Consideration of Bill, not amended in the Public Bill Committee
Removal of eligibility for child trust fund
With this it will be convenient to discuss the following:
Amendment 17, page 1, line 6 , leave out ‘3rd January 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 4, page 1, line 6, leave out ‘2011’ and insert ‘2016’.
Amendment 18, page 1, line 8, leave out ‘3rd January 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 5, page 1, line 8, leave out ‘2011’ and insert ‘2016’.
Amendment 19, page 1, line 14, leave out ‘3rd January 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 6, page 1, line 15, leave out ‘2011’ and insert ‘2016’.
Amendment 20, page 1, line 17, leave out ‘3rd January 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 7, page 1, line 17, leave out ‘2011’ and insert ‘2016’.
Amendment 21, page 1, line 18, leave out ‘3rd April 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 8, page 1, line 18, leave out ‘2011’ and insert ‘2016’.
Amendment 22, page 1, line 21, leave out ‘3rd January 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 9, page 1, line 22, leave out ‘2011’ and insert ‘2016’.
Amendment 23, page 2, line 2, leave out ‘3rd April 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 10, page 2, line 2, leave out ‘2011’ and insert ‘2016’.
Amendment 24, page 2, line 4, leave out ‘3rd January 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 11, page 2, line 4, leave out ‘2011’ and insert ‘2016’.
Amendment 25, page 2, line 5, leave out ‘3rd April 2011’ and insert
‘a date to be set by regulations made by the Secretary of State by statutory instrument’.
Amendment 12, page 2, line 5, leave out ‘2011’ and insert ‘2016’.
Amendment 26, page 2, line 8, at end insert—
‘(5) Regulations made under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.’.
Amendment 51, page 2, line 8, at end insert—
‘( ) The Chancellor of the Exchequer must lay a report before Parliament no later than 31 December 2011 on the impact of section 1 on looked-after children in England, Wales, Scotland and Northern Ireland.’.
Amendment 52, page 2, line 8, at end insert—
‘( ) The Chancellor of the Exchequer must lay a report before Parliament no later than 31 December 2011 on the uptake of tax free savings accounts by looked-after children in England, Wales, Scotland and Northern Ireland following the implementation of section 1.’.
Amendment 36, in title, line 1, leave out
‘To make provision about eligibility for a child trust fund;’.
The Bill was considered in Committee but it was not amended, despite the fact that we had some 19 Divisions, which showed the strength of feeling among Labour Members. I am pleased to see so many of my hon. Friends who served in Committee in their places today.
The Labour Opposition’s objection to clause 1 was well rehearsed on Second Reading and in Committee, but I regret to tell the House that it will be rehearsed again as we continue to explain our objection to the clause. As ever, I wish to help the Minister and be pragmatic by giving him the opportunity to reflect on the mistake he is making in proposing clause 1 and on the issues we raised in Committee, which my right hon. and hon. Friends want to debate again.
My main concern is to delete clause 1, which amendment 1 is designed to achieve, unless we can get the Minister to reconsider some of the amendments we tabled in Committee, which are before us today. I refer particularly to amendment 17, which would delay the abolition of the child trust fund until such time as the proposed child ISA—individual savings account—came into play. We had that debate in Committee and I will refer to it again later.
Amendment 4 would allow the abolition of the child trust fund to be delayed until 2016. Again, I want to help the Minister and give him an opportunity to fulfil his manifesto commitment to help the poorest third of children in society. At the general election in May, he said that he would not wish to see them disadvantaged by the abolition of the child trust fund.
I also support amendments 51 and 52, tabled by my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins), which raise issues that my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) aired in Westminster Hall relating to looked-after children. It is important to return to those issues again today.
Amendment 1 would delete clause 1. I want the Minister and the House to know that, however pragmatic our approach to the abolition of the child trust fund, our fundamental objective is to ensure that the fund remains for all children, as proposed by the previous Labour Government.
I say that for three reasons. First, we believe that the child trust fund promotes saving, encourages financial education and ensures that all young people have a financial asset at the age of 18, which is particularly important for those who come from poorer families. The child trust fund scheme, introduced by the Labour Government, was having a positive effect between April 2008 and April 2009: a massive 823,504 vouchers were issued—about 70,000 a month; more than 74% of the accounts were opened by parents; and about £2 billion is held in funds. By the end of this year, it is likely that more than 6 million child trust funds would have been opened. That is a success by any stretch of the imagination—a success now being torn up by the coalition Government. Those child trust funds would have helped to support our children when they reached the age of 18. That would have been a progressive measure, which is why Labour Members oppose clause 1.
The principal aim of child trust funds was to ensure that families who had never saved for their children undertook such saving as a matter of course. Previously, regular long-term savings had been made for only 18% of children. The child trust fund industry average is now 31%. Money is being saved every month in 30% of the child trust funds of families whose incomes are just above welfare dependency level. Families in the lowest income bracket are saving a higher proportion of their household incomes than those in more affluent groups.
In Committee, we heard evidence from Katherine Rake of the Family and Parenting Institution, and from the Children’s Mutual. They recognised—I quote from a letter written to The Sunday Times in July—that
“the decision to abolish the Child Trust Fund along with the Savings Gateway”
—to which we shall return later—
“ is short-term and misguided.”
According to the figures we have, there have been regular contributions to child trust funds, made in a highly tax-efficient way, of more than £22 million a month up to July this year. The Government are abolishing a successful scheme, which is why we will oppose clause 1 unless it is amended.
Let me again help the Minister. As he can see, amendment 4 alters the date of 3 January 2011 to 3 January 2016, which is later than the date of the next general election. That date was chosen so that the Minister could secure a proper mandate for the abolition of child trust funds. I accept that in Committee the amendment was rejected by 10 votes to seven, but it has been tabled again so that Conservative Members can stick to their manifesto commitment to the electorate. The Minister will know—but it is worth reminding the House—that this was in the manifesto on which he, indeed, all 306 Conservative Members—stood:
“We will… cut government contributions to Child Trust Funds for all but the poorest third of families and families with disabled children”.
I am being pragmatic about amendment 4, which is not perfect, but, if the Minister accepts it, I will ask my hon. Friends to support clause 1. The amendment gives the Minister an opportunity to fulfil his manifesto commitments to help the poorest third of families, to help children who are disabled, and to help children who are looked after and in care, who, indeed, form most of the poorest third of children. In February this year, the Government supported an increase in the amount payable to disabled and severely disabled children. Given that, and their commitment to retain child trust funds for the poorest children, I hope that the Minister will support our amendment, but I ask him to defend his decision to renege on that commitment.
As ever. I exempt the Liberal Democrat hon. Member for Birmingham, Yardley (John Hemming) from the charge, for he and his party stood on a proposal to abolish child trust funds across the board. As I recall, 57 Liberal Democrats and 307 Conservatives were elected in the general election, as well as a substantial number of Labour Members, Scottish National party Members, Plaid Cymru Members, Ulster Unionists, Independents, Democratic Unionists and Sinn Féin Members, none of whom supported the abolition of child trust funds. The policy of abolishing them across the board was officially supported at the general election by only 57 Members of the House of Commons, yet the Minister has come here today prepared—as part of a wider coalition agreement—to give up his principle of supporting the poorest third of families in the community so that the Liberal Democrats can put their seats on the line and their backsides in ministerial cars.
Clause 1 will hit the poorest children in our society, and it should be resisted. We should do what the Conservatives felt they should do in May this year, and support poorer families as a whole. Amendment 4 would allow child trust funds to be retained. It would also allow the Minister to go into the next election with his promise to the electorate maintained, although he would be able to argue to the electorate that, if returned in 2015, he will abolish child trust funds completely. The amendment does nothing but allow the Minister to keep to his manifesto pledges.
Amendments 51 and 52 stand in the name of my right hon. Friend the Member for Wythenshawe and Sale East but have broad cross-party support. As I said, my hon. Friend the Member for Kilmarnock and Loudoun raised the issue they address in Westminster Hall. Sadly, the new clause that I wished to be selected was not selected today, but these amendments give the Minister an opportunity to reflect on the impact of the abolition of the child trust fund on children in care.
I seek to assist the Minister. I want to give him a chance to reflect on his actions. I will put aside the fact that in Committee he voted down amendments we had tabled to maintain the child trust fund for looked-after children, because I hope he has reflected on what the Prime Minister said to my right hon. Friend the Member for Wythenshawe and Sale East at a recent Prime Minister’s questions, and because I believe he has had some very constructive meetings with my right hon. Friend.
I want the Minister to look at the impact of the abolition of the child trust fund on looked-after children. Some 6,000 children go into care each year, and there are 86,000 children in care across the UK—as of March this year, there were 64,000 in England, 5,000 in my home area of Wales, 15,000 in Scotland and just over 1,600 in Northern Ireland. Over previous years, the state has opened 33,158 child trust funds for children who are looked after by the state or by individuals who have been given that power by the state—children in residential care or foster care. When in Committee the Minister refused to allow the child trust fund to continue for those children, he was saying to them that the state no longer has a role to play in helping to support them financially at the age of 18. I believe he will want to reflect on that. Amendments 51 and 52 provide him with an opportunity to realise that we can, after all, offer help and support to such individuals at that time in their lives.
The amendments give the Minister an opportunity to look again at the impact of the abolition of the child trust fund and of the implementation of clause 1. They give him an opportunity to look at how we might provide some help and support. We must not allow individuals who do not have parents to contribute to their future to fall through the net. Indeed, for them, parental contributions to the child individual savings accounts that will be introduced in October next year will not be possible, because they do not have parents who play an active role—or their parents might not even be alive. The amendments would avoid a postcode lottery in respect of local authorities. As the Minister said in Committee, they can contribute to the fund, but they might do so individually with no recognition of the specific needs of each individual in their communities.
My right hon. Friend the Member for Wythenshawe and Sale East will outline his amendments in more detail, so I will not dwell on them much longer, but I want the Minister to say what we will do for looked-after children if clause 1 is agreed in the House this evening and enacted.
Amendment 17 also addresses the child trust fund issue. It is a pragmatic amendment that I hope the Minister will consider. Again, it would give him some flexibility. It would amend the Bill so that eligibility for a child trust fund was not cut off in January 2011, and Ministers could, by regulation at some point in the future, introduce a date to end eligibility. We discussed this matter in great depth in Committee, but I am still interested in the Minister’s thinking on it.
Amendment 17 does not say that the Minister will not be able to abolish the child trust fund, much as we wish he would change his mind on the issue. We have no final details on the new child ISA and no implementation date for it, although October next year has been suggested. The amendment simply says that in the time between the possible abolition on 3 January, as set out in the Bill, and the introduction of the new child ISA in October or November next year, the Minister is allowed to keep the flexibility of the child trust fund for all children, and in particular for the benefit of looked-after children and those in the poorest third. The amendment seeks to ensure that between 3 January and a date provided by regulation the Minister could continue to have lower payments in place, to which the House has already agreed, for children born after 3 January 2011. Alternatively, he could end Government contributions but keep eligibility in place for parental contributions until such time as he introduces the child ISA.
There are many good reasons for taking such an approach. Carl Emmerson, of the Institute for Fiscal Studies, has said:
“I do not think that it is possible to make decisions on how the policy should look and also ensure that the financial sector is geared up to operate a market of that size.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 16, Q37.]
He was making the point that we do not yet know what the child ISA is, how it will operate and when it will come into play, and we need to know those details before we abolish the child trust fund. Graeme McAusland, chief executive of the Children’s Mutual, told us:
“If what happens next is that you launch this new junior ISA, it would seem sensible to leave the child trust fund mechanism in place until it is clear what that new product is and until the industry is ready to participate in it.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 46, Q133.]
Amendment 17 gives the Minister a final opportunity to maintain the child trust fund, not for ever, for three years or for five years, but for a further eight months, until we are clear on the implementation of the ISA he is introducing.
These amendments are clear, and let me make it clear to the Minister that the Labour party opposes the abolition of the child trust fund and will continue to do so, not just here tonight and as we have done in Committee, but in another place. I hope that he will look favourably on the amendments tabled by my right hon. Friend the Member for Wythenshawe and Sale East relating to looked-after children, so that we can find a detailed solution before this Bill abolishes things. I hope that the Minister will consider maintaining his manifesto commitment, because I want him to go back to the electorate with some integrity in 2015.
Finally, I hope that he will look pragmatically at ensuring that an alternative product is in place and at maintaining the child trust fund until such time as the child ISA is introduced next October. Serious issues are at stake. I know that my right hon. and hon. Friends feel very strongly about these matters—we all do—and it is important for the Minister to respond on them. I hope that having reflected on the 19 Divisions in Committee and the seriousness with which we take these matters, he will at least come back to the House and reflect strongly on the views that we have put to him today.
We are back where we were in the Public Bill Committee: the Opposition are going to fight on the barricades to protect the child trust fund because it is so important. We are in a world where we are borrowing large sums—we have seen in Ireland what happens if we do not bring the finances under control—and the Labour party wants to borrow money to put it into child trust funds. That sounds interesting, and in 18 years, children will be able to access that child trust fund. We then have to ask, however, what happens to the money in that child trust fund, and it is relatively difficult to find out. Today, I looked at the annual reports of the Children’s Mutual. In 2008, the funds were generally worth less than the money put in. In 2009, some were worth more than the money put in and some were worth less.
The idea is that the Government borrow a large sum of money—it was running at a very high rate of about £500 million a year—and invest it to benefit other people. That means that we get a lower return than it costs to borrow it in the first instance. In 18 years’ time, those children will get a benefit. By working at an earlier stage, some will already have started paying tax, and that tax will be paying for the cost of the whole process. Given that we have a deficit that we need to bring under control, would it not be better at least to say that we will not borrow money to invest it and lock it away for 18 years, because, frankly, we have not got the money to do that? The Opposition argue that there is evidence that justifies the process because it encourages people to save, but the evidence is not there. The Government are proposing a junior ISA scheme that will be available to everybody from the point at which the child trust funds scheme ends. There is no question that anyone will fail to have a savings vehicle.
It is also important to remember the evidence we heard in Committee from the Royal College of Midwives, which said very simply that if a family is on a very low income and has a young baby the best thing they can do is spend the money on good quality food and health. We will soon hear Opposition Members argue that that is important.
There are those who say that people do not have to chose whether to spend £10 on better-quality food or to invest it in a savings vehicle that is not making them any money and that they can do both, but, I am sorry, that does not add up either. People do not have such options. If they are on a low income, they must decide what to do with the money. They do not have the resources to put money in a child trust fund and lock it away until the child is 18. Although the scheme has the advantage that the money can be locked away until then—it is quite useful for grandparents to know that the money will not be used until then—a family that faces difficulties when a child hits 10 or 13 finds that it is an inflexible vehicle that is not very good for their purposes.
On the amendments on children in care, I have a lot of concerns about the care system. There is confusion about the difference between a looked-after child and a child in care and the wrong figures are often quoted. In 2010, 9,500 children in England were taken compulsorily into care and more children were put voluntarily into care by their parents under section 20 of the Children Act 1989.
We identified in Committee that the administrative costs to the Government of running the machinery for the child trust funds were about £5 million a year—I think that the Financial Secretary can confirm that figure—[Interruption.] I thought that it was £50 million to start out with, but I had it confirmed that it was £5 million a year and I accept that it is. I have heard various figures from the Opposition for how much it costs to put in the additional cash to maintain the system for children in care, and those figures ranged from £1 million to £2 million a year. If we add the £5 million a year to the larger figure of £2 million a year, we will be putting in £7 million a year, which we are borrowing, to cover putting £2 million a year into an investment vehicle that probably does not produce a return over time to match the long-term benefit that we would have gained by not borrowing the money. We would be far better off simply saying that we will provide some funds when those children reach the age of 18. To spend £7 million in such a way is not a rational means of managing public finances.
The hon. Lady is entirely right. If we do not deal with the deficit, we face many other problems. We will end up paying a higher interest rate on sovereign debt. At the moment we are doing quite well, with an interest rate of about 3.5%. Before the bail-out, the Irish were being charged about 8% and the Greeks are being charged about 11%. When a country has a large deficit, if that country does not take action, not only does the amount of debt go up but so does the rate of interest.
That might be slightly out of order, but I should probably answer the question. There has been a debate about the £6 billion of cuts in this financial year. At about 4% of the overall deficit, £6 billion is not a large sum, but given what happened with the initial sovereign debt crises during the general election—things that we have to be aware of, such as what was going on in Greece—we need to give the message that we are serious about dealing with the deficit. That is a socially progressive policy.
Does the hon. Gentleman accept that the state has a special responsibility for children in care, irrespective of how they end up in care? Even in times of financial difficulty, any responsible parent would look first to the most vulnerable children, and that is what the state should do.
I agree entirely, but it is also the state’s responsibility to make sure that we do not spend £7 million to give people £2 million. Putting aside whether child trust funds bring a return over time, it is absolutely absurd to propose, as the Opposition do, spending £7 million to give children in care £2 million. There has to be a better way of doing things. Also, those children would not get the money until they were 18.
The point is that spending £7 million to give £2 million is an appalling waste of money. Anyone who votes for anything like that will have a real stain on their financial track record, because people will observe the Opposition saying, “This is so important that we have do things in this inefficient way.” It is a ludicrous proposal.
The hon. Gentleman has talked about ISAs replacing the child trust fund as a way of saving for children. Does he appreciate that ISAs are often related to stocks and shares and that their value can go down as well as up? I do not see the difference in what he proposes.
At this point, I should declare my interest, which is on the Register of Members’ Financial Interests, as the chair of a company, John Hemming and Co., which provides software to ISA providers. I understand how ISAs operate and that the value of ISAs that are exposed to the stock market can go up as well as down. The difficulty with the child trust fund is that it is relatively small and that there is a great challenge in managing small funds. As a proportion of the fund, the 1.5% charges rate is higher than that for many other funds.
There is no reason why a junior ISA should be any less effective for the corporate parents. The issue is that running the computer systems for the child trust fund costs £5 million a year. That cost would not affect local authorities but would mean central Government incurring an extra £5 million in administrative costs now to give children in care £2 million in 18 years’ time.
Rather than this being about whether there will be more or less cost, is it not simply about whether the cost will be borne by central or local government? In the scheme of things, that makes very little difference when we are talking about overall cost to the public purse.
The Opposition’s proposal to maintain the child trust fund and give £2 million to children would cost £7 million, so they would waste £5 million on the process. In the sphere of the massive deficit, £5 million might not seem like much, but it is the responsibility of Government to be effective and efficient in their use of public funds.
I cannot confirm precisely what is being done in the care system. I am not a Minister; I have never been in a ministerial car and I have no interest in putting my derrière inside one. I happen to be a Back-Bench Member of my party who is very supportive of the Government’s strategy of being cost-effective and of using public funds in the most effective way, particularly to look after the most vulnerable members of society. The simple point, on which I shall end if there are no more interventions, is that it is insane to spend £7 million to give people £2 million.
Let me begin by complimenting my right hon. Friend the Member for Delyn (Mr Hanson) and, indeed, all my hon. Friends for their sterling work on the Bill and exposing clearly its impact on looked-after children and children from all backgrounds. My right hon. Friend said that he wanted to be helpful and conciliatory. I have worked with him for many years and I thought he was very helpful and conciliatory this afternoon. I want to adopt the same approach regarding amendments 51 and 52, which stand in my name. They would place a duty on the Chancellor to report, by the end of 2011, on two things: the impact of clause 1 on looked-after children, and the take-up rate of tax-free savings accounts for looked-after children. Admittedly, this is in its early stages because we do not have the details on the child ISA that have been promised.
Whatever divisions there are in the House, we should always try to reach consensus on our obligations and duties in relation to looked-after children. We should not be divided on that and should constantly seek answers that we can all agree on and that clearly show we are prepared to meet our obligations. Whatever other motives might be attributed to the Minister in bringing the Bill to the House, I do not believe that he came here intending to cause children in care any harm. I believe that the impact the Bill will have on looked-after children is a genuinely unintended consequence. Equally, however, if it is enacted without steps having been taken to ensure that looked-after children are not disadvantaged by its measures, the Government—indeed, all of us—will have failed to meet our obligations.
The Minister has said on several occasions that he wants the new junior, or child, ISA to be the replacement for the child trust fund, which might have merit—I shall not discuss this in too much detail. That policy might well make sense for the child who has a parent who can afford to set up and contribute to an ISA, but for the child who does not have a parent or who does not have a parent who is in a position to invest on his or her behalf, it is meaningless. It is therefore essential to establish in the Bill the principle that the Government should open and make suitable contributions to a child ISA when a child is in care for a reasonable length of time. For me, that is a fundamental principle. I will be listening carefully to the Minister’s response, because its nature and content will be important when I decide whether to press the amendment to a Division.
It was many years ago, but I worked with looked-after children for about 10 years, most of which were spent in a local authority assessment centre in Wigan. The centre was the point of entry for many of the children in the area who came into care. Generally, we worked with those children for about three months. After that, about half of them, thankfully, were able to go back home, often with support from others in the community, because we had been able to iron out the problems, whatever they were. The other half went on in their care journey to other situations, such as foster care. It is the children in that group for whom we should have the greatest concern, because they face the greatest disadvantage. It is those children who end up over-represented in our custodial institutions, and in so many other aspects of our society that cause us difficulty.
My hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) is right to say that we take on the responsibility as parents when those children come into the care of the state, and with that responsibility comes a range of actions that we need to take. We have an obligation to support looked-after children in different ways. Government Members are quite right to say that a good way to help children when they leave care is to ensure that they have a job to go to and that they have been properly educated and trained. Any actions that the Government take to make that more likely will have my full support, because it is important. If setting up a child ISA is good enough for children in reasonably well-off families, it is good enough for the children whom we are obliged to support and look after.
I believe that a savings account, a nest egg or some such asset could make a real difference for a young person who has been looked after as they move into adult life. The reports that I am calling for in amendments 51 and 52 would offer the Government an opportunity to demonstrate their support for looked-after children. If, in the context of the Bill, they were prepared to put together a package that would deliver both the opening of accounts and contributions to them, they would have something very positive to say in those reports.
I first raised the issue with the Prime Minister on 27 October and was heartened by his response. I asked him whether he would ask his Ministers to work with me and others to produce an affordable alternative to the child trust fund, and he said yes. In a way, that did not surprise me; whatever other differences I have with him, he has made it clear that we need to do more for looked-after children and get better outcomes for them. In that sense, it did not surprise me that he was so positive. I had a discussion with the Minister last week, which, again, was a cordial exchange. I left him several things to think about, and I look forward to hearing his observations this evening and any further thoughts he has had.
The scheme that I propose is outlined in some detail in new clause 3—it was not selected for debate, and I understand why. I have been working with a number of Members and senior representatives of Barnardo’s and Action for Children, the two largest children’s charities in the country. We propose a very simple scheme that would apply to children throughout the UK: for any child who enters care and remains in care for a minimum of three months, the Government should open a junior ISA and make an opening deposit of some £250, which is consistent with the previous scheme, and there should be a top-up of £100 for every year that the child remains in care thereafter. Of course, it would be open for others to make contributions to that ISA, such as members of the extended family who were not in a position to look after the child but who could contribute. Nothing in our proposals would prevent local authorities, trusts and other benefactors from making contributions.
My hon. Friend makes an important point. If a looked-after child aged 16 or 17, perhaps studying and working part time, was in a position to make a modest contribution to their own fund, that would be a good thing. Looked-after children have to be more resilient than any other people in our society, so it would be good for them to learn about the importance of managing money and planning ahead through the medium of that child ISA or a savings account to which they and others may contribute. That could make them even more resilient, and looking back to the time when I worked with such young people, the opportunity to sit down with them and work out their money management would have been a great way to do it. I think that that suggestion has great merit, and if the young person could also contribute, that would be a very good thing too.
My proposal would require the Government to open accounts for about 20,000 looked-after children each year. With additional top-ups of £100 for those who remain in care for a year or more, as I have described, we are talking about a total annual sum of some £6.6 million. We can argue about whether child trust funds are a sensible way to spend half a billion pounds, and the Government have taken a view that is different from that taken by my right hon. Friend the Member for Delyn and those of us on the Labour Benches, but I put it to the House that a scheme that would deliver a savings account for every looked-after child in the UK who had been in care for more than three months, at a cost of less than £7 million, would be a good way to spend public money. The young person would get the money when they were 18. It could be an important part of care planning, as I said in response to my hon. Friend the Member for Kilmarnock and Loudoun, and would promote resilience. It would send a clear and strong message to the young people concerned that we owe them an obligation and are prepared to support them in a practical way.
I hope that the Minister will provide a positive response not only to the precise content of my amendments, but to the proposal in general and the need to do something, either here or in another place, that will put in the Bill something tangible for looked-after children. What I propose is modest, but it could make a real difference. If the Minister is prepared to act and make that clear, that would be good news for looked-after children. It would demonstrate that, whatever differences there are in this place over the Bill, when it comes to looked-after children we are prepared to sink those differences and do something together.
I am grateful for the opportunity to pass comment on the Opposition’s continued attempts to retain child trust funds. I am struck, in particular, by the nature of their opposition: rather than concentrating on the effectiveness or otherwise of child trust funds as savings vehicles, they appear to have reduced their argument to one about generic usefulness. There seems to be a growing objection to abolishing child trust funds, because somehow the Opposition have inadequate confidence in the junior ISAs or child ISAs that are due to replace them. That is particularly concerning.
I remind those Members who sat on the Public Bill Committee with me, and inform those who did not, of a quote from the director general of the Building Societies Association, Mr Adrian Coles, who said:
“let us not pretend that we need to rely on the Government or the public sector to do all of this. The 49 building societies and other mutuals offer about 100 children’s savings accounts in the free market, which have been pretty successful over the years”.––[Official Report, Savings Accounts and Health in Pregnancy Grant Bill Public Bill Committee, 2 November 2010; c. 26, Q67.]
I know that in Committee concerns were expressed that the customers who take out ISAs might be the more affluent or the more elderly. It was made clear at the time that 12 million people on incomes under £20,000 have ISAs, and that 40% of them are under the age of 44, compared with just 20% who are over the age of 64, so any concerns that younger families are not sharing in ISAs are unfounded.
I was particularly concerned when I heard continued doubts about the ability of families on lower incomes to cope with the financial complexity of an ISA. We need to trust people. A great deal of work is going into financial education—an increasing amount. It is a trend initiated by the previous Government, and I congratulate them on that. We are building on it, so we can have confidence in ISAs as a potential future savings vehicle.
Another reason for opposing the abolition of the child trust fund was the impact that that could have on the needs of families with disabled children. I was shocked by one of the statements by the shadow Minister, the right hon. Member for Delyn (Mr Hanson), when he said that
“the proposal for providing 8,000 week-long respite breaks each year for disabled children in England . . . trivialises the nature of the child trust fund”.––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 9 November 2010; c. 228.]
I found that a disquieting comment. I do not regard respite breaks for children as trivial in any way, shape or form.
There are two points about those discussions in Committee about which the hon. Gentleman is aware. First, the abolition of the child trust fund takes away a resource that is applicable in Scotland, Northern Ireland, England and Wales, and replaces it with a provision that is available only in England. Secondly, provision for respite care is entirely different from building a capital asset for individuals at the age of 18. That was the objective of the revised proposals from the Minister.
I thank the right hon. Gentleman for that effort to bring clarity. None the less, I regret the use of the word “trivialise”, if only because I have spoken to many families in my constituency with disabled children. When speaking just a fortnight ago to one family who had benefited from the family fund and had their first holiday in five years, the mother broke down in tears.
I raise the matter not to have a go at the shadow Minister, but to highlight one of the wider issues that was illuminated in Committee: the difference between the accessibility of an asset that is locked away until the young person is aged 18, and the changing needs of families with disabled children—and of looked-after children, for that matter. If we are seeking to target the child trust fund at those in the community who are the most vulnerable, who have the most chaotic lives, who are subject to the most pressures, to whom unexpected things occur, is it truly sensible to tie them into something that can be delivered only when the individual reaches the age of 18?
Does the hon. Gentleman agree that the situation should not be an either/or? We should be able to give day-to-day help and support to the most vulnerable, at the same time as allowing people—for example, looked-after children and people who have disabled children—to build a capital asset that will be available to them when they enter adulthood.
I agree entirely, and I wish that during the evidence taking in Committee and in the debate, we had had an either/or discussion, rather than an “and, and, and, and yet another idea” discussion. We had far too many shopping lists and not enough recognition that hard choices had to be made. It is important to recognise, as Marc Bush from Scope did when he gave evidence to us, that delivering an asset at age 18 is not the solution to the problems faced by families engaging in the transition of their child from childhood to adulthood, when faced with a complex disability. That starts at age 14 and can continue to age 30. The hon. Member for Stretford and Urmston (Kate Green) recognised that when I intervened on her, and that was a useful move forward.
When we are discussing the future of child ISAs, I hope it is taken into account that families who are particularly vulnerable may need access before the age of 18. Locking the ISA away until age 18 is not always the best solution.
I am grateful to the hon. Gentleman. He is right to say that if the junior ISA can offer that flexibility to disabled children, it would be a useful enhancement—I look forward to hearing the Minister’s response on that—but does he accept that another advantage of the child trust fund, which he and I would welcome in the junior ISA, was that it delivered extra money to more vulnerable children in the double payments that were available to children from low-income households or with disabilities, for example?
I thank the hon. Lady for that intervention. One of the joys of the Bill is that I have learned so much from her about progressive universalism. She is right that the progressive element is being removed. However, it has struck me that it is as though I have been locked away on Moonbase Alpha for the past fortnight, because there seems to have been no recognition on the part of the Opposition that we are operating in a much more stringent financial climate. The hon. Member for Wirral South (Alison McGovern), who is no longer in her place, dismissively said at one point in Committee, “I recognise that there has been a debate about the deficit and all that sort of thing.” I found that regrettable.
We are operating in a situation in which we have to make financial savings. Rather than having a discussion about whether the child trust fund is the most appropriate use of public money, we have continually debated why we should do this, and this, and this, and then something else, and something else again. At no point did we discuss the crux of the issue: whether the child trust fund was the best use of public money to help those most in need in our society.
I welcome the fact that the Minister is having discussions with the right hon. Member for Wythenshawe and Sale East (Paul Goggins). I hope something comes of that, but I remain concerned that the Opposition’s determination to try to save child trust funds is based on an outdated notion that only those savings vehicles provided by the state can provide a solution. That is not the case.
The child trust fund has a dual purpose—not only to give the young person a lump sum, but to nurture in them a savings habit for life. Some 74% of those eligible have taken up the responsibility of the child trust fund account. It is the most successful savings product on the market; ISAs and pensions fall well behind that figure. It is simple—much simpler than opening a deposit account—and it gives people a nudge to save.
Nearly a third of parents and grandparents have added to the fund, and the poorest 20% have added a higher proportion of their income to it. However, even for young people whose families do not contribute, the practical demonstration of saving in the account is invaluable. Organisations such as the Personal Finance Education Group, which works in schools, structure their lessons around it, certain in the knowledge that all pupils will have received a statement annually on their birthday, and that all pupils have such an account.
The very universality of the scheme provides a useful and practical foundation for learning and for influencing behaviour. In addition, it is especially useful for looked-after children and children with disabilities, who receive extra premiums. For looked-after children, it is a practical example of the state acting as parent and attempting to improve their prospects at 18—an ambition that all parents have for their children—by providing a lump sum at one of the most difficult periods of their lives, a time of transition that is difficult for any teenager, but especially for those leaving care.
For children with disabilities, the scheme provides an asset that allows them to take advantage of life opportunities or to invest in whatever they see as their priority. It is unfair to remove the scheme without a full impact assessment of groups who may be disproportionately affected, such as families with disabled children and people with disabilities, especially as the Demos report showed that the emergency Budget had a substantial financial impact on families with disabled children.
It has been suggested that a junior ISA may replace the child trust fund, but I cannot believe that it will provide an adequate replacement, even if a seamless transition in January 2011were possible, which has been disputed by a number of experts in the savings field. An ISA primarily benefits taxpayers and higher-rate taxpayers in particular, so what advantage does an ISA offer to a non-taxpaying family? Equally, the simplicity of the child trust fund product has been praised.
I have worked with people to whom ISAs and other financial products have little relevance, with people who need support to open a basic bank account and with people who have no notion of opening a deposit account. I urge Members, therefore, to retain the scheme in some form—even if only for looked-after children, children with disabilities and the poorest third of families—and not to scrap it completely. I urge Members to support the amendments.
I shall speak strongly in support of amendments 51 and 52, which my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) has tabled. As he says, Members from all parties share a deep concern about the continuing very poor outcomes that we, as corporate parents, deliver for children in the care of the state. Those children suffer difficult childhoods, often arriving in care in traumatic and traumatising circumstances. They are therefore significantly unsettled and disadvantaged in their childhoods, and that disadvantage continues, to our shame, into their adult lives.
Such children all too often achieve poorer outcomes in education and health: in adult life they are less likely to move into sustainable employment or further or higher education, and they are more at risk of poverty. I know all hon. Members feel deeply that that is wrong, so I shall speak strongly in support of my right hon. Friend’s amendments, because they open-mindedly ask us to address that endemic disadvantage. If Opposition Members are offered assurances that other financial instruments can meet those concerns, we will of course consider them, but we are clear about what those alternative instruments must deliver if they are to receive our approval tonight. They must deliver some of the advantages that the child trust fund was able to deliver for looked-after children—advantages that sought to some degree to adjust and compensate for the disadvantages that such children face as they embark on adult life.
The first important thing about a payment mechanism specifically designated to meet the needs of looked-after children is that it represents a signal from us as a community that we care about such children—that they are valued, and as precious as any child living with his or her family is to his or her parents. Too often, looked-after children feel that our society does not value or recognise them and that nobody has an interest in them, so a financial contribution to a savings fund for them is one of a number of steps that we can take to show that those children and their futures are important and matter to us all.
The child trust fund, in its design, also delivered much more hard-edged benefits to looked-after children. As Members have said, it put extra money aside for children through double payments, and in responding to my right hon. Friend’s questions it is important that the Minister should address how we ensure that those children do not suffer further financial disadvantage and inequality in adulthood by embarking on adult life with a significantly smaller asset than many other children. Adjusting wealth and asset inequality was one of the intended bonuses of the child trust fund—one that was particularly important for looked-after children, and one that I hope the Minister will address.
My hon. Friend the Member for Makerfield (Yvonne Fovargue) pointed out that the fund sought to meet costs at a time of transition, and reaching 18 is a particularly difficult time for children leaving care, because we leave them at the mercy of adult life as no familial parent would with her or his child. No mum or dad would throw their child out of the family home without so much as a kettle or an offer to underwrite the gas bill if they struggle as they set up home, but that is what we do to too many children who leave the state’s care. By providing those children with a financial asset, the child trust fund helped to smooth some of the extra costs that they faced at transition points, with which no other family member might have been available to help them. The fund therefore enabled those young people to embark on their adult life with the confidence, certainty and stability that other young people often draw from family support.
I hope the Minister will reassure me that any alternative financial model will replicate two other in-built advantages of the fund, one of which is the product’s relative simplicity. It was fairly clear what sums were going in, and it was fairly clear when they could be drawn out. Junior ISAs might offer more flexibility and allow more contributions and different points of withdrawal, and that might bring some advantages, but we must not set up a product that is too complex for corporate parents and others who might wish to donate to the funds of looked-after children to access readily and save within. I look forward, therefore, to the Minister’s assurances about how the product will prove accessible to anyone who wishes to save for a looked-after child or young person, and in particular how a corporate parent will be able, without unnecessary bureaucracy and expense, to make contributions for children in their care.
Right hon. and hon. Friends have mentioned how the child trust fund offered consistency throughout the country, between local authorities and in all four parts of the United Kingdom, ensuring that every looked-after child left care with the same opportunity of an asset with which to start adult life. Can the Minister assure us that the alternative mechanisms and products that he might bring forward will deliver such consistency? We do not need to perpetrate inequalities among children leaving care as we do between children leaving care and other young people as they start out on adult life.
My hon. Friend the Member for Makerfield rightly pointed out that the junior ISA offers little that is intrinsically attractive to savers who do not benefit from a tax break. By definition, that includes corporate savers who invest for the future of children leaving care. I very much want to hear how the Minister will at least incentivise, more than that exhort, and—preferably—insist that corporate parents save adequately and equally for every child who falls within their care. If those assurances are forthcoming this evening, like my right hon. Friend the Member for Wythenshawe and Sale East, I will be able to look again at his amendments. If we do not receive satisfactory assurances, however, every young person and every child who has been in care will expect the House to support the amendments, and I for one certainly will.
Let me offer these words to the House:
“Simply put the Child Trust fund started people saving for children again. Since its introduction, child saving across all schemes and products has risen. We should acknowledge that asset building for children became a widespread reality in the UK through the introduction of the Child Trust Fund in 2005, and it quickly became an internationally renowned example of a long term tax free savings and investment account for children, one which encouraged saving and promoted an understanding of personal finance.”
Those are not my words but the words of Phillip Blond, in a new pamphlet called, “Asset Building for Children—Creating a new civic savings platform for young people”. I did not expect to be speaking his words, let alone encouraging the Minister to listen to them.
It is correct that families have engaged in, and benefited from, the improved financial awareness that was one of the stated aims of the child trust fund. However, the evidence given by Dr Samantha Callan, a witness to the Committee, said that of parents who opened child trust funds,
“99%...have not received the maximum funding available. Therefore, it is not those on the lowest income that are actually taking the initiative to open the accounts.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 102, Q253.]
That means that they are not benefiting from the financial education and engagement that the funds were aimed at providing.
The hon. Lady overstresses that issue. She fails to see that the child trust fund was different from other savings funds because it was intended to provide not only financial education but a real asset to children who would not otherwise retain one. It is also important to realise that there is a real difference in kind between what the previous Government put in place and the junior ISA, which was thrown in fairly late on in the course of the thinking that occurred in response to the concerns expressed and is still fairly vague in its implications.
This is about a transfer of assets and tackling asset inequality. We are faced with not only income inequality but asset inequality. It is perfectly legitimate, and indeed desirable, that we look at asset inequality just as much as at income inequality. As my hon. Friend the Member for Stretford and Urmston (Kate Green) said, the way in which child trust funds were structured enabled additional money to be put in for looked-after children and children with disabilities. That is extremely important for them at the age of 18. Junior ISAs do not deliver that; rather, they will be of greatest benefit to those who get the tax relief that goes with an ISA.
In the past, there have been many schemes allowing parents, grandparents and other people to save on behalf of children. My children had baby bonds, which were provided under the National Savings scheme, and some of the money that went in came from their grandmother. That was wonderful, and a great idea, but it would not—I am sure that it did not—assist many children from low-income households, to whom the child trust fund was specifically designed to give additional help.
I want to return to the pamphlet produced by Phillip Blond, which has been given a lot of support from several organisations interested in this field. He strongly advocates that the infrastructure of child trust funds should be retained, even if the rest of the system is to go:
“Our first and foremost recommendation is to maintain, extend and improve the infrastructure of the…Child Trust Fund under the auspices of the new ABC account. Maintaining the old CTF platform comes at a minimal cost (£2m pa) and it preserves a unique and valuable savings infrastructure for the further augmentation and development of children’s savings.”
That would then enable the new proposal that comes from a raft of organisations working with children—the ABC account—to be developed using the same infrastructure. It would also enable this Government, or a future Government, to return to it and decide that they want to put in additional contributions at a later date. I am surprised at the lack of faith shown by Government Members, including members of the Committee, about the economy recovering. They do not seem to think that it is worth preserving the infrastructure for a future time when it would be possible to put in extra contributions.
I urge the Minister to listen to the words of Phillip Blond and those who have supported his proposals and even at this stage, if the Minister cannot support amendment 1, to consider keeping the infrastructure.
As the right hon. Member for Delyn (Mr Hanson) set out in his opening remarks, the amendments in this group, except for the two tabled by the right hon. Member for Wythenshawe and Sale East (Paul Goggins), seek to delay the ending of child trust fund eligibility, or indeed not to end eligibility at all. Amendments 4 to 12 and 17 to 26 would delay the end of child trust fund eligibility from January 2011, either to 2016 or a date set by regulations. Amendments 1 and 36 would mean that child trust fund eligibility did not end at all.
I set out clearly on Second Reading the rationale for ending child trust fund eligibility, particularly for ending it from January 2011. This Government inherited a fiscal position that the Governor of the Bank of England described as “clearly unsustainable”, and dealing with it immediately was unavoidable. As hon. Members will recall, my right hon. Friend the Chancellor set out a package of £6 billion-worth of savings in 2010-11 just a couple of weeks after the coalition Government were established. Part of that package was £320 million of savings from the child trust fund this year. A large part of those savings have already been made through the regulations made in July, which reduced contributions at birth and stopped them at the age of seven. Delaying the end of eligibility would reduce the savings that we plan to make by £20 million this year and by around £50 million in each future year that the delay continued.
Those figures assume that the current value of the child trust fund would continue at £50 at birth for most children and £100 for those in lower-income families. Some providers have told us that those values would not be viable for them in the long term, and so some could withdraw from the market. However, if the value of the vouchers were increased, which could be done through regulation, the costs of the delay in ending eligibility would increase too. Either way, the money would have to be found from somewhere, through other spending cuts, tax rises, or even more borrowing. The Labour proposals would also be confusing for families who understand that CTF eligibility is due to end in January this year, particularly if we were to take the power to set a date through regulations.
I understand the point that the right hon. Member for Delyn made about delaying the end of eligibility until the junior ISA, which I announced on Second Reading, is in place. I am not expecting that to take too long; I hope that the new account will be up and running as early as autumn next year. It will be available for children who are born after the ending of the child trust fund—that is, those born after 3 January 2011.
The hon. Member for Edinburgh East (Sheila Gilmore) said that the trouble with the junior ISA was that it is tax free, but so was the child trust fund, so I cannot see that its essential nature is very different. I do not quite understand her point.
The point that I was trying to make is that the only incentive given in the junior ISA is that the payer—the parent or grandparent, or whoever is putting in the money—can get tax relief. The child trust fund gave money to the children of families who do not usually benefit from putting money into a savings account that brings tax relief because they may not be paying tax, or paying very little tax, so it is not of such great advantage.
The fundamental difference is that under the junior ISA there will be no contributions from the state, whereas in the case of the child trust fund there were contributions from the state. Our intention is to save money in order to cut the deficit—that is why we are ending eligibility for those sums. The junior ISA will be a simple product. The hon. Member for Stretford and Urmston (Kate Green) queried that, but she should remember—to reiterate a point that I made in Committee—that 20 million people have ISAs, 12 million of whom earn incomes of less than £20,000 a year. The ISA is a mainstream financial product that people of all income streams and all ages understand; they find it very easy to contribute to a cash ISA or to an equity ISA.
Indeed, the tax models for ISAs and pensions are different. With an ISA, the income and gains are tax-exempt, which is one of their incentives.
I believe that child trust fund eligibility should end for children born from January 2011, as the Bill provides, and not from any other date. I continue to believe that ending eligibility is the right thing to do. I know that some find that disappointing, but in the middle of the exceptional fiscal challenge that we are facing, it simply does not make sense to continue to spend half a billion pounds a year on giving people money that is locked up until the age of 18. There are more urgent priorities, and the child trust fund is a luxury that we cannot afford.
I wish now to refer to the amendments tabled by the right hon. Member for Wythenshawe and Sale East and the wider points raised in his new clause and amendment that were not selected. I understand his point about looked-after children, who are among the most disadvantaged young people in our society and face a number of particular challenges that mean they need additional support. As he said, we met last week to discuss the matter, and he outlined to me the proposal that he has referred to today. As I said then, I have a lot of sympathy with what he is trying to achieve, and I want to consider the matter more closely. Indeed, I have already written to the Under-Secretary of State for Education, my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton), to ask his views on the proposal. We will have to consider it carefully, but as I have said a number of times during debates on the Bill, we have limited resources at the moment and there is currently no unallocated funding in the Department for Education budget that could be used for the suggested payments. We would also have to be sure that they were the best use of our resources and gave us the best possible value for money.
As I have said, there is also the question of whether locking up money for up to 18 years provides better value than spending it to support people now, and we need to ensure that we focus resources on our priorities. We will also have to consider what the proposal would leave children with. As the right hon. Member for Wythenshawe and Sale East explained, the provision would not be triggered until a child had been in care for at least 13 weeks, to avoid junior ISA accounts being opened for children who were in care for only a week or so. We know that, thankfully, most children are not in care for long periods. Of the children who left care in 2009-10, about 37% were in care for less than six months. I will therefore wish to consider how many children would receive accounts containing just the £250 Government payment that he suggests, and whether those accounts would necessarily provide good value.
However, as I have said, I am more than happy to continue to consider the proposal with my hon. Friend at the Department for Education, and I certainly commit to maintaining contact with the right hon. Member for Wythenshawe and Sale East. I reassure him that if we do want to move forward with his proposal or something similar, the Bill will not be the right vehicle for doing so. It may be possible to legislate on the matter alongside the provisions on junior ISAs, or even to introduce them without legislation. Not including them in the Bill does not close down our options.
I understood the right hon. Gentleman’s points on amendments 51 and 52, which were selected, but there are practical reasons not to accept them. First, as I have said, we are still looking closely at our options, and that may end up making the reports called for in those amendments unnecessary. Secondly, if we wanted such reports to be produced, requiring their completion by the end of 2011 would be too early. By then, child trust funds would only just have stopped being opened, as the last vouchers are not expected to expire until well into 2012, and junior ISAs would have been in place for only a few months.
Thirdly, I suggest that even if we did want to carry out the reports that the right hon. Gentleman suggests, we could do so without having them specified in the Bill. In fact, leaving them out of the Bill would provide us with more flexibility on both content and timing.
I am very grateful to the Minister for clearly giving very serious consideration to the points that I put to him at our meeting last week. He has clearly weighed them up carefully. I am grateful that he has already written to his colleague in the Department for Education.
The Minister will understand my slight concern that, notwithstanding the fact that he is going to consider my proposals seriously, the Bill will now go to the other place and—in fairly short order, he hopes—become an Act. With the Government’s majority, I am sure that will happen. I do not want the focus on the important issues that we have discussed to be lost, so will he make a commitment that as far as possible, they will be addressed as the Bill is considered in the other place?
The right hon. Gentleman will be aware that we are consulting on the design of the junior ISA, and we need to ensure that his points are considered in tandem with that, rather than in the accelerated time scale that it will take for the Bill to go through the other place. I reassure him that I am considering the matter seriously with my hon. Friend at the Department for Education.
The right hon. Gentleman makes important points about looked-after children, and we need to consider them carefully. As he knows, there are other provisions in place to meet the needs of such children, such as a bursary scheme for those who go into higher education, although I regret that not as many do so as we would all like. However, he has made important points both today and in our meeting last week, and I will pursue them with him and with my hon. Friend the Under-Secretary of State for Education. I hope that the right hon. Gentleman will not press the amendments tonight, but that is a decision for him to take. I hope that he will take into account my comments this evening about the approach that I want to take.
On the other amendments in the group, as I have explained, I believe that we should go ahead as planned with ending child trust fund eligibility from January 2011. I believe that the right structure is in place to ensure that children who do not qualify for a child trust fund will be eligible for the junior ISA, even if it is not introduced until late next year. I have made the commitment that any child born after 3 January 2011 will be eligible, and I believe that the for combination of reasons that I have set out—the need to tackle the deficit, the need to save money and the need to put the public finances on to a better, firmer footing—we need to press ahead. I urge hon. Members to oppose the Opposition’s attempt to squander yet more money.
I am grateful to the Minister for his response to the debate. It is self-evident that I am disappointed with the fact that he wishes to continue to seek the abolition of the child trust fund. I did not expect him to accept amendments 1 and 4, both of which gave him an opportunity to stick to his manifesto commitments and save some remnant of the child trust fund.
I have some concerns about the Minister’s responses. I hope to encourage my noble Friends to return to the matter raised in amendment 17, because it is about ensuring that we do not have a hiatus between the abolition of the child trust fund and the establishment of the new child ISA. It simply gives the Minister an opportunity to reflect on the fact that he can delay the abolition for what may be only six or seven months to ensure that he does not have to backdate the child ISA and confuse parents. He can put a product in place and ensure that we know about it by the time of the abolition. I suspect that there will be further debates on the matter in another place, and I hope that amendments will be tabled there to support the aims behind amendment 17.
On the amendments tabled by my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins), I am grateful that the Minister is continuing to discuss what we should do about looked-after children, who are a vulnerable group of individuals. I wish to ensure that he—[Interruption.] I hope that the Minister will listen to this point. He has just said to the House that he is in discussion with his colleagues in the Department for Education about how we deal with looked-after children. I am pleased about that, but I remind him that the current child trust fund is a UK-wide facility funded by the Treasury, which applies in the constituencies of my hon. Friends in Scotland and Northern Ireland as well as in mine in north Wales. If he just brings forward an England-only solution with the Department for Education, that will not satisfy my hon. Friends. I hope that he will reflect on the fact that the current child trust fund is a UK-wide provision for looked-after children. My right hon. Friend is trying to ensure that that is what it remains at a relatively low cost to looked-after children and the state. I do not expect my right hon. Friend to press his amendments, but I do expect the Minister, in the context of the discussions that we will have in another place, to look at a UK-wide solution, not a solution that simply involves him having discussions about England with his hon. Friend in the Department for Education.
In addition to the points made by the Minister, my right hon. Friend has raised a very serious issue. Any replacement provision for looked-after children would have to be UK-wide to be fair, so his point is clear. I share his thinking on whether I should press amendments 51 and 52 to a vote. When somebody with whom one has a disagreement reaches across and begins to come halfway, one probably does not poke them in the eye just at that moment. I am not tempted to press amendments 51 and 52 to a vote, but my right hon. Friend knows me well enough to know that, the Minister having made the commitment, I will be closely on his tail every inch of the way to make sure that he delivers something for looked-after children right across the United Kingdom.
I know my right hon. Friend very well and I know that he will do that. In coming to a solution, will the Minister make sure that it is UK-wide? Will he make sure that it is not based on a postcode lottery, under which one local authority might contribute for looked-after children, while another local authority might not? We want to ensure, at the very least, that we salvage something from this train crash, and that is help and support for looked-after children in our society as a whole.
Based on what the Minister has said, I have no alternative but to press amendment 1, because the abolition of the child trust fund is wrong. Opposition Members believed that it was wrong on Second Reading, we believed that it was wrong in Committee and we believe that it is wrong on Report, so we will press amendment 1 to a Division.
Question put, That the amendment be made.
Repeal of Saving Gateway Accounts Act 2009
With this it will be convenient to discuss the following:
Amendment 13, page 2, line 10, at end insert ‘with effect from 1st January 2014’.
Amendment 14, page 2, line 10, at end insert—
‘(1A) The provisions in subsections (2) to (5) come into force with effect from 1st January 2014.’.
Amendment 15, page 2, line 36, in clause 4, leave out subsection (2).
Amendment 16, page 2, line 39, leave out ‘The rest of this Act ‘ and insert ‘This Act, apart from section 2’.
Amendment 27, page 2, line 39, leave out ‘The rest of’.
Amendment 40, page 3, line 1, leave out subsection (4).
Amendment 28, page 3, line 1, leave out from beginning to ‘3(1)’ and insert ‘Section’.
Amendment 29, page 3, line 2, leave out ‘extend’ and insert ‘extends’.
Amendment 41, page 3, line 4, leave out subsection (5).
Amendment 31, page 3, line 4, leave out from beginning to ‘3(2)’ in line 5 and insert ‘Section’.
Amendment 32, page 3, line 6, leave out ‘extend’ and insert ‘extends’.
Amendment 39, page 3, line 7, leave out ‘The rest of’.
Amendment 37, in title, line 1, leave out ‘to repeal the Saving Gateway Accounts Act 2009;’.
We are in danger of repeating discussions that we had in Committee, but the Prime Minister has said that opposition is an important constitutional duty, and I intend to fulfil it in the next hour on the question of saving gateway accounts.
Amendment 2 seeks to remove the abolition of those accounts by removing clause 2. As ever, and as I said in relation to the first group of amendments, I am trying to be pragmatic. The Minister will note that amendment 13 seeks merely to delay the abolition of the saving gateway until 1 January 2014 to allow him and his officials a period of reflection in which they can examine whether abolition is required.
The saving gateway, which was originally introduced in the Saving Gateway Accounts Act 2009, is important—[Interruption.]
I am grateful, Madam Deputy Speaker. This debate is about how we help poorer people in society and save resources. Of course, that might not interest all hon. Members in the Chamber today, but that is another discussion—[Interruption.]
The Saving Gateway Accounts Act was introduced to pave the way for a national scheme. Members will be aware that the saving gateway was to be a cash savings account for those on lower incomes. It was to provide a financial incentive to save, with the Government making a matching contribution for each pound that people saved in the scheme. The saving gateway was first proposed in 2001, after which it was consulted upon and piloted twice. In total, more than 22,000 people took part in the pilots, achieving an additional £15 million of savings. As Members will know, accounts would have run for two years and would have been offered by financial institutions such as banks, building societies and credit unions. The Government would have contributed 50p for each pound saved, which would have been paid at the end of the accounts.
The criteria for opening a saving gateway account were fairly straightforward. If an individual in the community was on income support, jobseeker’s allowance, incapacity benefit, employment support allowance, severe disablement allowance or carer’s allowance, or if they were on tax credits and their income was less than £16,040 a year, they would qualify for the saving gateway scheme. The objectives of the saving gateway scheme were quite simple: to kick-start a savings habit among people on lower incomes, by providing a strong incentive to save through a matching fund contribution from the Government; and to promote financial inclusion by encouraging people to engage with mainstream financial services.
The pilots, which were successful, were delivered in partnership with the then Department for Education and Skills, with the Halifax bank—now HBOS plc—providing banking facilities. The first pilot ran from August 2002 to November 2004, with individual accounts open for an 18-month period. In the first pilots, about 1,500 people took part, and the scheme covered five areas: Cambridge, east London, Hull, Cumbria and Manchester. People living in those areas were eligible to open an account if they were of working age—between 16 and 65—and had household earnings of less than £15,000 or individual earnings of less than £11,000, or if they were out of work and receiving benefits, as I have described. Individuals in the first pilot were allowed to save up to a limit of £25 a month in the account, up to a maximum of £375 overall, for which they received a pound-for-pound match when the account matured. A final evaluation of the first pilot was produced in March 2005. Based on that pilot, the largest saving gateway pilot was run in the same five locations, as well as in another area, south Yorkshire. That pilot started in March 2005, and the accounts were open for 18 months, as in the first pilot. In total, around 22,000 accounts were opened and the second pilot was opened to a wider income group, including households with incomes of less than £50,000, individuals with incomes of less than £25,000 a year and, similarly, those receiving benefits.
The point of the pilots was to establish whether the scheme would be successful and whether it would meet the objectives that we had set, which were to encourage lower-income savers and to ensure that individuals saved resources that they would not have saved previously. The key findings from the pilots were that the saving gateway scheme generated new savers, that new saving was generated among existing savers and that the scheme brought individuals into contact with mainstream financial institutions for the first time. Research from the pilots showed that 60% of participants were still saving regularly two years after they had ended, and that three in 10 participants who were not saving regularly before the pilot were now doing so. Participants were extremely positive about the saving gateway. I quoted in Committee the fact that 98% of people involved in the pilots said that they would open another saving gateway account if offered the chance, while an astonishing 99% would recommend it to a friend.
In the Budget on 24 March, my right hon. Friend the Member for Edinburgh South West (Mr Darling) announced that the first saving gateway accounts would be available from July, and that Lloyds Banking Group, the Post Office and the Royal Bank of Scotland Group would provide the accounts on a regular basis. Before we touch on the fact that the accounts did not open in July, it is important to refer to the all-party support for the saving gateway account before the election. One of the reasons I wanted to give the Minister a chance to reflect, having had discussions in Committee, was that when the then Saving Gateway Accounts Bill came before the House in February 2009, he said:
“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.”—[Official Report, 25 February 2009; Vol. 488, c. 323.]
That was the Minister, before the pilots had been completed, saying that he believed that that Bill had merit, that he supported it and that he believed that it would help with some of the difficulties that people on low incomes would face if they lost their jobs. However, it was not just the Minister saying that, but the hon. Member for Taunton Deane (Mr Browne)—now the Minister of State, Foreign and Commonwealth Office—who was then the Treasury spokesman for the Liberal Democrats. On Third Reading, he said that
“it is the equivalent of the share-owning democracy being extended to people in the bottom 10 to 20 per cent. of society. That will bring widespread social benefits if the Bill works out as successfully as we all hope.”—[Official Report, 25 February 2009; Vol. 488, c. 325.]
The evidence that we took in Committee from those responsible for administering the scheme and for looking at its effectiveness indicated that they had no reason whatever to believe that in the event of a change of Government, which I accept and acknowledge has happened—
I am a realist—the Government have changed—but any realist would say that before the election the Conservative party and the Liberal Democrats supported the then Bill, along with my right hon. Friend the Member for Edinburgh South West, the then Chancellor, and his team, and every other Labour Member. Nothing has changed since except for the change of Government, which has meant that the Minister and the Liberal Democrats have stood on their heads and jettisoned the scheme, which would have been in place in July and would have helped to support the poorest in our society.
There is another significant change since that time, which is the financial mess that we found we had inherited. This Bill, along with other measures, has to sort out our finances. When the Public Bill Committee took evidence, Carl Emmerson of the Institute for Fiscal Studies said:
“I think that £1,000 at age 18 will improve their life outcomes and will help. I think that the money spent on education or on increasing their family’s incomes over those first 18 years is probably going to help more.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 12, Q23.]
Does the right hon. Gentleman agree?
There are two points about that. I do not wish to cause the hon. Lady any difficulty, but I think that her intervention relates to the previous group of amendments, on the child trust fund. We are now talking about the saving gateway account, which is for poorer people. It does not relate to people under the age of 18, and if she looks at Hansard, I think that she will realise that she is talking to the previous group of amendments.
However, I should also say that if the hon. Lady thinks that the current financial situation is difficult, I look forward to her supporting amendment 13 in the Lobby, because it would give the Minister time to reflect. Amendment 13 says that we should delay scrapping the saving gateway until 2014. We have had the saving gateway account—which the Minister and the Liberal Democrats supported in opposition and which Labour supported in government—which has had its pilots. The pilots have proved successful, and by any assessment more people have saved, resources have been generated and people on low incomes have learned the saving habit. The Bill abolishes the saving gateway account that was to be implemented in July this year, until the Minister put that on hold.
Two amendments are the focus of the debate. Amendment 2 would delete clause 2, so that the saving gateway account would not be abolished. However, I am being pragmatic, and I tabled an amendment to abolish the saving gateway account on 1 January 2014. That would provide a three-year gap in which the Minister could, as the hon. Member for Truro and Falmouth (Sarah Newton) said, look at the economic situation and assess whether the financial contributions are practical and desirable. I happen to believe that they are, and that the scheme is affordable now, but I will park that debate for the moment, and simply tell the Minister and the hon. Lady that if they accepted amendment 13, they would accept minimal cost, if not almost no cost, to the Treasury. All that would be abolished, effectively, is the pilots, and their assessment. The saving gateway scheme has not started, and there would be no financial contribution to it because it did not commence in July 2010.
The Minister could accept amendment 13 and not commence the scheme next year. He could accept it and not commence it in 2012, or 2013. He could make an assessment in 2014 of the principles that he espoused in Opposition with his hon. Friend the Member for Taunton Deane—that the scheme is a positive one that brings benefits. If the economic situation improves during those three years—the Minister presumably believes it will as a result of his other economic policies—he could consider returning to the saving gateway scheme without repealing the Saving Gateway Accounts Act, which is what the clause will do, and end any possibility of the scheme being introduced.
I am offering the Minister an opportunity. He need not abolish the scheme, but could reflect on it. He could delay its commencement until 2014, and not rip up a scheme that he supported in opposition, and on which valuable work was done in five areas in the first pilot, and in those areas plus south Yorkshire in the second pilot.
The Minister has a duty to explain why he believes the scheme should not progress now. If the reason is finance, amendment 13 provides the opportunity to reflect on that. The Opposition would swallow our pride and support him in not having the saving gateway scheme starting this year, next year or the year after. That would be a big step for us, but we might consider it if he would accept amendment 13.
Is not the truth about the Government’s position on the saving gateway that if they were serious about using it as part of tackling the deficit, as the hon. Member for Truro and Falmouth (Sarah Newton) said, they would support amendment 13 and delay repeal of the 2009 Act, because improving the financial habits of people from the poorest backgrounds is part of what the coalition Government say is their solution to the country’s financial problems?
I thank my hon. Friend for his intervention. He emphasises that amendment 13 would not cost the Government anything. If it cost anything, it would be a minuscule amount to maintain the scheme because it has not yet started. The Minister froze it, and said that he would not start it in July 2010, as planned by the previous Labour Government. All the expense to date has been on the pilots in phase 1 and phase 2. I remind him that the legislation had his support and that of his hon. Friends the Liberal Democrats without a vote on Third Reading, and with warm words being spoken by them in Opposition. The situation now—it is self-evident to my hon. Friends—is that we have a scheme that is on the statute book and that has been successfully piloted but has not commenced. Amendment 13 gives the Minister the opportunity to delay its commencement until at least 1 January 2014.
If the situation improves and the Minister’s economic policies ensure that we tackle the deficit, build a strong economy, recoup our money from Ireland and consider all the issues that we have talked about during debates on the economy over the past few months, he will be able, if he wants, to go back to his electorate in Fareham, Truro, Falmouth and everywhere else and say, “Not only have we helped to tackle the deficit, we have not hit poor people in doing so.” He will have secured a scheme that he can continue to implement because he will be able to repeal the 1 January 2014 date later. Presumably, both the Liberal Democrats and the Conservatives thought that it was a good thing in February last year, or they would have voted against it on Third Reading, and would not have used such warm words to describe it from the Opposition Dispatch Box.
I agree that the coalition definitely wants to enable people to make better financial decisions, and I am sure that the Minister will detail all the ways in which we plan to do that, but I want to bring the right hon. Gentleman back to the evidence that we heard about the saving gateway from the Institute for Fiscal Studies:
“There was not any really strong evidence from the saving gateway that it led to more overall saving from lower-income households.”
I could go on. There is not the strong evidence base that the right hon. Gentleman refers to.
That is not what the pilots showed. They showed that there were new savings, engagements and increased resources. Does the hon. Lady believe that, at no cost, we could maintain the saving gateway on the statute book, allow it to develop for the next two to three years, and not abolish the scheme until 1 January 2014? If she voted for amendment 13 tonight, she would vote not to spend any money or to start the scheme but simply to say, “Let’s note the pilots that have taken place and that the legislation is on the statute book, but let’s not repeal it until a future date.”
That option would allow the Minister to accept the amendment and reflect on the matter. I remind him that not only did he and the hon. Member for Taunton Deane support the measure in February, but nowhere in the coalition agreement or at the general election was there a manifesto commitment to abolish the saving gateway account—[Interruption.] The hon. Member for Birmingham, Yardley (John Hemming) asks whether it was in our manifesto. No, it was not. The Minister knows that it was not in his manifesto, but it was certainly in ours to maintain it once it had started.
We heard warm words about the scheme before the general election, no words about its abolition during the election and no manifesto commitment to do so. We have had successful pilots, and there is an opportunity tonight for me to put aside my wish for it to start in July and to ask the Minister not to abolish the scheme now, but to reflect on it and allow it to stay on the statute book. If it is a good scheme, as it presumably was in February and at the election, the Minister could return to it in the future and decide whether the Government can afford to contribute to it.
The pilots showed that the scheme increased poorer people’s savings. They were successful, and I hope that the Minister will not throw it out and stand on its head what he said in February 2009. He has had plenty of other opportunities to do that.
I welcome this opportunity to express my views on the concept of saving gateways. I listened with interest to the shadow Minister expressing his desire to save them for the future, but in his defence he missed some of the key pieces of evidence that we heard in the Bill Committee. I should like to remind him of some of that evidence. Adrian Coles, director general of the Building Societies Association, told us:
“No building society had committed to offering a saving gateway”.
Eric Leenders, executive director of the British Bankers Association, said that there were
“only a couple of providers who felt that it was suitably beneficial for them to provide the account”.––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 34, Q98.]
The Post Office would participate only if provided with taxpayers’ subsidy. It will cost £300 million to continue with the scheme.
There was a great deal of debate in Committee about the possibility of the fourth link in that chain being credit unions, and I pay tribute to the hon. Member for Makerfield (Yvonne Fovargue) for her assiduous advocacy of their cause. In a way, she was quite right. I was impressed to hear how many credit unions there were in Makerfield. I think she said that there is one at the end of almost every street, or certainly within walking distance for most of her constituents. We have a very successful one in Blackpool, too, but they would not be available for this purpose in the many parts of the country where the credit union movement has yet to implant itself fully, so we would be left with the kind of postcode lottery against which the shadow Minister was fulminating in the previous debate. We cannot have it both ways.
The hon. Gentleman describes a lack of credit unions in certain parts of the country, which is precisely why the opportunity to have the saving gateway is so important. Does he not appreciate that Government input into helping lower-income families to save is exactly what is needed to provide the necessary impetus?
Unfortunately, the hon. Gentleman’s point was not borne out by the evidence of Mark Lyonette of the Association of British Credit Unions Ltd. He was quite clear when he said of the saving gateway:
“None of the credit unions built their business plan around it, so I don’t think its withdrawal is a threat to the health of credit unions.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 52, Q149.]
It is important to ensure that we give credit unions what they want, and that is why we are seeing reforms to the Credit Unions Act 1979 enabling them to work with more than just individuals—they will now be able to work with interest groups, social enterprises and the like. We should not therefore allow the Opposition’s statement that credit unions have to be involved to obstruct the fact that this scheme will cost £300 million to continue. This might cause some Opposition Members to roll their eyes and shake their heads, as they did earlier in response to my hon. Friend the Member for Truro and Falmouth (Sarah Newton), but we are now living in a very different fiscal situation. The shadow Minister was quite right: the Government have changed, and we now have to take tougher financial decisions. We cannot justify spending £300 million on a saving gateway that will not be universally accessible across the country because there simply are not enough commercial providers willing to provide it. This is not a debate about a group hug, or about trying to encourage everyone to save more. We all know about those things.
I have been delighted to hear the hon. Member for Makerfield talk about Brighthouse, of which there is a branch in my constituency. I almost thought that she must have sneaked into my surgeries, because her tales about her voters’ problems with Brighthouse were the same as mine. However, I do not think that the saving gateway is the answer to the problems that many poor people face in getting access to cheap credit. It is not the answer to the problems we have been discussing. It fails the test that I raised on Second Reading—a test that I call my rhododendron test. The Opposition have a tendency to fixate on a single item of legislation that they believe will somehow solve all the problems in the world, but I am afraid that the saving gateway, however popular the pilots might have been, has not been popular enough with the providers that we need to ensure its success. That is why I support the Government’s decision to remove the scheme.
I want to talk about the abolition of the saving gateway and the disappointment felt not only by the putative savers but by the credit unions, which thought that it would have a massive impact on the sector. The credit unions put a large amount of time and money into designing and introducing their product because they believed that the scheme had cross-party support. While matching the money is important in incentivising savings, it is not the only factor involved; in fact, it is not always the most important factor in influencing people to save. As we have heard, ease of access to a financial institution cannot be overstressed, and to use the existing credit unions at the heart of the community and to encourage the growth and development of the sector via this product was seen as vital. Indeed, Mark Lyonette said that encouraging people to save with credit unions was the issue. People are used to credit unions giving out loans, but the important thing is to provide them with products that encourage people to save.
The message that has been endorsed by the Government via the scheme is that even a small amount of savings matters, and that cannot be overstated. Most people do not deliberately set out to be in debt, but life events—such as the loss of a job, accidents, disability or even something as simple as the cooker breaking down—can cause debt. A small amount of money saved can act as a buffer, and people can then feel more in control and have more confidence. The value of that feeling cannot be overestimated.
It might be conventional wisdom that people should pay off all their debts before they start to save, but I take issue with that, as do people from the credit unions. As I said, events happen. The washing machine might break before someone has paid off the cooker, and if there is nothing to fall back on, the spiral of debt gets faster and deeper. That is when people turn to the legal loan sharks who charge more than 2,000%, or the actual loan sharks who prey on the vulnerable who have no resources. It is vital to provide a mechanism to remove people from the spiral of debt and make it easier to save. We know that people want to save for such events. Otherwise, why would so many people have saved with Farepak, a scheme that they believed was safe? If we could provide a trusted, easily accessible, local savings vehicle to encourage saving, we would prevent a considerable amount of human misery as well saving the health service a considerable sum for the treatment of depression and, in some cases, attempted suicide due to debt. A small amount of investment now could prevent a huge amount being spent later, and I urge the Government to reflect on that.
The Government have to look at what can be done when resources are limited. It is generally accepted that we need to enable people on lower incomes to save, and access to bank accounts and credit unions are important in that regard. We had an evidence session in Committee, which was quite useful. The Institute for Fiscal Studies has no axe to grind in this regard, but its acting director, Carl Emmerson, said that
“perhaps the £115 million should just be spent on boosting the incomes of these individuals.”
I then asked him:
“Or potentially on a system with more crisis loans?”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 19, Q47.]
His response to that question was yes.
There is no question but that people need to balance their costs when they have to replace a washing machine, for example, and need the resources to do that. There is an issue there, but the Government need to look at the best way of helping people in those situations.
The Government are not leaving people entirely bereft of support, are they? Next spring, the new national financial advice service will be introduced, which will make available to everyone who needs financial advice—not just those in education—real support to ensure that they make the best financial plans for their families.
Indeed. The difference with this particular scheme was that it was to provide a way of matching funds that people put into their savings. If we go back to the evidence session, we find that the Institute for Fiscal Studies was asked whether it thought the child trust fund did no harm; in fact, it showed that this particular scheme had the potential to do harm by encouraging people to put money into the savings account rather than pay off the debt at the time. The Royal College of Midwives said that if people have just had a baby, it is better for them not to save money, but to spend it on healthy living and feeding the baby well. I believe that this is where the Opposition are fundamentally wrong. According to the IFS—again, I stress the IFS rather than the Government or the previous Government —there was no strong evidence that greater saving was encouraged.
I would be grateful if the hon. Gentleman could tell us why the Minister of State, Foreign and Commonwealth Office, his hon. Friend the Member for Taunton Deane (Mr Browne) supported the scheme prior to the election, did not oppose it during the election and did not vote against it on Third Reading?
If there were an amendment to say that we should delay it until it is instituted by order, I would find that more reasonable, but I do not think we should set a date in the future. If there is not sufficient independent evidence that this scheme achieves a result and there are good arguments to show that there are better ways of helping people in these circumstances, I would press the Government to consider them and work with organisations such as the credit union movement to ensure that everyone has access to accounts, is encouraged to balance out their financial positions and gain wider access to crisis loans.
The hon. Gentleman did not answer the question about why there was such a change of heart. When the figures came out after the election, they showed that borrowing was £20 billion lower than had been assumed before the election. That could not have been the reason for the change of policy.
The hon. Gentleman ignores the fact that there was a sovereign debt crisis in Greece and that we need to learn from circumstances. If we do not do so, we will face great difficulties. We have a saving of some £100 million-plus on a scheme viewed by independent experts as not being the best way to use that money. There is no independent evidence that it even achieved its objective, save perhaps for reducing the amount of money people spent on restaurant bills when eating outside the home or on takeaways. That is what the IFS drew our attention to at the evidence session. If we are serious—and we are—about ensuring that the Government keep the interest rate on sovereign debt down so that we avoid ending up with the problems of Greece or Ireland, we must take that into account.
Yes, I accept there is a job to be done: we need to look after people on lower incomes and ensure that they have access to funding systems so they can balance their finances when they incur higher expenditure. We also need to encourage people to save where appropriate, but it is not always appropriate to do so. As I mentioned, the Royal College of Midwives said that a mother who has just given birth should not be concentrating on saving all her money; she needs to focus on eating well. On that basis, the proposals represent an entirely sensible and reasonable way of reducing the amount of money that the country has to borrow.
First, the selection of evidence we have heard from the Committee sittings is very limited, particularly from the hon. Member for Birmingham, Yardley (John Hemming). Other people giving evidence explained exactly how helpful the saving gateway scheme had been in its pilot phases and could be in the future. Mark Lyonette of the credit union movement said how important saving was, not only because of the money actually saved, but because of
“what it does to people’s confidence that they have… a few hundred pounds built up over a year or two. It gives them some sense that they are more in control. They will have credit commitments at the same time, but it is really important to feel that there is something of a buffer. Whether through the savings gateway or some other initiative, we think that the Government can encourage—and needs to encourage—more people to get that better balance between what savings they have, however small, and their credit.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 49, Q143.]
Yes, he also said that the saving gateway was not the only way to generate savings for the credit unions, but when asked whether it would make an important contribution he said “Yes, absolutely,” it would.
I did not quite understand the rhododendrons reference of the hon. Member for Blackpool North and Cleveleys (Paul Maynard), but he seemed to suggest that we believed that a scheme like this was “the answer” to deprivation and poverty. That is obviously nonsense. We are not suggesting that and we never have suggested it. It is one part of a whole jigsaw of provision that has to be put in place. It is that part of the jigsaw that needs to look forward to two things: first, questions of asset inequality; and, secondly, long-term solutions where people begin to change their behaviour and build up some assets for themselves.
It is important that we start looking to the long term. What worries me about the response from the coalition Government to this Bill is that it is very short term. The response is in effect, “Let’s get rid of this now. We’ll make some savings. We’ll destroy some schemes.” Both this group and the earlier group of amendments are about looking at issues in the longer term. If we do not start doing that, we are never going to get to the point where we properly tackle poverty and deprivation. It is not that saving gateways are suddenly the answer to everything; they are simply one mechanism that would assist in tackling the problem.
The important part of assisting is not just to give people advice. There is a great deal of advice out there, and there needs to be more of it—I certainly would not disagree with that—but this scheme, because of the matching in it, is about giving people practical help and incentives. It is qualitatively different from giving people advice at school or through an annual health check on their finances, when they can tell the financial adviser that there is no money. That would not be particularly fruitful for a lot of families. This is a practical scheme. It is about matching saving; it is about incentivising saving.
The hon. Lady is dismissive of the importance of advice, good numeracy education in schools and an understanding of money. Proper budgeting and gaining an understanding of how to spread what I accept are limited means—I agree that this Government desperately need to deal with poverty in this country—are important; she should not be so dismissive of the importance of advice and good numeracy education in schools.
I was not being dismissive of advice; I said that it is not enough in itself. To suggest that it can be a substitute for something like the saving gateway is to miss the point—the real nudge, or the real incentive, that comes from the matching.
It has been suggested that there were not enough outlets for people to use the saving gateway, but the housing association movement was very interested in it and had a great deal of discussion about how it could become, in effect, a front end for people who wanted to save through the saving gateway scheme.
Does my hon. Friend agree that although advice and budgeting are important, one problem in society is the lack of good financial education? For people on very low incomes, it is difficult to find a means of saving. That is the whole point about the saving gateway and credit unions; otherwise, there are not the accounts or mechanisms for people on low incomes to save.
Indeed; I agree with my hon. Friend.
My point about the housing association movement is that the people who say that there are not enough outlets to make the saving gateway really work are not sufficiently prepared to look at some of the things that already exist. I firmly believe that we could have built the scheme up. If tenants could have agreed to small savings being taken at the same time as they paid their rent, for example, which would then be passed over to the provider—whether it be a credit union or another organisation involved in the saving gateway—that would have provided a relatively straightforward and easy-to-access method for those tenants. Housing associations, which see themselves as having a wider role than simply being a landlord, felt that this would have been helpful for their tenants.
We hear so much of “We have to do this because of the deficit.” We are told by the coalition Government, “We had to change our minds about all these things”—in fact, both Government parties did not support all these proposals, although they did support the saving gateway scheme—“because of the financial situation.” We have two different views about how to get out of a recession. The Government parties did not just want to pay down a deficit which they suddenly claim not to have known about before, although they did know about it and, as was pointed out by my hon. Friend the Member for Sefton Central (Bill Esterson), it had in fact been falling. They decided to reduce that deficit speedily, within five years, regardless of the consequences. There is another choice, although the Government may not agree with it.
The Government say to us, “You cannot support child trust funds or any of the other measures involved, because if you do, you will not reduce the deficit.” That is not the case. We take a different view on the economy. Our view is that the deficit should be reduced far more gradually. That was also the clear view of the Liberal Democrats as recently as late April: they said that fast cuts would be exceedingly dangerous. I do not see what has changed since then.
Ireland has been mentioned yet again. It cut public sector salaries and services, and it cut very hard. Indeed, only a few months ago it was being set up as a model in that regard. However, it has not got itself out of its financial difficulties.
We believe that if we reduced the deficit more slowly, two things would happen. First, we would be able to make choices about the things that are important, and I believe that the saving gateway would be one of them. Secondly, if we did not cut so drastically, unemployment would not be as high, which would mean more money for the Treasury, and we would not have a growing deficit problem. I firmly believe that if we proceed with the Government’s proposals the deficit will not be reduced as fast as they would like, despite the cuts, and it may actually increase.
We believe that those choices exist, and that the saving gateway is important because of the advantage that it brings to low-income families. It represents a long-term and real effort to change behaviour and improve the circumstances of such families, and that is why we want to retain it.
The speech of the hon. Member for Edinburgh East (Sheila Gilmore) was remarkable. It appears that only one group taking part in international debates is suggesting that we should be less aggressive in tackling the deficit and should put ourselves at the mercy of international markets, and that group is the Labour party. Surely the one lesson that should have been learned from our current circumstances is that a credible plan is needed to tackle the deficit, but Labour lacks that credible plan.
Many economists share our view, including Joseph Stiglitz and David Blanchflower. It is not true to suggest that it is only the view of the Labour party. There are different views, and it is entirely legitimate for people to hold different views, but it is simply not true that no one shares our view that reducing the deficit too rapidly is dangerous.
If the hon. Lady reads the comments of international organisations such as the OECD, the International Monetary Fund and the European Union, and those of rating agencies such as Standard & Poor’s, she will find that mainstream opinion agrees with the Government about the need to take action now to tackle the deficit in order to avoid the crises that we are seeing elsewhere in the world. All that we hear from the Labour party is “Let us delay the difficult decisions. Let us go into the election with the structural deficit, and try to deal with it in four or five years’ time rather than now.” That has been the theme of Labour Members’ contributions throughout our debates on the Bill. They have denied the need to tackle the deficit now, and have ignored the lessons that are being presented all around us.
Let me make some progress and explain why we are repealing the Saving Gateway Accounts Act 2009. The repeal is part of our deficit reduction policy. The right hon. Member for Delyn (Mr Hanson) quoted from my Second Reading speech. It was the third time that I had heard him use the same quotation. Let me now, for the third time, expand a little on what I said on that occasion. I said:
“The pilot scheme demonstrated some benefits, but it demonstrated some challenges too… What are the long-term benefits? What are we getting in return for the quite generous bonus that we are giving to savers?.. In the second pilot, questions were raised about whether the scheme was effective… First, there was no statistically significant evidence that, in delivering genuinely new savings, the saving gateway accounts delivered higher overall net worth.”
I referred to a
“number of anecdotes, rather than hard evidence, used to support the proposal”,
“It appears that money was moved from one set of savings to another, perhaps from a current account to a savings gateway account, simply to secure the Government match.”—[Official Report, 13 January 2009; Vol. 486, c. 145.]
While accepting the principle behind the saving gateway account, we nevertheless flagged significant concerns about its effectiveness.
The right hon. Gentleman mentioned the pilots. According to the conclusion from the second pilot,
“when we look at a broader measure of net worth (including investments as well as all cash deposit accounts), there is no statistically significant evidence that funds held in these forms have increased… we nevertheless do not find statistically significant evidence of an increase in overall net worth among this group.”
Carl Emmerson said in his evidence to the Committee:
“There was not any really strong evidence from the saving gateway that it led to more overall saving from lower-income households.”––[Official Report, Saving Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 18, Q42.]
Given the fiscal constraints that we face, we must question the value for money to be obtained from this project. It would be nice to be able to proceed with it, but the evidence suggests that it does not increase saving and does not possess the benefits ascribed to it by Labour Members. Not only is the evidence of its effectiveness in question, but it would cost more than £300 million over the next five years, which makes it unaffordable in the light of the need to reduce the deficit.
The other strand of the argument, touched on by the hon. Member for Makerfield (Yvonne Fovargue), is access. Who would be able to gain access to the saving gateway account? My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) echoed Adrian Coles, the director general of the Building Societies Association, who said that
“no building society had committed to offering a saving gateway account”.
Eric Leenders of the British Bankers’ Association said
“there were only a couple of providers who felt that it was suitably beneficial for them to provide the account.”
The banks that said they would provide accounts were Royal Bank of Scotland and Lloyds. The Post Office would take part in the scheme only if it received more taxpayers’ money.
I do not think we would have seen the easy access that the hon. Lady believed to be a key part of the scheme’s attraction. The only credit union outlet in my constituency is in a deprived area, and is open for only a short time each week. In my constituency, credit unions would not have been a vehicle for access to the saving gateway account.
Given that we do not intend to proceed with the scheme, we should leave no room for uncertainty among financial institutions or advice-giving bodies, and the best way in which to be clear about our intentions is to repeal the 2009 Act. I believe that if a future Government revisited the scheme, they would design it very differently. If the right hon. Gentleman wishes to press his amendment to the vote, I will ask my hon. Friends to oppose it.
I am disappointed by the Minister’s response, but that is the nature of the role that I currently fulfil. He did not oppose the saving gateway in opposition or in the general election; he did not vote against Third Reading of the Saving Gateway Accounts Bill; and he could have taken the opportunity today to accept the amendment enabling him to delay the repeal of the Act until a later date in order to judge how the economic situation developed. I have to assume that he says one thing in opposition and another in government, and that he is abolishing the scheme on the basis of dogma rather than the economic situation. I urge my hon. Friends to reject clause 2, and to support the amendment.
Question put, That the amendment be made.
With this it will be convenient to discuss the following:
Amendment 42, page 2, leave out lines 26 and 27 and insert—
‘(2) The Treasury will conduct a review of the health in pregnancy grant, to be concluded by 1 January 2012, which will consider, inter alia, the case for—
(a) the health in pregnancy grant to be retained in its current form;
(b) the health in pregnancy grant to be means-tested or in other ways targeted towards those most in need; and
(c) the health in pregnancy grant to be replaced by a system of vouchers.”’.
Amendment 44, page 2, line 27, leave out ‘2011’ and insert ‘2014’.
Amendment 43, page 2, leave out lines 31 and 32 and insert—
‘(2) The Treasury will conduct a review of the health in pregnancy grant, to be concluded by 1 January 2012, which will consider, inter alia, the case for—
(a) the health in pregnancy grant to be retained in its current form;
(b) the health in pregnancy grant to be means-tested or in other ways targeted towards those most in need; and
(c) the health in pregnancy grant to be replaced by a system of vouchers.”’.
Amendment 45, page 2, line 32, leave out ‘2011’ and insert ‘2014’.
Amendment 34, page 3, line 1, Clause 4, leave out ‘Sections’ and insert ‘Section’.
Amendment 30, page 3, line 1, leave out from ‘1992)’ to ‘extend’ in line 2.
Amendment 35, page 3, line 4, leave out ‘Sections’ and insert ‘Section’.
Amendment 33, page 3, line 5, leave out from ‘1992)’ to ‘extend’ in line 6.
Amendment 38, in title, line 2, leave out from ‘2009;’ to ‘and’ in line 3.
I am sorry for not notifying you in advance, Mr Deputy Speaker, that my right hon. Friend the Member for Delyn (Mr Hanson) and I would be job sharing on Report.
We had a reasonably comprehensive debate in Committee on clause 3, which deals with the abolition of the health in pregnancy grant, although not as comprehensive as we would have liked. The Minister did not provide as much explanation as we would have liked on why he and his Government colleagues felt compelled to rush into axing the grant without sufficient evidence that it is not achieving the purposes for which it was intended. Amendment 3 would therefore delete clause 3, the grant would continue and we would have more time to assess whether it improves maternal health and nutrition, and the health of the unborn child and the child once it is born, and whether it achieves the important aim of getting expectant women to access professional advice during pregnancy.
I do not have time to rehearse in full the arguments in favour of such intervention during pregnancy. In Committee, we heard compelling evidence from witnesses of the health benefits for mother and child of tackling poor nutrition. We heard statistics about how many parents worry about not having enough money to feed their families and how many people on low incomes do not have enough money to provide healthy nutritious food. That can be seen in research carried out by organisations such as the Joseph Rowntree Foundation on what sort of household income would be sufficient to provide a healthy diet. Witnesses also told us of the importance of the grant as a nudge towards changing behaviour—the Prime Minister has been a keen advocate of such nudges in the past. By giving the grant and, in particular, by making the payment conditional on accessing advice on nutrition during pregnancy, we have encouraged expectant mothers who perhaps were not completely au fait with nutritional issues to start thinking about them, to access advice on health during pregnancy and to start on the road towards changing their patterns of behaviour. The scheme was in place for only a couple of years, so there was nowhere near enough time to assess its impact, but we heard evidence that it could help break generational cycles of poor nutrition, poor health, birth defects or even mortality during childbirth.
We heard other evidence about whether intervening earlier and paying the grant at 12 weeks rather than at 25 weeks would be a better approach, but we have not tabled amendments to that effect because we debated it extensively in Committee. I know that the Minister will probably say that there is little or no evidence that the scheme has done what it set out to do—the Government have also argued that in respect of the child trust fund and the saving gateway pilots. The simple answer to that is that the Government do not have any evidence that it does not work, because they simply have not given it time to roll out. The Conservative party element of the Government went into the general election seemingly happy that the health in pregnancy grant would continue. I concede that the Liberal Democrats are honouring their election commitment to scrap the grant and so are being consistent—they are wrong, but for once they are being consistent.
I shall now deal with the more detailed amendments tabled by the Labour Front-Bench team. Amendment 42 calls for a year’s moratorium on the abolition of the grant while a full review of its benefits is carried out. Such a review would consider the advantages and disadvantages of retaining it in its current form; of means-testing it or otherwise targeting it towards those who are deemed to be most in need and who would benefit the most; or of replacing it with a system of vouchers.
I stress that our preferred option is retaining the grant in its current form, but throughout the Bill’s progress through the House and in Committee two main criticisms have been made by the opponents of the grant. The first is that, as a universal benefit, it goes to those who do not need it and the money could be better spent on those who do. The second is that, because it is given as a direct payment with no restrictions on how it should be spent, it could be spent on frivolities. That is said despite the evidence we heard from child poverty groups, not only in this instance, but in general throughout the debate on child poverty. They suggest that the vast majority of women trying to get by on very limited incomes will spend any modest additional resources wisely and well, doing so for the benefit of their child or, as in this case, their unborn child. Some said on Second Reading that women could not be trusted, which is why we included as an option for the review consideration of whether a voucher scheme would be a better use of money.
Amendment 46 also calls for a moratorium, although it does not propose a time scale, while the Treasury—assisted, I would imagine, by the Department of Health or the Department for Education—conducts a review of current provisions for expectant and new mothers. That would include looking at other options on the table; it would consider not just the health in pregnancy grant, but the way in which it overlaps and interlinks with the Healthy Start scheme and the Sure Start maternity scheme, which is also being rolled back. That would give us the opportunity to examine whether those schemes are a more effective way of achieving what the health in pregnancy grant was designed to achieve.
Amendment 44 suggests postponing the abolition of the grant until 2014 and is, thus, self-explanatory. That would give more time for a proper assessment to be carried out on the experience of and health outcomes for people who have received the grant, and, more importantly, had access to the advice on maternal health which has accompanied the money.
That leads me to the last of the amendments tabled by those of us on the Opposition Front Bench. Amendment 49 calls again for a one-year moratorium during which the Government will consider how we can ensure that more women have access—
Order. May I suggest that we stick to the amendments that are selected for discussion now? Amendment 49 is not on the selection list and nor are some of the other amendments. If we could stick to the list, I would be very grateful.
Sorry, Mr Deputy Speaker. I assumed that they had all been grouped together.
Let me make a general point that links back to amendment 3 and the need to retain the grant. This is not just a matter of putting the £190 into people’s pockets so that they can spend it either on improving their diet during pregnancy or on items that they might need when the child is born. We need to bring people in so that they access professional health advice at the 25th week of pregnancy or, as we have debated, earlier in pregnancy. That is really important and there is nothing to replace it. The Government seem to have no suggestion on how to bring people in through the door and ensure that we increase the number of women who access such advice if the health in pregnancy grant is not used as a trigger mechanism. If the Government will not accept amendment 3 or any of the other amendments that call for more time and a review of how the grant works, will the Minister at least tell us how we can ensure that more women access professional advice on their health and the health of their unborn child during pregnancy? The grant was designed to tackle a serious issue and it is being abolished in its early stages. It is a shame to abandon the project at this stage.
Thank you, Mr Deputy Speaker, for giving me the opportunity to speak about the health in pregnancy grant, which of the three items covered by the Bill caused the most consternation in Committee and on the Opposition Benches. It certainly appeared to cause confusion in the Opposition’s arguments.
I have noted even today that there has been a slow, gradual erosion in the totalitarian position taken early on by the Opposition that the health in pregnancy grant was the most wonderful thing imaginable and could not possibly be trampled on. There has been a gradual slip back and quite a few Opposition Members have claimed that the grant was somehow misnamed and that, had they only called it something different, it would have all been all right. I must take them back to what the previous Prime Minister said when the grant was introduced. He said that he had received “powerful representations” about the
“importance of a healthy diet in the final weeks of pregnancy”.
He was very specific. He said the “final weeks of pregnancy”—not early in pregnancy, halfway through, in the 12th week, in the first week, or in the 25th week. The grant was well named, because it did precisely what the previous Prime Minister intended it to do.
The debate is not about the benefits of maternal nutrition, either. Everybody in the House agrees about the importance of proper maternal nutrition, but, clearly, we are divided on how that is best achieved. The Government do not believe that the health in pregnancy grant is the way to do it.
The debate is certainly not about timing. We have a range of alternatives: the Healthy Start vouchers, the maternity grant, and the Sure Start facilities. The shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) focused in particular on access to health care advice. I entirely agree with her about that, but she cannot avoid the fact that the Healthy Start vouchers are linked to attendance with a midwife.
Furthermore, the idea of the health in pregnancy grant was to provide access to health visitors, but one of the previous Government’s innovations that I wholeheartedly approve and wish to build on is the family nurse partnership schemes that operate in about 50 different councils. They specifically offer the access to advice for the most vulnerable that the hon. Lady was talking about. I simply do not understand her obsession with the health in pregnancy grant as the sole mechanism through which we can access advice. There are already multiple pathways to that advice—pathways that are more successful. I even think that there is a family nurse partnership in Bristol. Such schemes target the most vulnerable in society from the moment of conception until well past birth. This is far more expensive, I accept, but that is because it is a targeted intervention.
I do not accept the hon. Lady’s argument that we need to retain the health in pregnancy grant because it gives access to health advice. It is not the sole pathway for that.
The hon. Gentleman mentioned the family intervention project, and he is right that it does some valuable work—including some valuable work in Bristol. Does he have any idea how many families receive that advice and how many have been brought within the scheme compared with how many people would have received advice through the health in pregnancy grant?
It is actually called the family nurse partnership, but I assume that we are talking about the same thing. I know that in Blackpool it has worked with about 200 families in the past year. The numbers are clearly far fewer than those who could access the health in pregnancy grant, but once again the hon. Lady is returning to the debate that we have had over and over again about the universal versus the targeted.
Does my hon. Friend agree that the difference with schemes such as the one in Bristol that he and the hon. Member for Bristol East (Kerry McCarthy) mentioned is that they can show tangible results, whereas the health in pregnancy grant can show no tangible evidence of how it has been beneficial?
I agree entirely. That is a very fair point. It was never clear whether the Opposition believed in universality or targeting. It seemed to depend on which amendment they happened to be pressing at any moment in time. It was part of the incoherent approach that they seemed to have to the debate.
The previous Government never tackled the issue of how it took up to eight weeks merely to process a health in pregnancy grant claim. The money often came through not in the 25th week but in the 33rd week—well beyond the time at which there was any hope of achieving real dietary change.
I specifically tackled the hon. Member for Bristol East on the issue of usefulness versus effectiveness. When she said in Committee that this was a useful grant, I asked her how she defined useful. She mentioned access, which I have dealt with, but never really dealt with the issue of effectiveness. That was my concern with the Opposition’s argument. At no point did they try to evaluate properly how effective the scheme was. I know that many amendments were tabled asking for such an evaluation, but all along the Opposition’s rhetoric was to use the word “useful” rather than “effective”. At no time did they argue that the scheme was effective, so we were left with not very much more than the shadow Minister trying to argue that it was nice to hand out other people’s money to other people. It might well be, but that is not a firm or solid foundation on which to build a health in pregnancy grant.
I support the abolition of the grant for the simple reason that we have a number of alternative mechanisms to support families who need assistance during pregnancy. The grant was not paid out at the right time in pregnancy, in my view, and I do not believe that it has achieved its goal. I do not believe that we would even be able to provide the evidence if that were the case. I wholly support the Government in what they are trying to do.
I am very sad that the Government have brought forward proposals to cancel the health in pregnancy grant. We have heard this evening and during the Bill’s earlier stages a number of criticisms of its structure. We have heard that it is paid at the wrong time—too late to have a significant impact on maternal nutrition and well-being—and that the money could have made more difference, even pre-conception, to low-income women of child-bearing age. We have heard that it misses the point and that women fritter it away on shoes and going to the spa. That might be true of a minority, but for many others the grant makes a crucial difference at a time when family finances become tight.
The Opposition have been asked whether we are not confused about wanting the grant to be universal or targeted at low-income and more vulnerable women. We are not confused. We are clear that we want a universal grant for all the reasons that we believe in universality: it is more effective at reaching the most disadvantaged, more cost-effective and simpler to administer, and it is easier to know when one is entitled to claim. We accept, however, that if we have to settle for a reduction in spending on pregnant women then, for a time at least, a targeted payment would have enabled us to keep the structure of the grant until it became affordable to offer it again on a universal basis.
We have also heard that the grant is not enough money and that £190 could not make much difference to a family budget. I assure hon. Members that £190 is a substantial sum to low-income households, particularly at a time when both parents might be facing the additional costs of a new arrival and when household income might dip as the woman takes time out of work to care for the newborn child. Whatever the grant’s imperfections, it is a matter of enormous regret that the Government propose to reduce our investment in women as they conceive, carry and give birth to children. I very much regret anything that could have a detrimental impact on maternal health and well-being.
We are very well aware of the effects of good maternal diet on the birth of healthy babies. Low-birthweight babies suffer particularly poor long-term outcomes in health and education and there is considerable evidence that poor maternal nutrition affects babies’ pre-birth development, including brain development. It is therefore very important to take every step we can as early as we can to improve maternal nutrition and therefore the chances of children being born healthy. My hon. Friend the Member for Bristol East (Kerry McCarthy) has already mentioned that the grant, which is linked to nutritional objectives, has enabled us to begin developing healthier eating habits in new mothers that would continue right through until after their child’s birth and on into family eating habits. We received evidence on that from a number of expert witnesses in Committee. We in Opposition are keen to sustain that long-term, albeit somewhat intangible, benefit.
Most importantly, the grant delivers more money to families and helps to relieve pressure on family budgets at a time when extra expenditure will be incurred. If it is not spent directly on food and nutrition, at least it frees up the family budget by meeting the cost of other, perhaps lumpy, items that parents have to buy when a new baby is expected, so there is less worry about the pressure on household budgets to meet day-to-day outgoings at that time. That is important in reducing the level of stress and mental distress that is felt by pregnant women if they are worried about money as they await the birth of their baby. It is particularly important that women prepare for birth in a calm and confident frame of mind. We know that women run out of money to pay for food if they are trying to manage in the late stages of pregnancy on a low income. We should seek to hold on to anything that can help to compensate for that fear and help them to be confident that they can make ends meet, so I very much regret this retrograde step.
Throwing the baby out with the bathwater is not desirable or necessary, and that is what the Opposition’s amendments seek to highlight. We want to take time to reflect on what in the grant has been successful and needs to be built on. If the grant is not the right mechanism, I challenge the Minister to tell us what he will offer instead to improve the well-being of pregnant women and the prospect of kids being born healthy. The health in pregnancy grant is, as the Zacchaeus 2000 Trust has said, not enough but a step in the right direction. I very much regret that we are seeing a step backwards—a step in the wrong direction—from the Government.
I support the abolition of the health in pregnancy grant, not least because £150 million a year could simply be better spent on improving the life chances of our younger generation—for example, by reducing the deficit and the burden that they would otherwise bear as a result for years to come. The grant is poorly focused, poorly targeted and poorly timed. It is poorly focused because it does not have to be spent on nutritious food or on the health and well-being of the mother or child, as was originally intended. As Dr Callan of the Centre for Social Justice said in evidence:
“There was absolutely no guarantee that the grant would be spent on nutritious food.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 116, Q279.]
Indeed, the Committee heard evidence to the contrary, as has tonight been confirmed by a Labour Member.
The grant is poorly targeted because it is paid to the better-off and not just those who really need extra financial help in pregnancy. I find that quite offensive, as someone who—along with many of, if not all, my colleagues on this side of the House—shares a real desire to improve the life chances of the less well-off.
On that basis, if the hon. Lady feels so strongly about it, why has she not advocated that the grant should be retained but restricted to the groups that she feels need it most? I am not saying that that is my point of view, but I was not aware that she or her colleagues were proposing it.
The hon. Lady makes a valid point: we are continuing the Sure Start maternity grant and the healthy start vouchers because their benefit is that they really hit their target, which is some half a million mothers in difficult circumstances who obtain vouchers from the 10th week of pregnancy to buy vegetables, vitamins, fruit and other healthy foods.
Does the hon. Lady not also accept that those women will at the same time suffer a loss of £190 that would also help them with those good outcomes? What steps would she take to ensure that those women were protected and did not find that they had less overall than they had before?
I thank the hon. Lady for that intervention. I made the point at the start of my speech that unless we look at the bigger picture and reduce the deficit that the country is bearing, the generation that those mothers are now bringing up will have to bear the burden of interest on interest for years to come, and their life chances will be far lower than £190 could compensate for.
The healthy start vouchers were described in evidence by Belinda Phipps of the National Childbirth Trust as
“a really good scheme… It has been put together well and people can get a broad range of healthy foods for the vouchers.”
The health in pregnancy grant is poorly timed. Belinda Phipps said in evidence:
“If you are setting out primarily to improve the… health of the baby”
the payment of the health in pregnancy grant
“needs to be earlier. If you… really want to change the future of the baby, it needs to be as early as possible.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 79-89, Q205-224.]
The 25th week is simply too late.
Although there is no doubt that the grant does some good for a number of families, that certainly does not justify the expenditure of £150 million per annum. Indeed, it is a rich irony that, throughout the evening, Labour Members have been exhorting sound financial management, yet now, in the same debate, persist in pursuing what is an example of a seriously ineffective use of public funds—precious public funds of £150 million a year.
We have heard a lot this evening about universal benefits and the need for targeting. I think that we all agree that having a grant that would allow us to give every pregnant woman £190 sounds, in principle, like a good idea, but clinical practice—for me, as an obstetrician—and what we have heard from many colleagues tonight indicates that there is no firm basis or grounding to support a grant of that nature.
I thank my hon. Friend for his comments. He makes the point that I shall develop a little later. If we want to make a real difference to pregnant women, the resources must be given to the front line. I had the experience of working at Brighton hospital for a considerable number of months. There was a great shortage of midwives at my hon. Friend’s local hospital.
No, I will not.
The pregnancy grant would be much better directed if it was used to improve care at the time of delivery, when we know that maternity care matters most in reducing the number of foetal deaths and in reducing poor outcomes in pregnancy and delivery.
The hon. Member for Bristol East (Kerry McCarthy) made the point that we need to be able to measure the effectiveness of the grant, and that it should be a nudge in the direction of good behaviour. I accept that any intervention should encourage good behaviour. Unfortunately, what I saw in my clinical practice, and I speak also as the chair of the all-party parliamentary group on maternity, is that unfortunately many mothers from vulnerable backgrounds were spending the grant on, among other things, cigarettes, which we know have a detrimental effect in pregnancy. There is also a high though often unseen rate of drug and alcohol misuse in pregnancy. The grant is potentially spent on those harmful things as well. Giving an intervention, such as the grant, 25 weeks into pregnancy is far too late to help women deal effectively with those substance misuse problems.
I am sure the hon. Gentleman will agree that the majority of mothers are not substance misusers or alcoholics. Indeed, there is considerable evidence over many years, including from the Policy Studies Institute, that shows that if women are given more money, what they do, as my hon. Friend the Member for Bristol East (Kerry McCarthy) said, is spend it on their kids.
That is a fair point. Nevertheless, many women smoke during pregnancy and do not necessarily give up smoking. The hon. Lady made the point in her speech earlier about low birthweight babies, a factor which we know is linked to smoking. The grant can be used by mothers to support their smoking habit. To be used effectively, a grant must be tied in with results and effect. We all want mothers to have better nutrition, but unfortunately the grant was often spent on harmful substances. The main problem with the grant is that it was not targeted, it was not effective, and it was not making a difference at the time that we know matters to mothers, which is at birth and delivery.
I am slightly suspicious about the extent to which the hon. Gentleman speaks with authority on what the women who come to see him in his surgery spend their health in pregnancy grant on. I cannot imagine them saying, “I’m off now to spend my grant on rather a lot of packets of fags.” What is the difference between the point that the hon. Gentleman is arguing now—that during pregnancy women should not be given a lump sum that they can spend in any way they choose because some of them might spend it on the wrong things—and what happens with child benefit after a child is born? Surely mothers could spend their child benefit on cigarettes, drugs and alcohol. If that is pursued to its logical conclusion, is it not an argument against giving them child benefit?
We are not talking about child benefit this evening. We are debating the pregnancy grant. On the principle that the hon. Lady outlines, if we want to provide an intervention and if we want to make a gift of money effective, we need to target it effectively. We have no evidence to show that the grant is an effective intervention in pregnancy. No one on the Labour Benches has shown that the intervention is effective in improving nutrition in pregnancy.
Granted, in my clinics I obviously did not discuss in detail where the grant was spent. Nevertheless, I saw in my clinical practice far too high a rate of women smoking during their pregnancy. I would much rather see effective and targeted advice, independent of any grant, being focused on making sure that women do not smoke while they are pregnant. That would be a much better way of dealing with the issue.
I endorse what my hon. Friend is saying. I took the time to read in Hansard the entire debate that took place when the Bill was first introduced. The very points that my hon. Friend is making now were made then—that the grant is not the right way to encourage good nutrition in women of child-bearing age, which we all agree is vital.
I thank my hon. Friend for her point. On nutrition in pregnancy, we know from all the evidence that the biggest and single most effective intervention in nutritional terms is to give women folic acid pre-conception and in the early days of pregnancy. Most problems or birth defects occur in the first six to eight weeks of development, when the embryo is very small, so if we are to intervene effectively that is the time to do so. We already do, because all GPs, midwives and obstetricians encourage women in the first stage of pregnancy to take folic acid, which is the single most effective intervention to prevent neural tube defects and all others.
We have heard how we need to ensure that when we intervene, particularly with the most vulnerable and disadvantaged groups, we do so effectively. When the Act was introduced, the whole point of it was to reach those groups, yet people from Traveller communities, Gypsies and people from deprived backgrounds often still do not access maternity services until the time of delivery or when it is far too late. The hon. Member for Bristol East tried to argue that the grant improves access to maternity services among disadvantaged groups, but lots of clinical audits and data prove that it does not. The evidence shows that the grant is not at all effective in helping improve access to pregnancy services. The hon. Lady’s point fails, and I hope Members will bear that in mind later.
We are talking about targeted, results-driven and evidence-based care, but there is no evidence to support the grant as a nutritional intervention or in terms of improving childhood outcomes at birth, so for all those reasons we must target our resources where they belong, on putting those 3,000 extra midwives on to the front line, because they, not a £190 grant, will make the difference.
It has been a brief but thoughtful and thought-provoking debate. The amendments that the hon. Member for Bristol East (Kerry McCarthy) proposes seek to achieve one of three things: keep the health in pregnancy grant in place, delay its abolition or require the Government to conduct a review into the case for maintaining it in another form.
The grant was introduced in April 2009 by the previous Government. When announced in the 2006 pre-Budget report, the provision was to be paid as child benefit from the 29th week of pregnancy to recognise the important role of nutrition in the last months of pregnancy, when nutrition is most important, and in the first weeks after birth, with parents bearing the extra costs. Then, the payment was to be a £190 one-off grant, made from the 25th week of pregnancy with the intention of providing support for the general health and well-being of women in the later stages of pregnancy and helping them to meet costs in the run-up to birth.
Those were laudable objectives, but, as we have outlined on Second Reading, in Committee and again tonight, the grant has been essentially flawed from the outset. There is no requirement to use it for better health and well-being: women can spend the money on whatever they want; and it is paid to pregnant women regardless of their income or need. As Dr Samantha Callan of the Centre for Social Justice said in an evidence session on the Bill:
“There was absolutely no guarantee that the grant would be spent on nutritious food.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 116, Q279.]
In the context of the unprecedented budget deficit, therefore, we believe that this payment to all pregnant women is a poorly targeted use of limited public funds. Abolishing the payment will help to reduce the UK’s budget deficit, saving £40 million in 2010-11 and £150 million per annum from 2011-12 onwards.
Having decided that we need to abolish the grant, the Government believe it should be done quickly to maximise the Exchequer savings. By delaying the abolition until 2014, as amendments 44 and 45 seek to do, we would reduce those savings, and amendment 3 would keep the grant in place, so additional money would have to be found through other spending cuts, borrowing or tax rises this year. As my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) said, there are other priorities. The coalition Government are clearly committed to increasing spending on health in real terms over the lifetime of this Parliament. Are Labour Members saying that that commitment should be relaxed to enable us to keep the health in pregnancy grant?
Much was said by Opposition Members on Second Reading and in Committee about the importance of a healthy diet during pregnancy, the importance of vitamin supplementation, and, especially, the effect of these on women on low incomes. There is no doubt that maintaining a healthy diet throughout pregnancy is important. However, the evidence suggests that that should start at the earliest possible stage. Belinda Phipps of the National Childbirth Trust said in the evidence session on the Bill:
“If you are setting out primarily to improve the nutrition of the mother to improve the health of the baby,”
the payment of the health in pregnancy grant
“needs to be earlier. If you…really want to change the future of the baby, it needs to be as early as possible. It is not possible easily to do it pre-conception, but the earlier in pregnancy you can do it, the better.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 79, Q205.]
Amendments 43 and 44 would stop the abolition of the grant and require the Treasury to conduct a review to consider whether the grant should be retained in its current form, means-tested or replaced by a system of vouchers. As I said on Second Reading and again in Committee, the Government are committed to supporting the health of pregnant women in low-income households through the Healthy Start scheme, which provides support from the 10th week of pregnancy, when diet is particularly important in a baby’s development. The Healthy Start scheme provides vouchers worth £3.10 a week for fruit, vegetables and milk, as well as coupons to exchange for Healthy Start vitamin supplements containing the recommended daily amounts of vitamins C and D and folic acid for pregnant women and new mothers. The Department of Health is also co-ordinating a consultation exercise that seeks views on the extension of the scheme to allow vouchers to be used to buy plain frozen fruit and vegetables. This would increase the flexibility and choice for women supported by Healthy Start while encouraging them to include more fruit and vegetables in their daily diet at the time in their pregnancy when that is particularly important.
The amendments would delay the abolition of the grant or keep the grant in place. That would mean that additional money had to be found through other spending cuts, borrowing or tax rises this year. The Government have to face some difficult choices as to where to cut public expenditure, and we cannot afford to continue spending £150 million a year on the cash payment of a health in pregnancy grant regardless of what it is spent on and whatever the income or financial position of the recipient. As my hon. Friend the Member for Congleton (Fiona Bruce) explained, it is not well focused, well targeted or well timed. That is why I believe that it is right to scrap this grant, recognising that measures are in place to help to support maternal nutrition among families on low incomes. We also have the Sure Start maternity grant, which is a lump sum to help those on the lowest incomes.
The Sure Start maternity grant is given only for the first child. If a family do not have that grant or the health in pregnancy grant, with the Government also reducing the amount that they would get in family tax credits for toddlers, they will be much worse off.
That is an unfortunate consequence of the difficult decisions that we have to take to tackle the deficit that the hon. Lady’s party has left behind. Tough decisions have had to be made to target help as closely as possible on those in the greatest need. The support that exists, whether through the Sure Start maternity grant—yes, we are restricting that to the first child from April 2011—or through the Healthy Start vouchers, provides targeted, focused help for those in the greatest need. That is the best way to give support to help mothers on low incomes through pregnancy. The health in pregnancy grant does not tackle nutrition, and it is not well timed because it should be delivered at an earlier stage to help families.
I have to say to the hon. Member for Bristol East that if the grant goes, there are still plenty of opportunities for expectant mothers to access health visitors, midwives and GPs to get the support that they need to help them with their diet or with smoking cessation, and to give them advice and support throughout the pregnancy. Support is not limited simply to receiving that grant; it is there throughout pregnancy, and we should not overlook that fact in discussing the Bill.
It is right to remove the health in pregnancy grant, even though we do not do it lightly and would not choose to do it unless it were a consequence of the situation that we have inherited. The previous Government lost sight of good fiscal discipline, and we are having to take measures today to tackle the problems that have resulted.
In all our debates on the health in pregnancy grant on Second Reading, in Committee and today, we have been going round and round in circles without ever quite nailing what the Government’s objections are to the grant continuing.
I shall try to pin down what the Minister has said. He says that the grant would be better if it were paid earlier, yet he has not brought forward any suggestion that it should be. He says that it is a problem that there is no guarantee about what it is spent on, yet he seems perfectly happy to go on paying child benefit to mothers or the winter fuel allowance to pensioners. There is no guarantee about how that money is spent, so I reject that argument. It has been suggested that there has been no evaluation of the scheme, but as he said, it was introduced in 2009. How on earth can we possibly have had the chance to carry out a full evaluation of the take-up of the grant, what it is spent on and people’s access to advice?
My final point, and the crux of the matter, is that the Minister praises the Healthy Start scheme because it is targeted at the people who need it most. He also mentioned the Sure Start maternity grant, which, as we know, is being reduced to cover just the first child. Does he not accept that if we abolish the health in pregnancy grant, the families he spoke of, who need the Healthy Start vouchers to cover expenses and to have a healthy diet during pregnancy, will be £190 a week worse off? That is why we argue for the retention of the grant, with a review of whether it should be means-tested and better targeted. In rejecting the idea of a review totally, he is basically saying that the poorest families, who are already suffering because the Sure Start maternity grant is being restricted to the first child, must lose £190 a week. That is something of a scandal. I therefore wish to press the amendment to a vote.
Question put, That the amendment be made.
I beg to move, That the Bill be now read the Third time.
As we have discussed today, the Bill deals with three policies: child trust funds, the saving gateway and the health in pregnancy grant. Both today and in Committee two weeks ago, we have debated the details of those policies. Opposition Members have pointed to their merits or, rather, their potential merits—as we have found, quite often the hard evidence to support their arguments is rather lacking. They have argued that we should either retain the policies or delay removing them, and sometimes both at the same time.
I shall come to some specific points about those policies in a moment, but I want to be clear on one point. The question for this Bill is not simply whether we think that child trust funds are a nice idea or whether we would like to give pregnant women some more money. The question for this Bill is a harder one to confront. It is whether we can afford such policies—at a cost of £3 billion over the spending review period—given the scale of the deficit that we inherited, and whether continuing with them would be the best use of taxpayers’ money.
As we decide to give the Bill its Third Reading, it is important to remind hon. Members of the context. When the Governor of the Bank of England says that our fiscal position is “clearly unsustainable”, when our borrowing last year was the highest in our peacetime history and when we are spending £120 million a day just to pay the interest on our debt, something has to give. If we do nothing and fail to tackle the deficit, we will see higher interest rates, business failures, rising unemployment and, potentially, even the end of the recovery. We therefore need a clear, credible plan to tackle the deficit. We have set one out, including more than £80 billion of spending reductions. However, to deliver it we have to make choices about where savings are going to come from.
We have made those choices, and this Bill implements three of them. They were not easy choices. As I said on Second Reading, the Conservative party supported the introduction of child trust funds and the saving gateway in opposition. Indeed, on at least three occasions so far, the right hon. Member for Delyn (Mr Hanson) has quoted what I said about the saving gateway, and I suspect that he may well remind the House again in his speech on Third Reading. We did not warn against the health in pregnancy grant, although we did raise some concerns about it. My Liberal Democrat colleagues were rather more sceptical. They opposed the child trust fund and prayed against the regulations that introduced the health in pregnancy grant. However, as I have said, the question is not whether it would be nice to keep those policies—in an ideal world it would be—but whether we can afford to keep them, given the fiscal challenge that I have outlined, and where else we would have to find savings if we did so.
I believe that the Bill makes the right savings. Continuing with the child trust fund, for example, would have cost us more than £500 million each year. That money would have been locked up for up to 18 years—a luxury we cannot afford.
Given our limited resources, we must spend money on our priorities: reducing the deficit, so that our children are not left to pay our debts; supporting the most vulnerable and poorest people in our society now—for example, through the pupil premium; and the extension of early years education and care to all disadvantaged two-year-olds. Those policies will provide real opportunities for disadvantaged children to move out of poverty for the long term.
While saving money from the child trust fund, we are still committed to encouraging people to save for their children in an affordable way. That is why I announced a new account—a junior ISA—on Second Reading. It will provide parents with a simple and clear way of saving for their children, albeit without Government contributions, and build on products that are already accessed by 20 million people of all ages and on all incomes. I also want to encourage people on lower incomes to save, but again that must be affordable. Unfortunately, it would not have been affordable to introduce a new scheme such as the saving gateway, which would have cost up to £150 million a year just when we are starting to tackle the deficit that we inherited in the summer this year.
I was worried that there would not have been enough providers to ensure that everyone had an accessible option for opening a saving gateway account. During the Bill’s evidence sessions, we heard from the British Bankers Association and the Building Societies Association that their members were far from enthusiastic about providing such accounts. The Post Office was going to offer the account only if taxpayers had funded it to do so. We cannot afford to introduce that account, and there were significant doubts not only about access and who would offer it, but about its effectiveness in increasing saving.
It is right to abolish the health in pregnancy grant. I remind hon. Members that it is a one-off cash payment of £190 to every pregnant woman around the 25th week of their pregnancy. In Committee, we debated at length the different ways in which women might spend that money, and how the scheme could be improved, such as by paying it earlier, in instalments or to only some women. The basic point is clear. The grant is unfocused, it can be spent on anything, and it is untargeted. We believe that there are better ways to support maternal health.
The hon. Lady has not participated in the debate today, but we have thought carefully about how to provide support during pregnancy to those on low incomes. There are vouchers under the Healthy Start scheme, and the Sure Start maternity grant, which we believe are more effective in providing targeted, better timed and more focused support to expectant mothers.
There is a choice. We could spend £120 million on the health in pregnancy scheme or we could scrap it and save the money so that we do not have to increase taxes or borrow so much. The latter is the right action to tackle the deficit. There are better ways to support maternal health, such as the Healthy Start scheme, which provides vouchers to enable pregnant women to buy fresh fruit and vegetables. The Department of Health is consulting on whether to extend that to plain frozen fruit and vegetables. Vouchers are also available for vitamin supplements, including folic acid, to provide a daily dose of vitamins B and C.
The Healthy Start scheme is effectively targeted at pregnant women and children living in low-income households, and is focused on supporting health and well-being, because it pays support in the form of vouchers rather than in cash. It is delivered at the earliest stage of pregnancy when dietary intervention is much more effective. That means that we can focus our resources better, but at the same time make some real savings—about £150 million a year. That is a vital contribution to tackling the deficit and ensuring that people are not burdened with the debt that we inherited from the previous Government.
That is the key point of the Bill. The changes that we are making to child trust funds, the decision not to introduce the saving gateway and the abolition of the health in pregnancy grant will save more than £3 billion over the spending review period. That is an important part of our plan to reduce the deficit and put our finances back on a stable footing.
As I said, this has involved some tough choices, but I believe that we have made the right ones. We found areas of spending, such as the child trust fund, which does not support people for up to 18 years, the saving gateway, which has not yet been introduced, so its removal will be less directly felt, and the health in pregnancy grant, which is untargeted and unfocused. We have confronted the questions, which I outlined earlier, of whether we could really afford to continue with those policies and whether they would represent the best use of taxpayers’ limited resources. The questions for anyone who wants to oppose this Bill and to continue with the policies are how they would find the money and what they would do instead. This is an important Bill. It is part of our work to tackle the unprecedented deficits that we inherited, and it will help us to put our public finances back in order. I commend it to the House.
I thank the Minister for his opening remarks on Third Reading. He and I have got to know each other, as Minister and Opposition spokesperson, and other members of the Committee quite well over the past few weeks. We have now discussed the key issues on Third Reading. He will know that we have had a total of 23 votes on Second Reading, in Committee and on Report. I hope that that illustrates the strength of feeling about the Bill among Labour Members. It contains only four clauses, yet we have managed to have 23 votes on a range of issues as we continue to oppose the Bill. We have fought the Bill at every opportunity, and will continue to do so in another place shortly.
We oppose the Bill because the abolition of the child trust fund will reduce the opportunity for the poorest in our society to have a capital asset at 18. We oppose it because the abolition of the saving gateway scheme will reduce saving opportunities for the poorest in our society. We also oppose it because it will reduce the help available to pregnant women by stopping the £190 grant that is available to them in the 25th week of their pregnancy. Again, I must point out, for the Minister’s benefit, that that will hit the poorest in our society the hardest.
As Opposition spokesman, I have tried to be as pragmatic and helpful to the Minister as possible on a number of occasions. I have tried to help him by giving him an opportunity to delay the implementation of the Bill, so that we could see whether some of our economic woes—which are difficult and challenging at the moment—are overcome in the next three years. We offered the Minister the opportunity to postpone implementation of the bill until 2014, or 2016, but he rejected it. We offered him the opportunity to have payment holidays, but he rejected it. We also offered him the opportunity to deal with Wales, Scotland and Northern Ireland differently, but he rejected it.
We offered the Minister the opportunity to fulfil his manifesto commitment to keep the child trust fund for the poorest third of our society, for those on disability living allowance and for looked-after children—a point that my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) has particularly focused on during the debate. We have considered a range of issues, including whether the Bill needed a proper equality impact assessment, but the Minister has chosen to reject them all. Well, so be it; that is his prerogative. I believe that he has made the wrong choices in relation to tackling the deficit, by putting women, children and the poorest at the forefront of his deficit reduction plan.
In doing that, the Minister has broken his manifesto commitments on the child trust fund for the poorest third, for looked-after children and for those on DLA. He has made a U-turn by abolishing the saving gateway scheme, which he supported during the election and right up to the moment when the Bill was introduced, and by abolishing the health in the pregnancy grant, for which he had no mandate. He never argued for its abolition at the general election, or mentioned having to cut it; he never said that he was concerned about it at all. He must have known at that stage that there would be, as there are, challenges for whoever won the general election to ensure that we met those needs.
The Bill abolishes the child trust fund completely; it abolishes the saving gateway completely; it abolishes the health in pregnancy grant completely. It is the deficit reduction plan hitting women, children and the poorest in our society the hardest. The Minister will know that the child trust fund was introduced by the Labour Government not just as a way of helping poorer people to save, but as a means of ensuring that we have individuals with a capital asset at the age of 18. He will know that there was a take-up of about 70,000 a month until he introduced this measure in July; with this Bill, we now look to 3 January 2011. He will know that 6 million families and people have the child trust fund in operation at the moment, but that in future that opportunity will be denied to individuals across the UK because this Minister has chosen—of all the choices he could have made—to ensure that the deficit reduction plan falls on those people who need the help and support the most. The Minister will also know that £2 billion of saving has been generated by the child trust fund to date. He will know that it might not be generated in future because the partnership between Government, the state and individuals will no longer be there in future.
In its place, the Minister wafts in front of us the prospect of a child ISA for the future. I await the details, but so rushed is this proposal that it was not even worked out fully for the Committee. So rushed is this Minister that he brings a proposal before the House today, yet he cannot even say what the child ISA scheme will be in detail. He cannot say when it will definitely be introduced. He cannot say whether contributions from looked-after children—an issue brought to our attention by my right hon. Friend the Member for Wythenshawe and Sale East—will be possible. He cannot say how much will be involved or how the scheme will operate downstream, yet he asks us today to abolish the child trust fund, which has had a proven record of saving success to date.
The Minister brings forward the abolition of the saving gateway, doing away with the Saving Gateway Accounts Act introduced in 2009, even though it was not opposed by the Conservatives on Third Reading. The purpose of that scheme was to promote savings habits among working-age people on lower incomes. He will know that we have had two pilots, neither of which was criticised by the Minister at the time, and they involved 22,000 people generating £15 million of savings—helping poorer people to save for the future. He does this at a time when his deficit reduction plan is going to put 500,000 people in the public sector on the dole. With VAT increases, with loan sharks operating in the community and with the collapse of schemes such as Farepak, which my hon. Friend the Member for Makerfield (Yvonne Fovargue) mentioned in Committee, the Minister will find that the need to give help and support to poorer savers is even greater now than before. But, no, the Minister will not even allow a three-year gap to see whether the economy recovers. The scheme would not cost him a penny in the next three years, but he wishes to abolish it because of dogma—nothing else but dogma.
When he abolishes the saving gateway scheme and when Government Members vote for that abolition this evening, they need to know that they are voting to ensure that people on working tax credit, income support, incapacity benefit and jobseeker’s allowance, and other low-income people will be denied the benefits of that scheme. Let us remind the Minister that a Labour Government would have brought this into play in July 2010, supported by our Chancellor and supported by a deficit reduction plan in last March’s Budget that would have ensured that we halved the deficit within four years.
Last of all, the Government are abolishing the health in pregnancy grant—a one-off tax-free payment of £190 to mothers-to-be who are 25 weeks pregnant. We can debate it and have debated it in detail, but nobody can deny that a £190 grant would have helped the poorest pregnant mothers in our society to meet the costs of their pregnancy and to ensure, as my hon. Friend the Member for Bristol East (Kerry McCarthy) said, that they receive further help and support through medical advice in the 25th week and beyond, linked to medical visits. The Minister knows that 750,000 qualifying pregnancies each year will not receive the grant. Again, he has hit women—pregnant women—and children hardest.
It would be different if the Government’s proposals were due merely to the fact that these were Labour Government initiatives. However, Mike O’Connor, chief executive of the watchdog group Consumer Focus, has said:
“The Saving Gateway would have been a great opportunity”.
The Child Poverty Action Group, which was led with distinction by my hon. Friend the Member for Stretford and Urmston (Kate Green), has said:
“It’s a real shame that this move to help people build up savings to deal with crises… should be scrapped.”
The National Childbirth Trust has said:
“At a time when families are trying to make ends meet, the Coalition Government has hit parents particularly hard. Cutting pregnancy and maternity grants”.
The Royal College of Midwives—this answers the point made by the hon. Member for Central Suffolk and North Ipswich (Dr Poulter)—has said that it is
“disappointed at the decisions to abolish the Health in Pregnancy Grant”.
A common thread runs through the Bill. The Government are hitting the poorest hardest. They are ensuring that those who need the help, support and partnership of the state are hit hardest; and although they claim to be doing it in the name of deficit reduction, they are actually doing it in the name of dogma. I urge my right hon. and hon. Friends to reject the Bill, but I also urge the Minister to reflect on the fact that, although there is much on which we have disagreed today, there are still areas on which we can reach agreement.
I particularly hope that the Minister will examine in detail the methods and discussions being undertaken by my right hon. Friend the Member for Wythenshawe and Sale East in regard to looked-after children, and that he will return with positive proposals so that, although the Bill has not been amended in this House, amendments may be made in another place. Whatever the Minister says about the need to abolish help and support through the child trust fund, or about the removal of the saving gateway or pregnancy grants, he must know that looked-after children do not have parents who are responsible for them. Their parents may be dead, or they may be in difficult circumstances—they may be in prison, or involved with alcohol or drugs. But the Minister knows that those parents are not there to support their children, and he should know that in that instance, if in no other, the state needs to step in.
I agree with my right hon. Friend that the Government’s proposals are a direct attack on the poor. In my constituency 7,824 children, many from backgrounds that are less than affluent, currently benefit from the child trust fund. The Minister said earlier that it was a luxury that we could not afford. Does my right hon. Friend agree that that is an affront to all those people in my constituency and throughout the country, many of whom are impoverished?
I am grateful for my hon. Friend’s comments. The Minister and the Conservative party—and let us not forget their partners, the Liberal Democrats—are ensuring that they hit such people hardest in abolishing the child trust funds, particularly looked-after children and those whom they said they would defend, the poorest third. They are hitting people on jobseeker’s allowance who would have benefited from the saving gateway. As for the removal of the health in pregnancy grant, the loss of £190 may not be the end of the world for many people, but for the poorest in our society it was a contribution on which they depended to ensure that they met the costs of pregnancy.
Whatever disagreements the Minister and I have had—and we have had many over the past few weeks—I hope that he will take the opportunity to consider some of the key issues that he can still salvage. I hope that he will at least ensure that we can provide a partnership for looked-after children. Undoubtedly all the promises that he made before the election will be quoted again in another place, and every one of the issues will be tackled again there. We shall see what is said in the other place, but I hope that the Minister will reflect on those issues. In the meantime—with some pride in what the Labour Government did—I urge my hon. Friends to reject the Conservative-Liberal Democrat proposals.
Let me ask a question. If the Labour party will not cut these three things, what will it cut? They are probably three of the easiest things to cut that could possibly be identified.
Let us take the child trust fund. At present we have a deficit. Every year, we borrow the deficit and add it to our debt. Putting money into the child trust fund means that the taxpayer—the state—borrows some money and then puts it into a fund. Some of the funds lose money while others gain money. Hopefully, 18 years later there will be a little bit of money for someone. If the Labour party cannot cut that, what will it cut? As the witnesses said, if we want to help people when they are 18, we can help them when they are 18. If we want to help 18-year-olds who are leaving care, we should help them at age 18, not so that they will have to wait for 18 years. It is absurd to borrow money today to put in a fund that might lose or might make money—there is evidence of both eventualities—and then 18 years later maybe a young person will have some money.
We have to make choices. A key question is whether people on lower incomes, and especially those who have just given birth, should spend money on food and health or save some money. In Committee, I asked Katherine Rake that question and she said:
“You cannot make a choice in that way.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 95, Q244.]
In essence, that is the Labour party’s argument. The Opposition are basically saying, “We don’t make choices. There’s no need to make choices. We can have this and this and this, and we can keep on going until the interest rates go sky high, we lose lots more jobs and we have a sovereign debt crisis.”
On Report, the hon. Member for Edinburgh East (Sheila Gilmore) talked about paying down the deficit. We do not pay down a deficit; we pay down debt. The deficit is the amount of money added each year to our debt, and the danger we face is that if we are not careful the interest rates on the debt will rise as well as the debt itself, and that would mean more cuts. If Opposition Members are going to argue this point of view, therefore, they have to explain where the cuts would come from, but they have not answered that. Are they going to close down hospitals to pay for these things? Are they going to sack more police officers? We face a very difficult time, but if the Opposition say they would keep these three particular projects, they have to explain where they would get the money from to pay for them. Would they put VAT up again?
If I had closed my eyes, I would have thought this was the hardest right-wing Thatcherite speech I had ever heard, yet it is being made by a Liberal, for goodness’ sake. Why are the Government taking this out on women and children? If cuts have to be made, why is it women and children who are in the firing line?
What we are talking about is putting some money in a fund and leaving it there for 18 years. That is not going to affect any woman or child for 18 years. What we should be doing is looking after people now. Our priorities have to be the vulnerable people now. We have to give priority to protecting the poorer, the less well off, the vulnerable and those with learning difficulties now, rather than putting some money away for 18 years.
Well—[Interruption.] Sorry? [Interruption.] Yes, that is a good one. The tax threshold is a good example. One area we are focusing on is low-paid people in work, so there is the first stage of gradually increasing the tax thresholds up to £10,000 a year, and the universal credit itself should be particularly helpful to those on benefits and low pay, such as many people who come to my advice bureau. On Saturday, I did some calculations with somebody who had worked out that when we took into account all the rules the Labour party had produced over the years, it was not worth his while to work. Interestingly, in that instance that was because of a Child Support Agency deduction. We need to focus on the low-paid and make sure that people get into work and through that route get themselves out of poverty. That is a good example of our putting money into the hands of low-paid families.
There is no evidence that the child trust fund produced extra saving, there is no evidence that the saving gateway produced extra savings—and there is only some evidence that, perhaps, it reduced spending on food outside the home—and there is no evidence that the health in pregnancy grant did any good for health in pregnancy. On that basis, if we are not going to cut these measures, what are we going to cut?
There are, indeed, choices to be made: there is a choice about the kind of society we want to live in, and there is a choice about how we resolve economic problems. Members on the coalition Benches want the public to believe that there is only one show in town, which is that we have the worst deficit in peacetime and that we have a situation that was entirely caused by the last Government spending too much over too many years. That is the only argument they want people to believe, but let us just unwind a couple of years.—
I am not going to take an intervention just now.
I recall that three years ago, at the beginning of the recession, people were predicting how high unemployment would rise, how difficult things would get and how high our deficit might be. Unemployment did not rise nearly as high as predicted under the Labour Government, and I will tell hon. Members why: because we were putting in money as part of an economic stimulus. Yes, we borrowed to do that but we did so because it was the right thing to do. We were told that it was the right thing to do by the junior partner in this coalition throughout that period. I remember those debates before the election—
I was thinking about the public debates on television involving the Chancellor and the would-be Chancellors. I recall what the Liberal Democrat spokesman on finance said, and he put forward a completely different perspective from the current Chancellor. There was no agreement.
Members on the Government Benches may disagree with what I am saying, and I am happy for them to do so because that is legitimate in politics. We have a different view of how to do things, but that does not mean that our view is so unreasonable that we are not even allowed to put it. We are hearing that we are not allowed to argue any of these points and that we are not supposed to say that we would make different choices. The Minister gave this one away when he said that these measures would not really harm people; he said that the saving gateway had not even started and so nobody was being harmed, which is why it is an easy cut.
How does the hon. Lady respond to the point that there were no willing providers of the saving gateway? No matter how successful her party’s pilots were, no building societies were willing to make that provision. It is all very well her saying all this, but the gateway was not going to take place in reality; it was just going to take place in her own private make-believe world.
If the hon. Gentleman looks at all the evidence and the research, he will find that it is clear that this was going to take place—[Interruption.] It was going to take place because there were providers who were going to do it—[Interruption.] I do not know why he is waving his hands in the air—we could do that too. There were credit unions that wanted to get involved, as did two banks. The complaint made in Committee was that because only two banks wanted to get involved, there might not be enough access points. I have suggested other access points and I described the debate that took place when the housing association movement, with which I was involved, wanted to be one of the ones that would help people to make payments into a saving gateway scheme. That argument does not hold up.
We have heard a number of distortions of the evidence. We were told that the NCT thought that the money should go on women buying food, rather than saving, but we should recall that Belinda Phipps, the NCT’s chief executive, has written a foreword to the book that I mentioned earlier entitled “Asset Building for Children—Creating a new civic savings platform for young people”. It was written by two people, one of whom is Phillip Blond, who believes very strongly in the child trust fund; he believes that saving is very important and he suggests that we should have stuck with this arrangement. He does not say that it was without its faults—this is not a case of saying that it did not have faults—but he devotes a paragraph to saying that although it could be improved, that does not mean we should throw it out completely.
Some of the debate, particularly in Committee, was interesting and covered a lot of important material. If we want to do the best by people, we would not simply reach a point where, without looking at the wider context, we say, “Right. We have to make some savings now. Let’s just chop this, this and this.” It may be that we could have improved some of these schemes and they could have been differently focused. However, that is not the debate before us, but the stuff that has been thrown up in the course of it; the debate before us deals with the fact that either we have these schemes or we do not.
Labour Members believe that we could run our economy differently and that we do not need to cut so far and so fast. On that basis, we would be able to decide which things we wish to keep in place and which things we might want to save. I could talk about all sorts of savings that I might want to make, but I would also want to talk about the balance between savings and taxation. There are legitimate debates to be had about that.
We do not need to accept proposals that harm some of the most vulnerable in our society and the long-term view. It is astonishing that the Conservatives, in particular, whom I always understood to believe in saving, should not want to go ahead with the saving gateway. In 2003, it seems, the present Chancellor said:
“We think that having savings…gives people a stake in society, gives them independence, encourages self-reliance and bolsters the freedom of the individual against the overbearing state.”—[Official Report, 15 December 2003; Vol. 415, c. 1345.]
He has clearly changed his mind.
Thank you, Mr Deputy Speaker, for calling me to speak in the last moments of the debate. It was an enormous privilege to serve on the Public Bill Committee and to listen to my colleagues on the Opposition and Government Benches, as well as to the many organisations that gave evidence.
Listening for all that time brought home to me why I am so pleased to be sitting on the Government Benches and not on the other side. I believe absolutely that Government Members will form the most reforming Government that I have seen in my lifetime—a Government who are prepared to make the tough decisions that will provide the solutions to the problems, as the Bill seeks to do.
There is no doubt in my mind about the good intentions of the Opposition when they introduced these three measures some years ago. There is also no doubt in my mind from reading Hansard from that time and from re-examining the evidence that we have been given over the course of the past few weeks that there is no evidence base to show that the measures will tackle the vital issues of alleviating poverty and helping the most disadvantaged people in our society.
On that note, does my hon. Friend agree that it is a great pity that it has taken the advent of the deficit for us to examine properly some of the previous Government’s policies? We all want to look after the most vulnerable, but the only way to do that is to target our resources properly. At the moment, in difficult economic times, there are fewer resources than there once were, and the only way to do it is to base that targeting on the evidence and to ensure that the resources go to the most vulnerable. That is what the Government are about. We are getting rid of universal policies that do not work.
I am delighted to agree with my hon. Friend. It is essential that we use the evidence base, and I find it frustrating that the evidence was available when the legislation was introduced a couple of years ago. Let us consider the debate on maternal health—I know that my hon. Friend has great expertise in this area. It was very difficult for my colleagues who were in the House at the time to get evidence on maternal health from the then Government, but it was demonstrated that the data set that could reasonably be used to measure the impacts of any additional nutrition on maternal health did not exist. When hon. Members are pouring out their crocodile tears, as we have seen for weeks, saying how poor the affected people will be and how we must take more time and evaluate these measures, they know full well that the data set does not exist to measure the impacts.
We should listen to my hon. Friends, and to midwives and clinicians up and down the country as they give their practical experience of working with women of child-bearing age to improve maternal health. We have heard about policies and projects that deliver. For example, we know that not enough women understand how to cook nutritious meals on a low income. Much more needs to be done about cooking in schools and in the community so that people on low incomes can cook nutritious food, and plenty of evidence supports the idea that that is an effective thing to do.
As my hon. Friend said earlier, we know that the single most important thing that we can give to a mum in her early stages of pregnancy is folic acid. All the support that the Government are putting in place through their reforms to the NHS will target help at women of child-bearing age and at those who are the most vulnerable in our society and who need such effective services from the NHS.
This Government are all about giving people a hand up, not a handout. Week after week we sit here and Opposition Members’ answer to every problem is to throw some money at it. We in the Government will ensure that hard-earned taxpayers’ money is spent where the evidence shows it will be most effective.
Representing, as I do, a constituency in Northern Ireland where there is considerable dependency on benefit and high levels of deprivation in urban areas, I am particularly opposed, as are my colleagues in the Social Democratic and Labour party, to the abolition of the child trust fund, the saving gateway account and the health in pregnancy grant. We are therefore opposed to the Bill. The current Government seem to think, as the Minister has shown, that the child trust fund, the saving gateway account and the health in pregnancy grant would contribute to deepening the deficit and are therefore unaffordable. It is extremely unfair that the disadvantaged and vulnerable should be penalised when efforts should be made to help to support them, and I find it shameful and unacceptable.
As a former Minister in Northern Ireland, I, like my right hon. Friend the Member for Delyn (Mr Hanson), have been responsible for the Department for Social Development and, therefore, for social security benefits, community development and housing. I note, with some alarm, that Ministers in the Northern Ireland Executive have not been consulted or asked for their opinion of the Bill’s content or its possible impact on the most disadvantaged and their communities. It is worth noting that 36 neighbourhood renewal areas in Northern Ireland are defined statistically by the Noble statistics on deprivation as having acute levels of poverty.
The withdrawal of these funds, combined with the coming changes to the benefit system, will simply deepen poverty levels and plunge people into further depths of despair. The measures might push people who are already suffering undue financial burdens into the arms of loan sharks and, in certain parts of Northern Ireland, they could enable those with paramilitary control to have a tighter grip on people. But no cognisance has been taken of any of that and there has been no consultation. The Government should step back from the brink and avoid implementing the measures. They should think of Northern Ireland as a place that is coming out of the legacy of conflict. We are trying to mitigate the influence of poverty and conflict and we are trying to underpin devolutionary arrangements. I ask the Government to please abandon the Bill tonight; we will be voting against it.
I shall try to be brief so that the hon. Member for Stretford and Urmston (Kate Green) can get in. The right hon. Member for Delyn (Mr Hanson), who leads for the Labour party, said that there had been more than 20 Divisions during deliberations on the Bill, but I think that only two principles have been at stake. The first is deficit reduction, and that has been dealt with comprehensively by my hon. Friend the Member for Birmingham, Yardley (John Hemming) and the Minister. The second is a matter of dogma, to use the right hon. Gentleman’s word, and that is what I want to talk about.
What is the role of the state in ensuring that people can make a journey out of the poverty into which they were born into more successful adult lives? The Opposition say that it is to give out dollops of free money, which will somehow transform people’s life circumstances even if that free money will not be available until they are 18, which might be a decade away for some. It has been the contention of my party since the run-up to the election, and it is now the contention of the coalition Government, that the role of the state is to enable people, for themselves, to achieve while they are at school and then have successful careers in their adult lives, thereby generating surplus funds. That will contribute to the culture of saving far more effectively than any Government incentive. The biggest barrier to someone saving is having an income that enables them to save. The biggest barrier to someone having an income that enables them to save is lack of educational achievement and inability to find a job that transforms their long-term work prospects.
The comprehensive spending review is a package of measures, the main concentration of which is the reduction of expenditure over four years, but that is a net reduction and there are increases within it as well. One of those increases is one of the four main pledges that my party made during the election: the funding of the pupil premium. It is to be funded, as we laid out in the run-up to the election, specifically by the abolition of the child trust fund, which we opposed when the previous Government introduced it and opposed during the general election. That pledge has been carried forward into the coalition agreement.
It is amazing to listen to the hon. Gentleman: the people of Bristol West voted for a Liberal and ended up with a Tory. Does he not recognise that there is no extra money in the pupil premium, that the Budget was about choices and that the choice that the Liberal Democrats and the Conservatives made is to hammer families, children and parents right across the country?
I thank the hon. Gentleman for his intervention, but let me tell him that the people of Bristol West voted for my No. 1 pledge, which I talked about continuously during the general election and which is something I have stood for all my political life: rescuing people from poverty, particularly children from poorer backgrounds. The introduction of the pupil premium will make a significant long-term difference to the life chances of young people in our country. It will be far more effective and make a far greater difference than telling everyone, whatever their circumstances, that when they are 18 they will get some money to spend on their birthday party or some other initiative.
The dogmatic difference between the two sides is that we believe that enabling people to make choices about their lives is far more important than the state saying, “Here is some money to spend at some point in the future.”
In the short time remaining I will address one or two of the points that were raised in the last part of the debate. Is it right to give people cash? Absolutely. There is much evidence of the fundamental difference that an adequate family income makes to a range of good outcomes. Do people squander that cash? Absolutely not. There is a wealth of evidence to show that when low-income families, particularly mothers, are given more money, they spend it on their families and they spend it on their kids. Is it right that we cannot afford that? Only if we look narrowly at the short term. Government Members have rightly challenged us on the long-term savings to be made by addressing inequalities, but savings achieved tomorrow by investing in families today must be taken account of, and that is something to which Government Members have given no thought.
The child trust fund, in offering the poorest young people the opportunity to start their adult lives with an asset behind them, makes a significant difference to those young people, and I am distressed that that is to be taken from them as a result of the Bill. We have offered the Government so many ways in these difficult circumstances to manage those policies through. We have offered them the opportunity to set a target for a time or to cease paying into those funds for a time. We have pleaded with the Government not to scrap them entirely, not least because they have nothing better to put in their place.
The Government are taking £18 billion out of the incomes of low-income households and half a million jobs out of the public sector, many of them for the lowest-paid workers, and then they have the temerity to say that, in addition, they will remove the £190 health in pregnancy grant because, they claim, there are other things to support pregnant women. That is indecent and ungenerous, and I am distressed that so many Government Members consider it acceptable, necessary or even desirable. I very much hope that when the Bill moves to another place, there will be an opportunity to amend the clauses in a way that we have regrettably not been able to do. I regret that the Bill is going forward in its current form, despite the best efforts of my right hon. and hon. Friends.
Question put, That the Bill be now read the Third time.
Bill read the Third time and passed.