Saving Gateway Accounts Bill

Let me begin by adding my condolences to those expressed by other right hon. and hon. Members to David Cameron and his wife on their tragic loss. The amendments in this group cover three areas, relating to eligibility and the notices of eligibility. Amendments 11 and 12, which the hon. Member for Fareham (Mr. Hoban) covered, deal with the circumstances in which a person has ceased to be an eligible person but has not been issued with a notice of eligibility, and they seek to ensure that such a person will be sent a notice. We discussed that matter in Committee, as the hon. Gentleman mentioned, and I have since written to explain and clarify the position. The purpose of clause 1(3)(b) is to allow the commissioners for Her Majesty’s Revenue and Customs to issue a notice of eligibility to a person who is not an eligible person on that date, but who was eligible for the scheme at an earlier date as determined by them. We have now got to the bottom of the matter. People will be sent a notice of eligibility automatically. Therefore, amendments 11 and 12 are not needed, because the issue is already covered in the Bill. Amendments 3 and 4 relate to eligibility for the scheme. As hon. Members will know, the saving gateway is targeted at people of working age on lower incomes. The hon. Gentleman’s amendments seek to ensure that people in that group who are not entitled to one of the qualifying benefits and tax credits listed in the Bill would still be eligible for a saving gateway account. We have carefully considered the best way of determining eligibility for the saving gateway, including whether it should be based on a means test or on passporting from benefits and tax credits. Again, we rehearsed some of those arguments in Committee. We believe that passporting is the most simple and effective method available for determining saving gateway eligibility. In particular, passporting will mean that people will not be required to fill out a form or complete a means test to prove that they are eligible for the saving gateway. Instead, they can automatically be sent a notice of eligibility. We also believe that the majority of our target group—working-age people on lower incomes—will be eligible for the saving gateway through the system of passporting set out in the Bill. We expect about 8 million people to be eligible. A number of hon. Members asked about the specific numbers who might be included if amendments 3 and 4 were accepted. The best figures that we have available are based on taking those on low income to be individuals with incomes of up to £11,000 and couples with incomes of up to £16,000, which is approximately in line with the highest incomes of those claiming one of the qualifying benefits and tax credits. Using that as our yardstick, we estimate that around 4.5 million people of working age on lower incomes will currently not be eligible for the saving gateway through passporting. However, more than half that number—2.7 million—are eligible for one of the qualifying benefits and tax credits; they just have not claimed them. An important issue of take-up is involved. We are actually talking about 1.8 million people who would not be eligible for those credits who, if they could claim them, could open a saving gateway account. However, this is of course a particular point in time. Many of those of working age who are on a lower income but are not eligible for one of the qualifying benefits and tax credits are likely to become eligible for a saving gateway at some point in their lives. That is an important point. The amendments would introduce a means test alongside passporting. We have carefully considered that option, too. I accept that it would give some additional people a way of accessing the saving gateway, but it would also introduce extra complexity and costs, and we do not believe that they would be proportionate. First, there would be extra costs for HMRC, estimated at about £2.5 million a year and reducing to about £1 million a year in a steady state. Secondly, there would also be an increased compliance risk in operating a means test, as individuals would be allowed to open a saving gateway account without having previously been through Department for Work and Pensions and HMRC checks to establish their eligibility for other benefits or tax credits. Inevitably, some accounts would be opened but would subsequently have to be closed, in cases where people who would not otherwise have been eligible had mis-stated their income. That would be burdensome for providers of saving gateway accounts. Thirdly, having two methods of determining eligibility for the saving gateway could be confusing and would certainly add complexity to the system. Some people who are eligible through passporting may think that a means test was required and be put off applying, for example. There are therefore several downsides to introducing a means test alongside passporting. It is also important to remember that although some working-age people on lower incomes may not be eligible for those qualifying benefits or tax credits at a particular point in time, people’s circumstances change. For many people, therefore, it will not be a case of missing out on eligibility; rather, it might be one of having to wait until they qualify. Also, people will be able to have only one saving gateway account in their lifetimes in any case. Members of the Public Bill Committee will remember that the experts who gave evidence were positive about the eligibility criteria and the approach that the Government have adopted. Citizens Advice, for example, compared the system of passporting with the alternative, which Teresa Perchard said was"““an expensive system of targeting, recruitment and application,””" which would"““load costs on to the accounts and will also be a barrier to take-up.””" She also said:"““If the intention is to attract people to save for the first time in their lives, or in their family’s history, the Government have come up with an approach that gets the balance right.””––[Official Report, Saving Gateway Accounts Public Bill Committee, 27 January 2009; c. 7, Q15.]" I appreciate the point that the hon. Member for Fareham has made. Indeed, I have a lot of sympathy with what he has said, because we want people on low incomes to get the savings habit. However, there are a number of practical downsides to introducing a means test alongside the approach of simple passporting, which is why we have taken the decisions that we have. The last point that was raised on eligibility related to whether people would be eligible at the age of 16 or even earlier. I want to make it clear that, in using a passporting system, we will be depending on the eligibility criteria for the underlying benefits. Some of those will have an age limit of 16; others might have other age limits. However, we are not doing anything in this legislation to change the age limits. Finally, I will deal with amendment 13. I agree with the hon. Member for Fareham that the saving gateway should be carefully evaluated and monitored. However, I do not agree that it would be appropriate to set out in the Bill an information requirement of the type that he suggests. Similar legislation, such as that relating to individual savings accounts, contains no such reporting requirement. However, as hon. Members may be aware, HMRC publishes details annually on individual savings accounts subscriptions and valuations, as well as a more detailed distributional analysis of the scheme. A similar approach might well be appropriate for the saving gateway; that will need to be considered in due course. However, we do not believe that it is appropriate to set down in the Bill an inflexible commitment to publish certain data. As for the data that the amendment would require, I recognise that they might allow some basic calculations to be made about the take-up of the accounts or the coverage of the scheme. At best, however, they could give only a partial evaluation of the scheme’s success, against measures such as the take-up of accounts. As hon. Members will appreciate, our objectives for the scheme are far broader than could be encompassed by the metrics that the hon. Gentleman proposes. We could not assess the success of the scheme purely against those factors, because a broader range of factors than those detailed in his amendment will need to be considered. I therefore hope that he will not press it to a vote. I assure him and the House that we want to ensure that information will be made available and that the saving gateway scheme will be properly monitored and evaluated. My hon. Friend the Member for South Thanet (Dr. Ladyman) asked about the carer’s allowance. I was going to address that matter on Third Reading, but I am happy to confirm that I am certainly minded to table an amendment for consideration in the other place that would ensure that people of working age in receipt of carer’s allowance should be able to qualify for opening a saving gateway account. It is my understanding that the cost involved would be about £5 million in 2012-13, and a few million in subsequent years, but based on our discussions in Committee and on further reflections and discussions with other groups, I believe that extending the qualifying benefit in that way would be a good thing to do. I hope to be able to table that amendment at a subsequent stage.