Saving Gateway Accounts Bill

My Lords, on reflection, I think that it applied for about as long as the credibility of the economic policy then being pursued by the noble Lord, Lord Lamont of Lerwick—in other words, not very long at all. However, the very fact that interest rates had to be moved from, I believe, 15 to 17 per cent in one day, having gone to 15 per cent only that morning, will remind the House of the chaotic conditions of economic management that prevailed at that time. Perhaps I may get back to the point that I was making. The fact is that, if we had been contemplating this legislation at that time and had decided that we wanted to specify a very low rate of interest, we might well have concluded that that rate of interest should be 3 or 4 per cent—an unbelievably low rate compared with the 15 or 17 per cent then prevailing. Of course, that would have proven to be a very foolish decision in the light of the fact that interest rates are now at their lowest level for 350 years. Therefore, there is a very real danger in seeking to specify what that rate of interest should be. That leads me to the conclusion that we could not simply specify a rate of interest because, if the noble Baroness is correct in her warnings to the House that we should be cautious in our dealings with banks because of their mendacity and their capacity to pull the wool over the eyes of their customers, we would have to find something that avoided this being satisfied by complying with a requirement to pay a rate of interest of 0.0001 per cent per annum. I think that that exposes the very practical problem that would arise in specifying a rate of interest. The point is compounded by the third reason that I want to put forward. There are, in any case, constraints on the Government’s ability to regulate in this area. In particular, once a saving gateway account has matured, any new account that the account holder has with his provider will be a normal commercial arrangement. Using regulations to set certain boundaries for it would amount to a significant interference with the right of both the account provider and the account holder to enter into the sort of contractual relationship that exists between any provider of a savings account and their customers in the formal banking sector. For this reason, we believe that it will be possible to regulate the default rollover account only at the point of transfer, when the saving gateway account rolls over into it, and not beyond that. In theory, therefore, the characteristics of the default rollover account could change completely the following day. My main argument therefore is that, even if we were to regulate for default rollover accounts, we would still be forced to rely on providers to put in place appropriate options. Even if we required them to pay interest, they could choose what rate to pay, and even if we required certain characteristics to be in place at the point of transfer, they could choose to change them after that point. As I said, therefore, I do not believe that regulation could achieve a great deal, and I think it is better to put our trust in providers and to use our more informal influence to suggest, perhaps through guidelines, the sorts of default rollover accounts that we would like to see put in place. My fourth and final point is that, even if this were not the case and we felt that we could regulate these accounts effectively, there is an argument that we should not do so. One thing that we hope the saving gateway will achieve is a greater level of financial capability among account holders, as my noble friend Lord Morgan observed earlier, and an increased ability to manage their finances and make financial decisions. Regulating for what should happen at the end of their accounts could be at odds with that, although of course we will want to ensure that account holders are able to get any support and guidance that they need. In conclusion, therefore, I am not convinced that regulation of default rollover accounts is necessary because I believe that account providers will put appropriate options in place. If we are to support people in making their own financial decisions, I am not convinced that it is desirable to insert regulation at this point. I am not convinced that it would achieve a great deal in any case because of the limited conditions that we could impose. For those reasons, I am not convinced that we should take this reserve power, and I hope that the noble Baroness will seek leave to withdraw her amendment and will forgive me for my jousting about high interest rates.