Saving Gateway Accounts Bill

I should always expect a Liberal Democrat MP to make a reference, wherever possible, in any debate, to proportional representation, but that may take longer to introduce. I suspect that, from the outset, the Bill was far more likely to come into force than his demand for a referendum. Some might argue that the Bill is a distraction from the economic and financial crisis that the country is facing, but we also need to bear in mind that one in three households in this country have no savings and no cushion against being laid off, or are facing wage cuts or an end to overtime. This Bill serves a valuable purpose in encouraging people, particularly those on low incomes, to save. People on higher incomes have an opportunity to smooth out fluctuations in income and expenses to which those on low incomes do not have access. If the Bill is successful in encouraging people to save, it will enable them to create a modest buffer against variations in income, such as the unexpected expense of being laid-off for a short period. It will give people a degree of financial security that they have not had hitherto. The Bill is a means to an end. It is designed to develop a savings culture in this country and there is a relatively generous match of 50p in the pound to encourage that culture to develop. A clear belief was expressed in the evidence that we heard that the two-year duration and the match level would be sufficient to start to encourage the development of that savings culture. I do not believe that the account in itself is enough. Alongside it, we need an emphasis on financial education and other ways of tackling financial exclusion. We need to help people to understand why it is important to save, and although the lessons people learn from the financial crisis will act as a spur to save at the moment, a longer-term change in culture is needed. We need to ensure that there is an evaluation of the effectiveness of the scheme. We need to demonstrate that it works. There is a significant cost to the taxpayer—it will cost the £340 million in the first three years of its operation, falling to £60 million thereafter—so we need to demonstrate that taxpayers’ money is being spent well and wisely, that the Bill has led to people saving money and to an increase in net wealth. There are some rough edges to the Bill. We talked on Report about the mismatch between the groups of people we want to help and the way in which the Government will deliver the Bill by tackling the issue of benefit entitlement. We understand the practical and pragmatic approach that the Government have adopted in trying to achieve the Bill’s goals, but we should not forget that there will be people on low income who are not eligible to the account, and we need to find ways of encouraging them to save. More work needs to be done on that. The Bill is a welcome measure that will help to tackle the lack of savings among a small group of people—although it must be said that 8 million people are eligible. The problems families are facing today give a clear sign that we need to do far more work to encourage people to save to provide a cushion for short-term fluctuations to their income, and to enable them to take responsibilities for their families’ futures in the long term. The Bill is a start, but far more work needs to be done to achieve the goal of increasing savings in this country.