The Prime Minister has set out the Government’s mission to build a country that truly works for everyone, not just the privileged few. Clause 2 introduces the Help to Save product, and we can be extremely encouraged that it speaks directly to that mission. Evidence from the Joseph Rowntree Foundation cited in the House of Commons Library briefing paper shows that between a quarter and a third of households have said that they are unable to make regular savings for rainy days. According to the family resources survey, a household with less than £25,000 in income is twice as likely to have no savings as a family with more than £50,000. We heard from the debt charity StepChange in its written submissions—this point was amplified in its contribution to the evidence session—that access to a £1,000 savings pot can reduce the likelihood of the average family falling into debt by almost half.

Faced with that evidence—and the evidence we all know from our constituency surgeries of people living fragile financial lives, where one thing going wrong can tip them into debt or other problems—it is only right that we provide a strong incentive and reward for working households on lower incomes to build a savings buffer.

Help to Save will support up to 3.5 million people on lower incomes who are just about managing but may be struggling to build up their savings. It will help them develop their financial resilience and ability to cope with unexpected financial pressures. Clause 2 sets out the main characteristic of Help to Save: the Government bonus or contribution, which will be paid by the paying authority. The bonus will be paid at 50% of the highest balance achieved in the account. Over the four-year maturity period of the account, an eligible individual can save up to £2,400 and earn a Government bonus of up to £1,200. We intend that HMRC will pay any bonus amounts due and that that will be passed to eligible individuals by the account provider. Schedule 2, which we will consider shortly, makes further provision in relation to Help to Save accounts and the Government bonus.

Help to Save will meet a real need and will support many of those who are just getting by, helping them to build their financial resilience and supporting their ability to cope with financial shocks.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Schedule 2

Help-to-Save accounts: further provision