Amendment of the Law

Yvonne Fovargue Excerpts

Thursday 20th March 2014 Commons Chamber

[Yvonne Fovargue (Makerfield) (Lab)]

I welcome one measure in the Budget that has had relatively little publicity: start-up support for regional airports to link up with future markets by supplying new routes. Manchester airport and other regional airports are key drivers of local economies. Encouraging new routes and businesses into the regions is vital, and I look forward to seeing more details on that.

I want to move on to one of the central planks of the Budget: the measures for savers. Help for savers is welcome, but this help does not target those with little or no savings. A report produced by HSBC last year showed that 25% of people across all age ranges have little or no savings. Indeed, 33%—a third—of people in the 18 to 44 age range have no savings at all. On the basis of that evidence, HSBC estimates that 8 million people in the United Kingdom have no savings.

Many of my constituents can relate to that. They are indeed the “makers and doers” referred to by the Chancellor, but they are not making do. They are juggling their finances, with no spare money to save for a rainy day because there has never been enough sunshine. These are the people who turn to payday lenders when there is a broken washing machine, or when the children need new shoes and school clothes. If the Chancellor is serious about keeping people out of the hands of the payday lenders or “pay weekly” stores such as BrightHouse, they should be helped through savings measures. They are the people most at risk of descending into a spiral of debt and who end up seeking help from citizens advice bureaux or StepChange. In fact, figures from StepChange show that only 5% of people who have sought its help have any savings.

Simplifying and raising the limits for individual savings accounts are likely to make little difference to those in middle and low-income households who have few if any savings. Just one in four households with incomes of less than £400 per week has an ISA, compared with half those with incomes between £700 and £1,000 a week. Research shows that matched savings and savings account bonuses give lower-income households a much stronger incentive to save than interest rates or tax reliefs.

The additional ISA changes will have cost the Exchequer £565 million a year in lost tax on savings by 2018-19. Surely that money could be better spent on providing savings account bonuses or matched savings targeted at those in lower-income households, who have the least resilience to financial shocks. In fact, the matched savings schemes introduced by Labour were one of the first things to be abolished by the coalition Government in 2010, on the grounds that “the country could not afford them”. As the money and the will to encourage savings clearly now exist, why do the Government not consider reintroducing, and even expanding, such schemes? A savings target of just £500 for low-income households, which represents just below the average payday loan debt owed by StepChange clients, could be just that “rainy day” buffer that people need to keep the wolf—or perhaps I should say the shark—from the door.

Yet again, we have a Budget that does little for those on the very lowest incomes. Raising the income tax threshold to £10,500 will do significantly more for those who are paying the higher rate of tax and earning up to £100,000 a year. They will gain £1.92 per week, whereas those who are working full time on the minimum wage are highly likely to be receiving housing and council tax benefits, and will therefore gain just 29p per week. At this rate, even if they saved every penny of the increase, it would take more than 100 years for them to be able to take advantage of the new ISA limit, and 33 years for them to have the buffer of £500. No wonder unexpected expenditure falls hardest on those households, making the need for incentives to help them to save more urgent than ever. No wonder a payday loan is taken out every four seconds in this country.

This is not a Budget that helps the hard-working families in my constituency who face a cost of living crisis. It is not a Budget for those who are struggling to get by, and to whom saving even £500 seems an impossible dream. The Chancellor could have helped those people, but he chose not to. He could have taken on the payday lenders by helping to eliminate the need for them, but he chose not to. This is not a Budget for the many in my constituency; it is a Budget for the few.