Clause
3Eligible
persons Mr.
Browne: I beg to move amendment 4, in
clause 3, page 2, line 17, leave out
paragraph
(b). This
is a simple, clarifying amendment. Clause 3 (1)(b) says
that “the
person has a connection with the United Kingdom of a kind prescribed by
regulations.” Unless
I have not fully understood the nature of those regulations, I am
slightly uncomfortable with the vagueness of the phrase, “a
connection with the United Kingdom”. I have connection with all
kinds of countries without necessarily expecting to be eligible for
financial support from them. Subsection (2) lists as specific
criteria “income
support; employment and support allowance; jobseeker’s
allowance” and
so on. There are seven different criteria of eligibility. If one were
eligible under one or more of those seven criteria, one would imagine
that one also had a connection with the UK. After all, one does not
qualify for JSA in the UK if one has no connection with this country.
Otherwise, there would be billions of people getting UK JSA. The point
I seek to draw out in this amendment stems from the fact that I do not
understand the need to specify the connection with the UK when it is
implicit in the nature of the list of
entitlements.
Ian
Pearson: The amendment would remove the requirement that a
person must have that connection with the UK to be eligible for the
saving gateway account. As a result, any person entitled to a
qualifying benefit or tax credits would be eligible. A person may, in
certain circumstances, continue to be entitled to certain qualifying
benefits and tax credits, even though they no longer live in the UK,
provided they still satisfy all the other conditions for entitlement.
While there are good reasons for them to be able to continue to claim
their benefit or tax credit when they no longer live or work in the UK,
we do not believe that that is the case for the saving gateway account.
The connection with the UK that individuals need to be eligible for the
saving gateway account will be set out in regulations. The relevant
draft regulations have been published and I hope that they will be
available shortly, if that is not already the
case. Very
broadly, those who live or work in the UK, as well as being entitled to
a qualifying benefit or tax credit, will be able to open a saving
gateway account. That will also include Crown servants posted abroad
and their partners, and people who are ordinarily resident in the UK
but are temporarily absent. That is one reason why the legislation is
phrased in that way. It will exclude, however, people claiming
incapacity benefit, severe disablement allowance or contribution-based
employment and support allowance who move out of the UK permanently,
although they may still be able to claim the underlying benefit. It
will also exclude people who are not ordinarily resident in the UK but
who would otherwise be eligible for the saving gateway through a joint
claim to one of the qualifying benefits or tax credits such as child
tax credit.
I appreciate
that this might be slightly complicated, but the key point is that that
presents no problem for the vast majority of people who are ordinarily
resident in the United Kingdom. We are trying to introduce a system
that is as simple as possible. We think that Crown servants posted
abroad should be entitled if they qualify, as should people who are
ordinarily resident here but who are temporarily absent, perhaps
because they are working or have activities abroad that take them there
for a period of time. We do not think that people who are not
ordinarily resident in the United Kingdom should be able to open a
saving gateway account. That does not seem to us to be a very targeted
use of taxpayers’ money. I hope that that clarifies the points
that have emerged. The regulations, which I am sure we will consider in
due course, explain this in more detail, and no doubt we will return to
them later.
The
Chairman: Order. Just in case any Member is not aware and
in the light of the point of order raised by the hon. Member for
Fareham, copies of those draft regulations are now available in the
Room. Connection with the UK is addressed on page
5.
Mr.
Browne: I am grateful to be made aware of that,
Mr. Bercow. I do not doubt that it is possible to come up
with a whole list of criteria and regulations which satisfy the
drafters in the Minister’s Department. The concern often
expressed is that it is very difficult for members of the public to
understand who is, or is not, eligible for certain entitlements, and
why they are not eligible when someone they know who appears to be in
similar circumstance is eligible. This is typical work for
an MP, both in their surgeries and in correspondence. It is strange to
have a list of criteria, one or more item of which has to be satisfied,
then come up with a separate category which is defined in regulation by
another list of criteria.
This may be
for the DWP rather than the Treasury, but quite a few people would find
it strange that there are people claiming benefits who are essentially
receiving money directly from the UK Government despite having no
connection with the United Kingdom of a type laid out in the
regulations. I think that most people would feel that if someone had no
connection with the UK they should not be receiving the benefits listed
in subsection (2). There may be co-ordinating criteria
explaining why it is so much easier to get benefits than it is to open
one of the new saving gateway accounts and why our taxes are being
spent on people who have no connection whatsoever with the UK, but I
sense the Economic Secretary is not keen to add the type of clarity
that I would wish to see. On that basis, having made my point, I beg to
ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn.
Mr.
Hoban: I beg to move amendment 26, in clause 3,
page 2, line 21, at beginning insert
‘income-based’.
The
Chairman: With this it will be convenient to discuss
amendment 27, in
clause 3, page 2, line 22, at
beginning insert
‘income-based’.
Mr.
Hoban: These amendments relate to entitlement, which was
alluded to in an earlier debate. They would insert the phrase
“income-based” in subsection (2)(b) and (c). At the
moment, employment and support allowance and jobseeker’s
allowance can be claimed on either an income or on a contributions
basis. We want to make sure—and the Economic Secretary made this
point in his response to the amendment tabled by the hon. Member for
Taunton—that the resources are targeted well and carefully on
the demographic that we want to develop a saving habit. The hon. Member
for South Thanet talked about MPs losing their seats in the next
election and being able to claim contributions-based JSA, open a saving
gateway account, then moving out. Perhaps the House authorities might
take that into account and put it in a leaver’s pack for MPs at
the next election. It is an example of people who could claim the
contributions-based JSA, see the opportunity to put £600 into an
account, and get £300 back from the Government. That is a good
rate of return, and probably reflects a dead-weight cost. I think the
second pilot was meant to reduce the income threshold so that people
who were already saving or were in a position to save were not
diverting savings from a different account to benefit from the 50 p in
the pound match. The amendment seeks to narrow down eligibility to
those who are claiming income-based JSA or employment and support
allowance.
Mr.
Hoban: I can sense that both hon. Members are desperate to
intervene. I will give way to the hon. Member for Taunton first and
then to the hon. Member for South Thanet.
Mr.
Browne: I am grateful to the hon. Gentleman for giving way
to me first. I understand his desire to try to reduce dead-weight
costs, and I share that instinct. However, I am always concerned when
the complication of any scheme acts as a disincentive preventing people
from participating in it. In particular—obviously, I am making a
generalisation—I am talking about people who are on low incomes
and may not necessarily have saved in the past or be familiar with the
mechanisms for saving. Is it not a worthwhile consideration, even it
may slightly increase dead-weight costs, to make sure that people are
not disincentivised to save because they find the systems
intimidatingly complicated?
Mr.
Hoban: I am not sure that I agree that that point applies
to the design of the system, because we have already introduced some
complexity, through the reference to whether someone is ordinarily
resident in the UK. I do not think that is a huge increase in
complexity, but I do think there is a need—and I would be
grateful for the Minister’s comments on this, and it is partly
why I tabled this amendment—to understand the demographics of
the group claiming JSA on the basis of national insurance
contributions. One of the points made in the evidence session last week
by Teresa Perchard of the CAB, and by Brian Pomeroy as well, was that a
high proportion of people who claim contributions-based JSA are on low
incomes. They could, by virtue of the eligibility criteria, help to
develop a savings culture through their entitlement to open a saving
gateway account.
If the
Minister says, “Yes, there is a high proportion of people in
that demographic group claiming contributions-based JSA who are on low
incomes, and it is right to enable them to acquire a savings gateway
account”, I am quite content with that explanation. I am just
probing the rationale for including contributions-based JSA, which
would potentially allow quite a large number of people to open a saving
gateway account even though they are outside the target demographic for
this initiative.
Dr.
Ladyman: I cannot recollect whether the hon. Gentleman was
in the Chamber yesterday for DWP questions, but it was a recurrent
theme among Conservative Members that there is insufficient difference
between the benefits people get, having paid contributions all their
lives, and the benefits they get if they had not paid any contributions
when they became unemployed. It seems ironic that, if that is the view
of the Conservative party, he should suggest that we should narrow
again the difference between the benefits that people receive, whether
they are claiming income-based JSA or contribution-based JSA. Not to
make this benefit available to those who have made contributions would
be very unpopular among Conservative
Members.
Mr.
Hoban: The hon. Gentleman makes an interesting point. It
is certainly a point that has been raised with me by my constituents. I
received a letter last week from someone who had paid national
insurance contributions all their life. When they claimed JSA at
£60 a week, because they were single, they wondered why they had
bothered to pay for that benefit, and wondered what they got in return
for their contributions. The hon. Gentleman makes a very important
point, but we are
trying to ensure that this initiative is well targeted. We should think
about the potential leakage to people who are already saving, and we
should ensure that our approach provides value for money. I tabled
amendments 26 and 27, not simply to press them to a vote, but to obtain
clarification from the Government about the impact of extending the
measure to people who claim JSA on the basis of their contributions. It
is a big part of the teasing-out process, which is important for
scrutiny in the
House. 11.45
am One
may argue that capping the contribution at £25 a month might
reduce the extent to which the measure could be taken advantage of by
people who have savings in other sources and who want to switch from an
ISA or an instant-access savings account to a saving gateway account.
Perhaps the Government’s objective is to try and broaden the
eligibility criteria as far as possible, within reasonable boundaries,
while preventing—I do not like the word
“abuse”—people from taking advantage of it, by
limiting the amount of money that they can pay into the account. That
would be
reasonable. These
are probing amendments. What will the impact be of enabling people who
qualify for JSA based on their national insurance contributions to take
up the saving gateway account? Are people who claim contributions-based
JSA in the target demographic for the saving gateway account, as
suggested in the evidence session last Tuesday? Those people do not
have a history of saving and this would be a good way for them to
acquire that savings
culture.
Ian
Pearson: I accept the probing nature of
amendments 26 and 27, and I am happy to put the
Government’s thinking on record. To summarise, we think that
most people on contributory JSA would be moving from one low-income job
to another. We do not have incredibly good data on that, but it is our
strong view that that is the case. Given the advantages of passporting
from qualifying benefits and tax credits in the Bill, it is the
appropriate way to go. I shall provide the hon. Gentleman with a little
more detail because, as he is aware, the amendments would restrict
entitlement to individuals who are on the income-based forms of JSA and
ESA.
I understand
the points that the hon. Member for Fareham has made. Some
contribution-based JSA and ESA claimants might have relatively high
levels of savings, but we do not believe that it is the case. In any
system of passporting, there are some rough edges. However, the
advantages of passporting outweigh the disadvantages, particularly the
fact that some people with relatively high savings might qualify. The
fact that people will not be required to fill out a form or complete a
means test to prove that they are eligible for a saving gateway account
is an important part of the programme. As the hon. Gentleman rightly
says, if we are talking about a small number of people who have
relatively high levels of savings, the sort of incentives that the
saving gateway will provide would not have a great attraction to
them.
I would like
to give a little more detail, starting with contribution-based JSA.
Sharon Collard, of the personal finance research centre at the
university of Bristol, told the Committee at last week’s
evidence session that
“people moving
off...JSA are unlikely to be moving into highly paid employment. We
know that that is the case.”——[Official
Report, Saving Gateway Accounts Public Bill Committee, 27 January
2009; c. 24,
Q48.] I would
like to have better information on the numbers involved, but it does
not seem to be available. We would be concerned that if
contribution-based JSA were not a qualifying benefit, people who move
in and out of work frequently and do not therefore move on to
income-based JSA—we have good evidence about such
people—would not be eligible for the saving gateway account. In
October last year, the average time spent on JSA was 3.7 months, but
most people will not move from contribution-based JSA to income-based
JSA until they have been on JSA for about six
months. Inclusion
of contribution-based JSA was supported by Teresa Perchard of Citizens
Advice in last week’s evidence session. On the question of
whether both income-based and contribution-based JSA should be
qualifying benefits, she
said: “Sticking
with broad availability for both groups is
appropriate”.——[Official Report, Saving
Gateway Accounts Public Bill Committee, 27 January 2009; c. 7,
Q16.] All the
research and evidence points to that being the appropriate thing to do.
Similar arguments apply to contribution-based ESA, so I do not need to
rehearse
them. Finally,
it is important to remember that many people who are entitled to both
JSA and ESA on the basis of their national insurance contributions will
meet the income and capital requirements for the income-based benefits.
The amendment would penalise those people on the basis of the national
insurance contributions that they had paid. That is another reason why
the hon. Gentleman will want to withdraw the amendment, although he is
right to raise the problem of potential dead-weight costs. I hope that
my explanations have reassured him that while the policy has some rough
edges it is a sensible way to proceed, compared with significant
means-testing for all
applicants.
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