COMMITTEE FOR SOCIAL DEVELOPMENT
OFFICIAL REPORT
(Hansard)
Saving Gateway Accounts Bill
26 February 2009
Members present for all or part of the proceedings:
Mr David Simpson (Chairperson)
Mr David Hilditch (Deputy Chairperson)
Mr Billy Armstrong
Mr Mickey Brady
Mr Thomas Burns
Mr Jonathan Craig
Ms Anna Lo
Miss Michelle McIlveen
Ms Caral Ní Chuilín
Witnesses:
Mr John O’Neill Department for Social Development
The Chairperson (Mr Simpson):
I invite the Committee Clerk to speak first, and then we will bring the brains in if there is an issue that members want clarified.
The Committee Clerk:
Thank you very much, Mr Chairman. [Laughter.]
Ms Ní Chuilín:
Who has the brains?
The Chairperson:
I will leave that to your discretion. [Laughter.]
The Committee Clerk:
A legislative consent motion is to be put to the Assembly to allow the provisions for the Saving Gateway Accounts Bill to be extended to Northern Ireland. The Bill — which is included in members’ packs — is designed to encourage people on low incomes to start saving under a scheme in which the Government will contribute 50p for every pound saved over a two-year period.
The Bill will allow the Department for Social Development to share benefits information with HM Revenue and Customs. The information will be used to establish eligibility for the scheme — for example, whether the potential saver is in receipt of income support, jobseeker’s allowance, severe disablement allowance, incapacity benefit, and so on.
Social security is a devolved matter, and Westminster cannot legislate without the Assembly’s approval. That approval is required before 5 March 2009, which is the date on which the Bill will receive its Third Reading. As this matter has already being cleared by the Executive, it is requested that the Committee agrees to support the legislative consent motion.
Miss McIlveen:
Where were the pilots carried out? What was the percentage uptake of the scheme? How much did it cost?
Mr John O’Neill (Department for Social Development):
The pilots were carried out in Great Britain; we did not have any role in them. They were designed to find out whether people would use the scheme. Strictly speaking, this matter should be covered in Northern Ireland. However, due to low uptake and the costs of running the scheme, we feel that it would be much more beneficial for HM Revenue and Customs to run the scheme for the whole of the UK and bear all the administration costs. HM Revenue and Customs will decide which financial providers will offer these services, and it will bear all the administration costs. Financial providers in Northern Ireland who take up the scheme will not bear any of the running costs.
Miss McIlveen:
How many people are entitled to access the scheme?
Mr J O’Neill:
Anyone who succeeds under the qualifying benefits will be able to apply for an account, into which they can make payments according to certain regulations. At the end of the two-year period, that person will get 50p for every pound that he or she has saved during that time. The draft regulations have already been published for the benefit of the Westminster Committee. I do not have a copy of the regulations with me today, but they set out the operation of the scheme in more detail.
The scheme is similar to the child trust fund scheme, in which parents of newborn children are given £200 to be invested over a period of time. HM Revenue and Customs have experience of running that scheme, which is why we are not getting involved in the administration of this one at the moment.
Miss McIlveen:
I appreciate that you may only be able to make a guesstimate, but, based on the pilot system, do you have an idea of how many people are likely to take up the offer?
Mr J O’Neill:
The pilot scheme was received with enthusiasm by those involved. The opportunities for people who have suffered social exclusion to be involved with some of the major financial institutions are limited. The institutions are not really interested in people who save £2 a week for two years.
However, this savings scheme will allow people to save small amounts of money and begin to interact with financial providers. Many people who are in receipt of benefits have no connection with institutions such as banks and credit unions, and this scheme will be a start for them in accumulating some money. I suspect that the 50-pence-per-pound rate of interest is better than one could presently achieve in other financial institutions, and evidence from the pilot scheme indicates that people who begin saving in this type of account go on to open others. The scheme will act as an introduction to the financial market.
Miss McIlveen:
I see the merits of the scheme. I am just attempting to discover whether there are any figures to support the assumption.
Mr J O’Neill:
We can certainly get some information on the results of the pilot schemes in GB.
Ms Ní Chuilín:
I was going to make the same request, because it would helpful if we could have that information.
Furthermore, last week in the Assembly, there was a debate about credit unions, and questions were asked about whether the Financial Services Authority should regulate them. Child trust funds were mentioned also, and, given that many people here cannot access those, some clarity is required. You will appreciate local people’s nervousness about banks at the minute, so will they be able to access Saving Gateway accounts through credit unions?
Mr J O’Neill:
Credit union regulation here is a matter for DETI.
Ms Ní Chuilín:
It is. There was a debate about that last week; however, there will be an overlap in that there are six qualifying benefits, which means that quite a number of people could be involved.
Mr J O’Neill:
We have been talking to credit unions here about that matter, and about their possible involvement with the social fund, so we have a relationship with the credit union movement.
The Chairperson:
Ms Ní Chuilín, are you requesting more information about that matter?
Ms Ní Chuilín:
Like Michelle, I think that it would be interesting to see the figures.
Mr Armstrong:
There is a concern about fraud. What is the ceiling for the amount of money that people will be allowed to save?
Mr J O’Neill:
The ceiling will be set by HM Revenue and Customs in the scheme’s regulations. However, there are some provisions in the Bill to deal with fraud. People will be saving relatively small amounts of money, and interest will be paid at the end of the two-year period.
The Chairperson:
Are you saying that HM Revenue and Customs has yet to indicate a figure?
Mr J O’Neill:
The draft regulations have been published, but I have not had a chance to look at them yet before I came to the Committee. They will have to be studied by the Committee at Westminster during the Committee Stage.
Fraud — giving incorrect information, etc — is covered in clauses 19 and 20 of the Bill.
The Chairperson:
Did you say that the Bill will progress on 5 March 2009?
Mr J O’Neill:
It has passed the Committee Stage and is at Report Stage. The Westminster Committee will report back to the House in March. The Assembly does not have to pass the legislative consent motion until the Bill has had its Third Reading in Westminster, which will happen after 5 March 2009.
Subject to what the Committee says today, the Minister for Social Development will table a motion in the Assembly for a substantive debate on the legislative consent motion.
The Chairperson:
I appreciate that. At this stage, we require the information that members have requested.
Mr Armstrong:
It all depends on where people get their first pound, or £50, from.
The Chairperson:
They could ask the farmers for it. [Laughter.]
Mr Armstrong:
They could, and they could stand outside DARD offices in Dromore. [Laughter.]
I am concerned that the scheme might be used fraudulently for money laundering.
Mr J O’Neill:
I assume that you are concerned about where the money might be coming from if someone who is supposed to be on income support were to be saving £300 a month in a Saving Gateway account?
Mr Armstrong:
Yes.
Mr Brady:
Is it safe to assume that there would not be enough money to bail out the Royal Bank of Scotland?
Mr J O’Neill:
As a mortgage holder with the Royal Bank of Scotland, I am very interested in its figures.
The Committee Clerk:
The Minister has written to ask the Committee to let her know as soon as possible whether it is content with the legislative consent motion.
The Chairperson:
Are we content, subject to receiving the information requested, and on a without-prejudice basis?
Members indicated assent.