I beg to move, That the Bill be now read a Second time.
The Bill does three things: it ends eligibility for child trust funds for children born from January 2011 onwards;
it repeals the Saving Gateway Accounts Act 2009, following our decision not to introduce the saving gateway scheme;
and it abolishes the health in pregnancy grant, again from January 2011. I will explain the detail of the measures shortly, but first I want to explain the rationale behind them, because they all have the same aim of helping to reduce Britain's budget deficit.
As my right hon. Friend the Chancellor of the Exchequer set out clearly last week, the Government have inherited an exceptional fiscal challenge. Last year, we had the largest peacetime deficit in our history, and we were borrowing £1 in every £4 that we spent. We are now spending £120 million a day just to pay interest on our debt. As the Governor of the Bank of England said last month, that position is "clearly unsustainable". Taking urgent action to tackle the budget deficit is clearly unavoidable.
"Abolishing the Child Trust Fund would make newborns worse off in eighteen years time. But spending cuts in other areas might leave them worse off."
That is the challenge that the coalition Government face. This is the question that the hon. Lady should be asking: why did her right hon. and hon. Friends leave the country in such a mess that the present Government are required to take these measures?
Without healthy public finances, we cannot have sustainable growth in our economy. The consequence of failing to act now would be higher interest rates, business failures, rising unemployment and even, potentially, the end of the recovery. So we set out a clear plan, in the Budget statement in June and in the comprehensive spending review statement last week, to tackle the deficit. Last Wednesday the Chancellor set out more than £80 billion of spending reductions to help to deliver the Government's fiscal consolidation plan, which will reduce borrowing by £11 billion per year by 2014-15. The International Monetary Fund has said that our plan
"greatly reduces the risk of a costly loss of confidence in fiscal sustainability and will help rebalance the economy."
The Bill is part of that plan.
I realise that the changes made by the Bill will disappoint some Members and others outside the House. Indeed, when we were in opposition, the Conservative party supported the introduction of the policies that have been removed, although at the time we raised some questions about their effectiveness.
Yes, we did support the recapitalisation of the banks, but I am not sure where the hon. Lady's point is leading. The deficit is a consequence of the huge growth in spending under the last Government, and their failure to ensure that the fiscal position was sustainable.
This year, the child trust fund would have cost more than half a billion pounds, and that money would have been locked in for up to 18 years instead of supporting people now. That is a luxury that we simply cannot afford, given the fiscal challenge that we face. We also could not afford to introduce a new scheme like the saving gateway, which would have cost £300 million over the next five years, just as we started to tackle that challenge. Nor can we afford to continue to spend £150 million every year on giving cash payments to all pregnant women, whatever they spend the money on and whatever their incomes.
If the hon. Gentleman cares to stick around for a few minutes, he will learn something about what we are going to do for families in that regard. I believe that this Government will do more than the last Government in terms of long-term benefit to encourage families to save.
Taken together, 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 us £370 million in the current financial year, about £700 million next year, and about £800 million in each year from then on.
According to an excellent research brief provided by the House of Commons, the Government will save £450 million in future years in relation to the saving gateway. However, the Minister has just admitted that it has not been introduced. How is it possible to save £450 million on a scheme that has not been introduced?
Spending on that scheme was included in the spending score card by the last Government. We are not spending the money; therefore we are saving it.
If we had not found the savings where we have found them, we would have had to find them through other spending cuts, through tax rises or through higher borrowing, and that would have kept the deficit higher for longer. Those who oppose the Bill must tell us what they would cut instead.
Having explained the context of the Bill, I shall now describe its measures in more detail starting with the most straightforward element, which is clause 2. It repeals the Saving Gateway Accounts Act 2009. As Members may be aware, the saving gateway would have been a cash saving scheme for people on lower incomes based on matching-there would have been a Government contribution for each pound saved. The scheme was due to be introduced in July 2010; that is when the previous Government booked the spending from. I believe that people in Britain, including those on lower incomes, need to save more, and there was evidence from the saving gateway pilots that matching was a popular and easily understood incentive to save, but when we looked at the proposal ahead of the Budget, it was clear that this would have been exactly the wrong time to introduce a new scheme that would have cost us up to £115 million a year.
I was grateful for the support the hon. Gentleman's party gave when in opposition to the then Labour Government's efforts to reduce child poverty. What assessment has his Department made of the effect of the withdrawal of these grants and schemes on child poverty in this country, not just in general but by region and constituency?
There was clearly a choice. We could have continued with these schemes and cut spending elsewhere, but we decided that it was better to take action now to tackle the deficit than to put that decision off, as the hon. Gentleman's party would do, and therefore have to make deeper cuts in the future. I think the steps we are taking are the right course of action to tackle the deficit.
Although the previous Government had agreed with RBS and Lloyds Banking Group that they would introduce saving gateway schemes, none of the other big high street banks were planning to do so, and although the Post Office was going to offer the accounts, that was only because the previous Government had agreed to pay it to enable it to do so. Also, while a number of credit unions were signed up, not a single building society signed up to provide the saving gateway account. Therefore, although I appreciate the engagement of those who had planned to offer saving gateway accounts, I was concerned that not everyone in the eligible population would have had an accessible provider. For these reasons, we announced at the Budget that the saving gateway would not be introduced. We therefore stopped the Saving Gateway Accounts Act from coming into force, and this Bill repeals it altogether. Although we may want to come back to this idea at some point in the future, we have no plans to do so at present so it would be wrong to leave this legislation on the statute book.
The Minister alluded to the fact that credit unions were particularly interested in supporting this initiative, and he will be aware that credit unions are particularly likely to be located in communities with high concentrations of disadvantage and poverty. Therefore, although he says the scheme's reach was not complete, will he accept that in fact it was potentially rather well targeted?
That assumes that there is a credit union in every deprived community, but in some such communities a credit union may not be accessible, and the Post Office would have stepped in only if a Government subsidy were provided, so I do not believe there was going to be a complete network of saving gateway account providers to ensure that every eligible person in this country would have been able to access an account.
Clause 3 addresses the health in pregnancy grant. It is a one-off cash payment of £190 to pregnant women. The previous Government said it was being introduced in recognition of the importance of a healthy diet during pregnancy. However, the National Childbirth Trust said that
"the evidence indicates that, if dietary intervention is to have an impact on birth weight and outcomes for the baby in later life, it should be started as early as possible."
Given that the grant is not paid until the third trimester, it is not clear how effective it is, and although-
Let me make some progress. Although the previous Government said the grant was intended to support the general health and well-being of women in the later stages of pregnancy, there is no requirement to use the grant for better health and well-being. Women can spend the money on whatever they want, and the grant also goes to pregnant women regardless of their income and their need for it.
It seems to me that that money was also for meeting the additional costs of having a baby. It was very much linked with women receiving advice from health practitioners too; there was a link between our making sure that women were getting the very best advice and their being able to access the money.
Well, other schemes are available to help women ensure that their diet is healthy. May I tell the hon. Lady what others have said about this one? Zoe Williams, writing in The Guardian in April 2009, said that this is
"a universal grant to mothers who may or may not need it, and may or may not spend it on vegetables that may or may not positively influence the health of their unborn children."
"The Health in Pregnancy Grant is frequently not even spent on healthy food."
Order. Look, I understand that this is an important matter and it concerns everyone in the Chamber, but it is no good everyone trying to chunter at once. The Minister has been very generous in giving way so far and I am sure he will be generous in the future. One at a time please, rather than chuntering from across the Benches.
Mr Waugh continues:
"It is spent on absolutely anything the mother wants. A lot of middle class mums simply bung it towards a fancy new Bugaboo pram."
Clearly, if this grant was targeted at enabling women to buy folic acid, the argument would be different, but no strings are attached to this grant; money can be used in any way that people want.
The Minister says that this grant has not always been spent on what it was intended for and instead has been spent on things such as buggies-they are equally important. Would it not have been advisable then to have targeted it, by using, for example, income-related benefits, so that it went to people who really needed it and was spent on what it was intended for?
Of course the hon. Lady should really address that to her colleagues who were Treasury Ministers when the grant was introduced, as they could have chosen to target it more closely. Other grants that are available are targeted at women in the early stages of pregnancy and the Sure Start maternity grant is in place.
I accept the honourable way in which a number of Labour Members have stood up and are concerned about this, but does this not show that once we give any benefits they are taken for granted by whoever ends up receiving them? Does the Minister recognise, and will he confirm, that the Bill deals with only a small number of the grants that could be looked at by the Treasury? We have to get this deficit down and his opening comments have made a perfectly valid point. Will he confirm that he might well have examined a considerable number of other grants in this Bill, but it deals with only a small number?
My hon. Friend makes an important point. The Government have had to go through this challenging spending process with care, examining both spending and welfare decisions. We have had to take decisions that are not straightforward, not easy and not ones that we would have wanted to take, but we have had to do so because of the financial problem that we inherited from our predecessors.
Let me give another example of targeted support that is available, because Mrs Hodgson talked about means-tested grants. I am sure that she will be aware of the Healthy Start scheme, which is a statutory scheme providing a nutritional safety net and encouragement for breastfeeding and healthy eating to more than 500,000 pregnant women and to children under the age of four in low-income and disadvantaged families across the UK. The scheme is tied carefully because, unlike the health in pregnancy grant, it provides vouchers for people to put towards the cost of milk, fresh fruit and vegetables, and infant formula milk at 30,000 retail outlets. So measures are in place to support the groups that she is most concerned about, and it is right that that is so. The health in pregnancy grant is unfocused and untargeted.
The Healthy Start scheme is a good, targeted one, but will the Minister admit that the Government are also restricting the Sure Start maternity grant, abolishing the baby element of the tax credit and not going ahead with the toddler tax credit? Pregnancy and the first year of life is vital for a child's development; if we can give children the best start in life, it saves us all in the long run. So will he reconsider his abolition of these schemes?
Perhaps the hon. Lady would tell us what she would cut instead. It is very easy for the Opposition, who did not come forward with a plan to tackle the deficit before the last election. Now, every time a cut is proposed they oppose it. As was very clear from the leaked document in The Times today, they recognise themselves that their economic plan has no substance.
There is no doubt whatsoever that the Labour party left the country's finances in an appalling state, but why is the Conservative-led coalition taking it out on children and pregnant women?
If the hon. Gentleman looks at some of the analysis that was set out at the time of the Budget and last week's spending review, he will see that we are taking action in both to ensure that child poverty does not deteriorate under this Government. For example, there are increases in child tax credits to families on particularly low incomes to deal with the issue of child poverty.
Does the Minister not agree that the clue as to the purpose of the health in pregnancy grant lies in its title? It was supposed to promote health in pregnancy. Does he agree that there is no evidential base to suggest that in the seventh week of pregnancy onwards it was providing that improvement in health?
My hon. Friend makes an important point. I would say that the challenge is as follows. Other schemes are in place to help families on low incomes to deal with some of the issues around childbirth. I have talked about the vouchers that are available to help with nutrition and we have the Sure Start maternity grant, too, which is designed to help low to middle-income working families and out-of-work families to cover the one-off costs associated with having a new baby. There are measures out there, but, yes, they are restricted. The Sure Start maternity grant will apply to the first child-it is a grant of up to £500-but, of course, the problem is that the previous Government left us with a huge debt that we need to tackle and to pay back. If we put off these decisions, as the hon. Friends of Liz Kendall would want us to, it would be the poor who would pay the most. It would be those children who would be saddled with the debt that the previous Government left hanging around their necks.
I have a two-and-a-half-year-old son, so I have had the benefit of some of these universal benefits. I must say that in these straitened economic times it makes sense for things to be targeted in a much more effective way. That is all that we are trying to do, and it is regrettable to see the way in which the Minister is being harangued by Opposition Members. We should be targeting these benefits; they should not be universal. This is entirely the right way forward.
My hon. Friend makes an important point. We need to look very carefully at where money is spent and ensure that it is spent wisely in pursuit of improving the life chances of children and young people. That is why, for example, our right hon. Friend the Deputy Prime Minister announced recently that we will extend to all disadvantaged two-year-olds 15 hours of free nursery care. That is a very targeted way of helping children from the most disadvantaged backgrounds to achieve their life chances. We have seen the pupil premium introduced, with £2.5 billion a year to help children from disadvantaged families. The coalition Government have set out plenty of measures that are focused on helping the most vulnerable in society. That is what we need to do in the light of this financial crisis: to target measures on those who need them the most, rather than simply opposing every cut for the sake of it, as the Opposition are trying to do.
Would the Minister not agree that the logic of his position is that universal benefits should not exist? In that event, why are women and children being targeted for the loss of these universal benefits? Why not pensioners, who might not use their winter fuel allowance to pay their fuel bill? They might use it for something wholly inappropriate, such as buying a new pair of shoes or a piece of clothing. Why are women and children being targeted in this way?
The Labour party is clearly looking for more substance for its economic plan, and perhaps the hon. Lady's idea of tackling the winter fuel payment is something that the shadow Chancellor will embrace. I look forward to hearing whether those on the Opposition Front Bench will decide to adopt her idea or dissociate themselves from it.
The Minister is turning to support for the most disadvantaged. If there is one area that should unite all parts of this House, it is the welfare of looked-after children, most of whom arrive in care with nothing and leave care with nothing. If there is any group that needs to build up an asset base, it is children in care, yet the Minister is taking away at a stroke the possibility of building up an asset base by getting rid of the child trust fund. How can he, as a Minister, possibly justify his Government's claim that they are protecting the most vulnerable, when he is robbing children in care?
I am turning to child trust funds, and I take on board the right hon. Gentleman's point. As one of the consequences of our decision to scrap the child trust fund, we are using some of the money that we have saved to provide respite care for disabled children. We have thought carefully about the issues, and, frankly, the decisions are not easy to take. Our decision to scrap the child trust fund is important. It will enable us to deliver the pupil premium and the £2.5 billion package, which was recently announced, to support children from disadvantaged backgrounds. The right hon. Gentleman should look at the issue in the round rather than cherry-picking particular policy areas.
No; I will continue. I have given way quite a lot, and I want to make some progress. This is an important Bill, which is why I want to ensure that I have given Opposition Members the opportunity to intervene, but I want to continue setting out the case for why we need to take these measures to tackle the problem that the previous Government left behind.
We announced in May that Government payments to child trust funds would be cut in two stages-they will be reduced first and then stopped altogether. In July, we made regulations to take the first step. For those born from August this year, payments at birth were reduced from £250 to £50, or from £500 to £100 for children in lower-income families or children in care. Government payments at the age of seven also stopped completely from August. The regulations will end the additional payments made to disabled children from 2011-12 onwards, although, as I have said, we will recycle the money that we have saved on those payments to provide additional respite breaks.
Those regulations could not end eligibility for child trust funds altogether, because that process requires primary legislation. This Bill completes the process by ending eligibility for child trust funds for all children born from January 2011 onwards, which means that the remaining Government payments will stop altogether.
No; I want to make some more progress.
I realise that many people, including some hon. Members, will find these changes disappointing. As I have explained, however, the child trust fund is simply unaffordable given the deficit that we face and the need to focus our resources on supporting people now.
Although we need to reduce spending on the child trust fund, we remain committed to encouraging people to save. I want to see a saving system that is based on our principles of freedom, fairness and responsibility, as well as being affordable and effective.
I am with my hon. Friend 100% on the principle that he has just enunciated. Will he clarify the issue of encouraging people to save for their further and higher education? If they do so, they will apparently be penalised under the coalition Government's proposals if they pay their fees upfront having done the right thing and saved for their education? Is that correct? If so, how is it consistent with what he has just said about our commitment to encouraging a savings culture?
My hon. Friend has made an interesting point. We want to encourage more young people to save and to give them some assets at the age of 18. I will look into his point and write to him.
As I have said, the saving gateway and the child trust fund are not affordable given the budget deficit that we inherited, so we are taking a different approach to encouraging saving that builds on the latest research on how to influence people's behaviour.
The coalition agreement announced the roll-out of a free, impartial national financial advice service paid for by the financial services industry. The service will be fully rolled out by spring next year, providing information and advice on money matters and helping people to understand their options.
I will continue.
In the Budget, we announced that an annual financial health check will also be available from next spring as a component of the national financial advice service, offering everyone the chance regularly to review their financial situation and encouraging them to take action including through saving. Both the national financial advice service and the annual financial health check will help people to make the right decisions. We can also do that by making sure that the right products are available, including for families to save for their children.
To make sure that parents have a clear, simple and accessible option to save for their children, we will introduce a new, tax-free children's savings account after the end of child trust fund eligibility. That account will not have any Government contributions, but it will allow families to build up some savings for their children.
If the hon. Gentleman allows me to finish, I may well answer his question.
We are working on the details of the accounts with the industry and other stakeholders, and we will set out more detail in the months ahead. We are clear that, as with child trust funds, those accounts will belong to the child; that they will be locked in until the child reaches adulthood; that they will allow investment in both cash or stocks and shares; that they will be able to receive contributions from family, friends and others up to an annual limit; and that all returns will be free of income tax and capital gains tax.
The Minister has forgotten to mention that both the child trust fund and the saving gateway were specifically targeted at lower-income groups, many of whom-perhaps most of whom-do not pay tax. All the evidence suggests that in order to incentivise people, you have to either provide them with an asset or match their savings pound for pound.
As I have set out, the previous Government left us with no choice but to axe those schemes, because we had to save £80 billion in public spending to get spending back on track and keep the deficit under control and interest rates as low as possible for as long as possible. That was the Government's priority.
I will not, because I want to continue making progress.
We want to provide people with a clear and simple way of saving for their children, while saving the £500 million a year that we currently spend on child trust funds.
The savings from the child trust fund, the saving gateway and the health in pregnancy grant will allow us to prioritise the limited resources that we have. As the Chancellor set out last week, we have chosen our priorities as we tackle the deficit that we inherited. We are delivering on our commitment that health spending will increase in real terms in each year of this Parliament. We are prioritising long-term growth, creating the conditions for a private sector led recovery. We are also radically reforming public services to build the big society where everyone plays their part.
I am sorry, but I need to make progress.
We are prioritising fairness and social mobility, providing sustained routes out of poverty for the poorest. While encouraging some of the poorest to build up savings can be seen as meeting those goals, in the tight fiscal position that we have inherited, it is better to invest more in education and health, which will have a greater immediate impact than building up assets.
The Minister has mentioned education. The Government are introducing larger fees, so young people will leave university with up to £40,000 of debt. A small nest egg from the Government in the form of the child trust fund would have incentivised families to save to pay for that debt. Will he explain how those two concepts go hand in hand and where the fairness is?
The hon. Lady should have taken the opportunity to ask her colleagues that when they introduced tuition fees and the child trust fund in the previous Parliament. The situation is not new, and I am sure that she has discussed the matter with her colleagues.
Order. Mr Goggins, you are going to have to sit down. The Minister is not giving way. I know that you are trying to catch his attention, but you cannot stand up for five minutes waving your hands. You have got to get used to being back on the Back Benches.
I was not sure whether he was waving or drowning, Mr Deputy Speaker.
As we tackle the deficit, one of our priorities is to transform the prospects of the poorest children, who need it the most, through the schools pupil premium which will be worth £2.5 billion by-
On a point of order, Mr Deputy Speaker. Is it in order for the Minister consistently to refuse to take an intervention from someone who has already pursued a specific issue and wishes, in the light of something that the Minister has said since, to take up that issue with him in a constructive manner?
That is not a point of order. I understand your frustration but the Minister, in fairness, has been generous to many colleagues. Unfortunately, you have been very unlucky in not catching his eye, but I am sure that, if he were generous, he just might spot you standing once more.
As I was saying-[Hon. Members: "Shame!"] Members on both sides of the House want to speak in the debate, Mr Deputy Speaker. I have been generous in giving way and I want to continue with my remarks.
Through the schools pupil premium, which will be worth £2.5 billion by 2014-15, as well as by extending the provision of 15 hours a week of early-years education and care to all disadvantaged two-year-olds from 2012-13, and by maintaining funding for Sure Start in cash terms, we will provide real opportunities for disadvantaged children to move out of poverty for the long-term. We will also use some of the savings from withdrawing child benefit from families with a higher-rate taxpayer to fund significant above-indexation increases in the child tax credit, thereby ensuring that the spending review will have no measurable impact on child poverty in the next two years.
Some people say that stopping Government payments to child trust funds is not fair to children, but there would be nothing fair about leaving the next generation with unsustainable debts that would mean higher taxes and poorer public services. We can fund our priorities at the same time as reducing the deficit only if we find savings elsewhere and this Bill will contribute to that. As I have said, it will end eligibility for child trust funds, repeal legislation on the saving gateway and abolish the health in pregnancy grant.
These were not easy choices to make, but they were the right choices. We simply cannot afford the luxury of spending half a billion pounds a year on the child trust fund when that money is not available to people for 18 years. We simply cannot afford to introduce a new scheme like the saving gateway as we start to tackle the most challenging fiscal position for decades and we simply cannot afford to keep spending £150 million a year on the untargeted, unfocused health in pregnancy grant. The tough choices that we have made on those policies will save £370 million this year, about £700 million next year and about £800 million each year from then on. That means £800 million less in spending cuts, tax rises or borrowing, as we would have had to find that money from somewhere else.
This is a timely debate as it comes on the day that a leaked Labour document acknowledges the lack of substance in Labour's economic plans. If the Opposition oppose the Bill tonight, they will have to explain how they would plug the gap. If they do not, that will be further proof that their plans lack substance. We have made our choices and they have to make theirs. The Bill puts those choices into action and I commend it to the House.
If the Minister did not know the strength of feeling on the Labour Benches about this Bill before, he does now. It will hit children, women and families unfairly, it will hit the poorest in our society the hardest and it will undo the positive steps that the previous Labour Government took to tackle inequality. I say to him, on behalf of my right hon. and hon. Friends, that it is a bad Bill and that we will oppose it this evening in the Lobby. As he has said, it removes eligibility for child trust funds, abandons the saving gateway and abolishes the health in pregnancy grant, each of which was a progressive measure of the previous Labour Government and was welcomed by groups that tackle inequality. Each of those measures is being jettisoned by the Conservatives and Liberal Democrats not as a matter of deficit reduction but as a matter of dogma. As my right hon. and hon. Friends have said in interventions, there has been no impact assessment. Not content with taking a gamble in the spending review on our jobs and growth, the Government have made choices that are unfair and that will hit the poorest in society the hardest.
Clause 1 concerns child trust funds, which were introduced by the Labour Government for three main reasons: to promote saving, to encourage financial education and to ensure that in future all young people would have a financial asset at the age of 18. The CTF scheme is having a positive effect. Between April 2008 and April 2009, a massive 823,504 CTF vouchers were issued-70,000 a month. More than 74% of those accounts were opened by parents and more than £2 billion is now held in those funds. At the end of this year, there will be 6 million child trust fund accounts for which the Minister will abolish contributions for the future.
Does my right hon. Friend agree that it is clear that Government Members are ashamed of this terrible Bill as there is hardly anyone on the Government Benches to link themselves with it?
Does the right hon. Gentleman accept that child trust funds were never designed to help children because they are paid to 18-year-olds and that when funds are scarce it is better to target them at children who are in education through something like the pupil premium? If his party was so concerned about people having an asset at the age of 18, why did it introduce tuition and top-up fees?
I shall not take lessons from the Liberal Democrats on tuition fees given the outcome that they have got in that regard. The hon. Gentleman needs to recognise that the trust funds are an investment to tackle inequality among people at the age of 18 and to give poor people in society a chance at the age of 18. Not everyone in the House's child is going to have a trust fund at the age of 18: some of the Cabinet's will, but not everyone's. He should recognise that poor people need that help and support at the age of 18.
Does my right hon. Friend agree that Martin Horwood's comments are a bit rich given the Liberal Democrats' current position on tuition fees after they campaigned against them for years? The Government claim to be very interested in eliminating child poverty, but how will what has been announced tonight do that? It is sheer hypocrisy.
My hon. Friend is correct in the sense that there are ways in which we can tackle child poverty, such as by ensuring that people have an equal opportunity at the age of 18 to make progress in their lives through jobs, training and university. One way in which we were doing that was through the child trust fund.
Does my right hon. Friend agree that if the measures were due to financial constraints, the Conservatives would have kept the CTF mechanism in place, given its success, and perhaps cut the contributions with a view to reinstating them when times were better rather than abolishing the funds altogether?
I shall come to that point later. The Government have chosen to take a sledgehammer to the funds and not even to consider other options such as that mentioned by my hon. Friend.
My right hon. Friend is touching on the choices that the Government have made. The number of attacks that they have made on children, families and women is revealing. They seem willing to give money to married couples who do not have children but they are taking money from families with children. Anyone who has been married and had kids knows that it is not getting married that costs money but having kids. When my son was four months old I thought that he was robbing my wallet because I had no money left. Does not the Government's approach show how out of touch they are with the real lives of families and children?
I agree. The Government are not in touch with the difficulties of raising a child or of meeting the costs when children reach the age of 18.
The child trust fund is worth £500 to each child over their lifetime, but is worth £1,000 to the poorest children. The Minister will know that the previous Labour Government also introduced a disability living allowance payment on top of £100 or £200 for those entitled to DLA. That measure was introduced to take into account the significant extra challenges that disabled people face at that important time in their lives. When that measure passed through Parliament earlier this year, under the previous Labour Government, the Conservative party did not oppose that addition. Indeed, the Financial Secretary said that
"we recognise that additional support is required for children with disabilities, and we have no objections to this statutory instrument."-[ Official Report, Eighth Delegated Legislation Committee,
As young people reach 18, the financial challenges-not least those imposed on them by the current Government-will be more difficult. If individuals do not come from a wealthy background, the prospect of stumping up extra money for tuition fees is an eye-watering one. Not everyone will have a trust fund of their own to manage those resources. The children's trust fund would have provided young people with an extremely welcome lump sum, would have helped people with education and training from the age of 18, and would have helped people to save who had never saved before, to supplement their future income.
May I just say three words to the hon. Gentleman: education maintenance allowance? I look forward to him voting to abolish that and to raise tuition fees-both of which he pledged not to do at the general election.
With children's trust funds we are trying to help poorer people and those on lower incomes to save for their children's future. Before the children's trust fund, only 18% of all children were having regular long-term savings made for them. The child trust fund industry average is now 31%. Among families on incomes just above welfare dependency, 30% of the children's trust fund accounts are now having money saved into them every month. Families in the lowest income bracket are now saving a higher proportion of their household income for their children than those in affluent groups. Do not take it from me, Mr Deputy Speaker: parenting groups, charities, think-tanks and academics have all put their names to motions and supporting letters that say the decision to abolish the child trust fund, along with the savings gateway, is short term and misguided.
So today, as the Government prepare to take the children's trust fund from our children, we need to know what they intend to replace it with. The Minister has said that there will be no substitute and no compensation for the scheme where there is a Government contribution to encourage that saving. I welcome the fact that he wants to consider a future scheme to maintain the infrastructure. We know that the annual cost of running the child trust fund was about £5 million last year. I hope the Minister will confirm and look, in the winding-up speech at least, at how we keep that infrastructure in place to ensure that parents can make voluntary contributions.
Does my right hon. Friend agree that the difference between the numbers of Members present on each side of the House is interesting? As the Minister said, Governments have to make choices; indeed, I think the Chancellor said that only last week when he announced the comprehensive spending review. Some of those choices are more difficult than others and some are more shameful than others. Perhaps there is only one Lib Dem Member in the Chamber and so few Conservative Members because this is a rather shameful thing that they are doing, and a lot of them cannot face up to what is being done.
We shall see. I welcome my hon. Friend's contribution. When we debated the child trust fund and the reduction in funding in Committee in July, and when we had a vote on the Floor of the House, Liberal Democrat Members flooded into the Lobby to support that measure; Conservative Members flooded into the Lobby to take money away from newly born children from August of this year. That is a disgraceful position, and the strength of feeling that the Minister will face today from my right hon. and hon. Friends shows that Labour Members, who introduced the savings gateway, the child trust fund and the health in pregnancy grant, are proud to have done that and proud to defend them in the Chamber today.
The right hon. Gentleman is absolutely right that the coalition Conservative Government are doing some appalling things to women and children, but perhaps he could talk about what the Labour party did. Was not the Labour party going to halve child poverty? What actually happened to child poverty in the last few years of the Labour Government? Did it not go up?
I will just say to the hon. Gentleman: record levels of the minimum wage, record support on Sure Start, record investment in education and tackling child poverty across the board. The Labour Government have a proud record of tackling inequality and trying those issues. [Interruption.] The Financial Secretary says, "Records of deficit". I recognise, as does my right hon. Friend the shadow Chancellor of the Exchequer, that we need to tackle the deficit, and that is where the choice is today. The choice for the Financial Secretary is to cut deeper- [Interruption.] If he stops chuntering for a moment from the Front Bench and listens, he will hear me say that choices have been made to cut the deficit much more slowly than the hon. Gentleman was doing, over a longer period. There are other issues that could be looked at. The Government's banking levy is worth a proposed £2.4 billion. If the Labour Government had been in office, it would have been £3.5 billion. There is £1.1 billion extra already from that funding. The hon. Gentleman knows there are differences of approach here, and this Labour Government would have taken a different approach to the deficit, and would have been able to save those resources in a much better way.
Does my right hon. Friend agree that another example of the fundamental difference between what we would have done in office-indeed, what we did do in office-and what this Government are doing today is the disgraceful sop we have heard from the Minister today replacing the child trust fund with a tax-free account, which as we all know will do absolutely nothing substantive to encourage saving among low-earning families, as the trust fund was doing? That is the real business we are debating today, and I, for one, think it is a mistake and a disgrace.
One of the great benefits of the child trust fund was that it encouraged people on lower incomes to save, it gave a kick-start to their savings accounts and it helped them to get into the habit of saving. The change that the Minister has made will mean that those people who can save will save, and those who are not used to saving, do not have the resources to save or are not part of that savings culture, will not. That will impact, in due course, on the inequalities of people in their 18th year.
Before I give way to my right hon. Friend, let me say that one of the most disgraceful things will be the fact that the Government are taking child trust fund contributions from children who have no parents, who are in care, who need the support of the state to reach their 18th birthday-who will need that kick-start in due course. I am sure that is the point that my right hon. Friend was going to make.
I am very grateful indeed to my right hon. Friend for giving way. [Hon. Members: "Hear, hear."] He has been very generous, as was the Minister until, for some unknown reason, he declined to take interventions towards the end of his speech. My right hon. Friend may remember that in an earlier intervention I raised the issue of looked-after children. After that, the Minister announced, although he did not go into too much detail, the new tax-free savings account for children. Does my right hon. Friend think it would help if we knew how looked-after children might be able to benefit from the new scheme that the Minister just announced?
Perhaps the Minister can tell us that in his winding-up speech, because clearly, looked-after children, children in care, would have had a contribution to the child trust fund, which would have helped them, on leaving care at the age of 18, to start a life without parental support. That is an important contribution that this Government have taken away from looked-after children.
To be constructive: there may be opportunities for local authorities, for charitable trusts, for other people in the community, to contribute to funds set up in the name and for the benefit of looked-after children. Will they be able to benefit from this new tax-free savings account? I do not know, because the Minister would not take my intervention and answer the question.
Teenage pregnancy levels are high in some of our most deprived communities, and the child trust fund at least offered 18-year-olds who were about to have children the chance to take a different track or to receive some support. Does my right hon. Friend agree that the Bill will take away a key tool in the battle against child poverty?
It will indeed take away a key tool in helping to deal with inequality and poverty at the age of 18. The child trust fund encourages saving, particularly among people from the poorest parts of our communities.
My hon. Friend is exactly right, and from her background outside the House as well as inside it, she will know how important that contribution is, but let me move on to the Saving Gateway Accounts Bill, which was introduced in 2009 by the Labour Government, again to encourage people on low incomes to save for their future.
Cash savings accounts were created for those on lower incomes, providing a financial incentive to save, with the Government matching, pound for pound, the money that people saved in the scheme. The scheme was proposed in 2001: 22,000 people have so far taken part in the pilots, and £15 million has been invested in savings through those pilots. The accounts have run for two years, and they have been a positive way for people to start to save, with help and support for those in our poorest communities.
The first pilot ran between 2002 and 2004, and 1,500 saving gateway accounts have been opened in Cambridge, Cumbria, east London, Manchester and Hull, in the part of the world of my right hon. Friend Alan Johnson. Additional pilots have been run recently in south Yorkshire. Those schemes have shown that we can generate new savers, new saving and, indeed, help people on poorer incomes to put aside money to meet some of the challenges that they face in their daily lives.
Hon. Members need not listen to me about the importance of those schemes; let me give them an authoritative voice on the Saving Gateway Accounts Bill:
"The 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 they have not had hitherto."-[ Hansard, 25 February 2009; Vol. 488, c. 323.]
Those are not my words, nor those of my right hon. and hon. Friends; they are the words of the Minister, who is now introducing proposals to end such schemes, although he supported the 2009 Bill-doing one thing in opposition and, yet again, another thing in government. At a time when potentially 500,000 people are being laid off because of the public sector cuts as part of the comprehensive spending review, the Government will take that support away from those who need it most.
In the absence of the saving gateway scheme, how does the Minister propose to promote the culture of saving among people on lower incomes? As my hon. Friend Kate Green said, how do we ensure that saving is not the preserve of the rich and that it is done throughout society, so that people can help themselves and ensure that they save for the future in partnership with the state?
If we turn to the last part of the Bill, we see the full force of the coalition's new politics turning itself on those who are pregnant. Any hon. Member who is a parent knows that raising a child is a uniquely rewarding experience, but we all need to recognise that it can be financially challenging in the run-up to a birth and that it can be difficult for young mothers and young families. Not only was the health in pregnancy grant introduced in recognition of the health benefits of covering some of the additional costs involved during pregnancy, but it was paid universally to all mothers to ensure that they could buy help and support during the last weeks of their pregnancies. Such support covered healthy eating, vitamins, medicines, books on healthy pregnancy or the cost of maternity clothes or folic acid, as mentioned by my hon. Friend Yasmin Qureshi. Folic acid can help to reduce the risk of spina bifida, but 400 mg costs £9.99 at Boots. The health in pregnancy grant can be used for those costs and put towards getting help and support for health, and it is linked specifically to ensure that advice is given to mothers in pregnancy as part of the deal.
I am sure that hon. Members on both sides of the House agree it is important to target resources at the most vulnerable, but in dealing with pregnancy specifically, can the right hon. Gentleman point to any evidence that such help has improved the outcomes of deliveries, or births, or the health of ladies during their pregnancies?
If the hon. Gentleman cared to listen not just to me but to a range of groups that support pregnant mothers-from maternity groups to the Fawcett Society and others-he would find that there is a real input. He has a medical background, but if he is telling me that the grant does not matter to individuals who pay extra for healthy eating and minerals, who take medicines to reduce the risk of spina bifida and who need to buy maternity clothes and so on, I would like him to stand up and tell his constituents why that is so.
The right hon. Gentleman is making points about a grant that is given later in pregnancy and talking about minerals that are given earlier in pregnancy, so he needs to understand the issue a little better, but can he give any evidence of how the grant has improved the outcomes for mothers during pregnancy? Can he produce such evidence from any birthing group, any obstetric group or any midwifery group?
The hon. Gentlemen need not listen to me but should listen to the groups that are arguing for the retention of the grant. It is important not just for health but for costs of pregnancy, such as maternity dresses or equipment for the home, or covering time taken off work through ill health. Women on poor incomes need help and support to cover those important things, and this universal grant can help individuals to meet those needs at a time of great stress in the 25th week of pregnancy.
I noticed that the Minister referred during his submission to a quotation from the National Childbirth Trust, which expressed its upset that the grant was not provided earlier in pregnancy. I also have a quote from the trust that might provide the evidence requested by Dr Poulter:
"At a time when families are trying to make ends meet, the Coalition Government has hit parents particularly hard. Cutting pregnancy and maternity grants, as well as child benefit and tax credits, will make it even more difficult for new parents or those wanting to start a family... the Government should stick to its commitment to making the UK more family friendly."
My hon. Friend quotes the chief executive of the National Childbirth Trust, but she could have also quoted the Royal College of Midwives, which said that there is an opportunity for midwives to communicate health advice to women and their families, as the grant is dependent on engagement with health practitioners. Never mind the cost of maternity dresses and other clothes, minerals, healthy eating, advice or taking time off work, these are important grants.
The Bill shows that the Government are out of touch with the needs of the vast majority of the British people. A £190 maternity grant may not seem much to some Government Members, but for the shop worker getting by on the minimum wage, it is a significant amount of money. For a woman with an unemployed partner, it might make a difference to the future health of their child. For those people, the grant makes a difference. Like the child trust fund, the grant is about investing in our future and in our children's health and in giving them a good start and ensuring that they have a break at the age of 18, to make their way in life with positive support.
Does my right hon. Friend agree that one of the things that is likely to happen if women are given a sum of money in the seventh month of pregnancy is that they will go out and spend it, thereby also helping to regenerate their local economies?
Indeed. That is a good point, but I would say in passing to my hon. Friend that, unless I missed something, the Minister seemed to indicate that he did not feel that women would spend the money on things that matter for their pregnancy. He seemed to take a "shoes and nail varnish" approach in relation to what the grant has done. Most women take a great interest in the development of their children-that is the most important thing in their pregnancies-and they will do things to ensure that their children have a great start in life, and the grant was an opportunity to help in that respect.
Government Members are slightly confused on this matter. The Government keep saying that these draconian cuts for the poorest children are necessary to help the deficit and laud their own policy of giving two-year-olds 15 weeks' free education, basing access to such a service on eligibility for free school meals. How many two-year-olds receive free school meals at the moment? If those two-year-olds do not have older siblings, what mechanism must be set up across Departments to work out which two-year-olds are eligible? What is the cost of such a mechanism? How much of the money recouped from the cuts that the Government propose will be wasted on a complicated mechanism to work that out?
My hon. Friend makes an important point. There was a thread running through the Labour Government's intentions to ensure help and support for children, help and support for those on low incomes to save, and help and support for families to save for their children's 18th birthday and beyond. [Interruption.] The Liberal Democrats are down by 50% already-down to one Member present.
Stephen Williams is a member of the Finance Bill Committee, as am I. I am in the Chamber defending our position on behalf of the Labour Opposition. The hon. Gentleman is in the Finance Bill Committee saying nothing about what is happening upstairs and supporting the Conservative party in Divisions upstairs. Martin Horwood should reflect on those matters.
The changes proposed in the Bill, coupled with changes to direct tax, tax credits and benefits, will hit women harder than men. The spending review changes hit women twice as hard as men. The emergency Budget changes hit women three times as hard as men. Cuts in child care, tax credits, child benefit and other support will make it harder for women to work. More than £6 billion is now being cut in direct financial support for children-three times more than is being taken from banks.
I come back to the fact that the banking levy proposed by the Conservative Government, which was a Labour Government initiative, will raise £2.4 billion. My right hon. Friend the Member for Kingston upon Hull West and Hessle proposes a banking levy of £3.5 billion.
The banking levy was not an idea of the previous Government. The previous Chancellor of the Exchequer ruled out the banking levy that we have introduced.
No. If there is a banking levy in place, we will support a higher banking levy. Would the hon. Gentleman support a banking levy of £3.5 billion and scrap the abolition of pregnancy grants today? No, he would not.
There are a range of measures that the Labour Government introduced and would have introduced in relation to deficit reduction. There are a range of measures that my right hon. and hon. Friends and I were elected to implement to reduce the deficit over a four-year period, including an additional banking levy and help and support for deficit reduction. [Interruption.] The Financial Secretary says that is not so. Whatever happened in the general election, we were elected on a policy to reduce the deficit over four and a half years. We would have done that. We would have implemented measures including a range of tax changes and help and support for public sector efficiencies of £15 billion. He is making a choice that puts women, children and the poorest in our society at the greatest disadvantage as a result of the changes. That is a disgrace. We should have looked at the situation differently.
Indeed. As my hon. Friend knows, even now some of the Budget measures that make the Budget seem fairer than it is are measures that we supported in government and which the Conservative Government opposed when they were in opposition. I will not take lessons from the Conservative Minister on fairness towards pregnant women, children and those on poorer incomes, because the Labour Government, when in office, had a proud record of fighting on those issues.
In conclusion, the debate is about choices for the future. As my hon. Friends have pointed out, other choices could have been made. I am not saying that I would have supported them or agreed with them, but the Government could have considered a range of other choices. They could have suspended payments for a period of time for the child trust fund, the maternity grant or the savings gateway. They could have means-tested them, so that individuals with the highest income in society did not receive the maternity grant or the child trust fund.
The Government could have considered measures including a payment holiday. They could have considered phasing out the support over a longer period. They could have done all those things, but they have not. They have taken a sledgehammer to the child trust fund, the savings gateway and the health in pregnancy grant. It is not the deficit that is driving these measures; it is dogma on the part of the Conservative party.
The Government do not recognise the pressures of bringing up a child with limited financial means in the 21st century; they do not understand the difficulties faced by people trying to save on a low incomes; and they do not understand the difficulties that mothers- to-be on low incomes face in the final weeks of their pregnancy. The Bill shows that the Government have made the wrong choices. It will deepen inequalities in our society, and I urge all right hon. and hon. Members to reject it.
It is a pleasure to follow the shadow Minister, Mr Hanson, who was my first political foe when I was just 14 and he was leader of Vale Royal borough council. In the intervening 20 years, he has only got worse. That is a sad thing to have to say.
It is important that we remember why we are here today and what we are here to discuss. We are not here to discuss whether it is a good idea for families to save, or to encourage children to save. We are not here to discuss whether it is a good idea that pregnant women should enjoy good health during pregnancy. That is not what we are here to discuss. We are here to discuss whether the specific items of legislation introduced by the previous Government achieved their goals and warrant continuation.
The Labour Government had a fondness for introducing legislation willy-nilly, volume after volume of it. At no point did they ever feel a need to investigate whether their legislation achieved its goal. I have nothing against innovation in public policy. The work of think-tanks is important, and it is a disappointment to me that the former Prime Minister, Mr Brown, is not in his place today to defend his creation, as I know he felt such a passion for it at the time.
What we are here to do today is to decide whether specific items of legislation were effective-not whether they were popular, whether they made Labour Members feel good about themselves, or whether they excited think-tanks, interest groups, pressure groups or campaigners. The question is whether they achieved what they set out to achieve. We cannot have such a discussion without considering the wider economic issues. Every day we are spending £120 million just paying off the debt that we inherited from Labour. I could spend that money in my constituency alone 40 times over. I am sure every Member in the House could do so. We must place the debate in the wider economic context.
There are two important tests that we should apply to any legislation. I call them the Ronseal test and the rhododendron test. The Ronseal test, for those who watch commercial television, might be a bit obvious: does it do what it says on the tin? Any piece of legislation and its effectiveness must be assessed on whether it achieves its goal.
The rhododendron test might be a little more obscure. I often find when listening to those who represent the left in British politics that they identify totemic pieces of legislation that they consider vital and which become representative of a much wider public policy area. They go on to defend that legislation to the hilt, thereby ignoring every other aspect of public policy in that area that could make a difference, just as in a parkland, rhododendron may look beautiful but it covers so much ground that it chokes off wider growth that might be beneficial.
If we apply those two tests to the child trust fund, for example, how do they stack up? Originally, the former Prime Minister called it the baby bond. It was meant to be a nest egg, a form of what was then in vogue-asset-based welfare. Unfortunately, the fund was not much of an asset by the time the child got to 18. The scheme certainly was not what the philosophers behind the idea of asset-based welfare had in mind. Others sought to define it as progressive universalism. We have a habit in this country of trying to adopt fancy-pants names for new ideas, philosophies and ways of looking at politics, and I am not entirely clear what progressive universalism actually means.
I shall be happy to explain to the hon. Gentleman what progressive universalism means in the context of the child trust fund. It means that all children receive something but the poorest receive more. In that way, we obtain the benefit of popular support for a policy that directs more money to those who need it most.
I thank the hon. Lady for what I presume she thought would be a helpful contribution for idiots like me. I shall read a useful quotation from the Child Poverty Action Group in 2005, which I believe the hon. Lady chaired at the time. It is a lengthy quotation on the group's approach to the fund, but it bears repeating:
"Although the Child Trust Fund will benefit some lower income families, we are concerned that families who are at greatest risk of living in severe and persistent poverty are the least likely to be able to contribute to the CTF, so their children will derive little or no financial benefits when they turn 18."
If the hon. Gentleman will calm down and let me finish the quotation, I shall happily give way. Learn some manners, sir, please.
The CPAG continued:
"The very children who would benefit most from having savings and assets are likely to derive least financial advantage from the scheme."
I shall now give way to the hon. Lady.
I am very grateful to the hon. Gentleman. It is true that the CPAG, of which I was chief executive at the time to which he refers, had some misgivings about the initial design of the child trust fund. Thanks to our lobbying, I like to think, the product was improved over time and the extra payments for low-income children were then introduced. Does the hon. Gentleman not agree that that was rather a good development in a policy that is certainly still ripe for improvement, as he rightly says, but not for abolition?
Let us rejoin the theme of progressive universalism, which the hon. Lady so kindly and patronisingly explained to me. If the fund is so universal, why in the first four years did 25% of people not apply for it? To me, that is not universal; that is rather partial.
Is the hon. Gentleman aware of the research by Elaine Kempson of the university of Bristol on the increased take-up of the child trust fund? Three out of every five parents now take it up automatically, and the state picks up the rest.
Three quarters of those accounts opened since 2005 have failed to receive additional deposits; 99% have not received the maximum funding available; and only 71% of eligible children have a child trust fund. I am not trying to argue, as Opposition Members seem to think, that the fund is a failure; I am trying to argue a more subtle point, that this piece of legislation-this policy innovation-has not achieved its goal.
The child trust fund has not been in existence long enough truly to reap the benefits that it would if it were kept on. In respect of deposits, the fact is that when parents have young children, their outgoings are extremely high, but if the child trust fund is in place in the future, when they have more expendable outgoings, they are able to invest more money in it. So, an awful lot of parents who might not invest when the child is a baby might do so in a few years' time when the child has gone to school and they are not paying for child care and so on.
I thank the hon. Lady for those ifs and buts. We can all hope for what might happen at some point in the future.
The shadow Minister, the right hon. Member for Delyn, set out three reasons why Labour introduced the measure. It was about inculcating a savings culture, encouraging financial education and providing a nest egg. So, rather than assessing the measure against the legislation, let us try to assess it against what the shadow Minister said was important.
There is no evidence that the fund has encouraged a savings culture. Many organisations that promote financial education come to me time and again to ask, "Why didn't the last Government do more to promote financial education, particularly at primary level?" In the average family, a piggy bank-
No, I am sorry, but I am not giving way to you, madam, so kindly take notice of that.
Having a piggy bank- [ Interruption. ] I am going to make the point that having a piggy bank in one's bedroom is a much greater spur to saving and learning about the culture of savings than any attempt to lock away money until the age of 18.
Paul Goggins, and Cathy Jamieson in her Westminster Hall debate, have raised the issue of looked-after children and how we deal with them. It is a very important issue, but the Opposition should hang their head in shame at the outcomes that looked-after children obtain after 13 years of Labour rule. The points that those Members made were an example of what I call the rhododendron test. By focusing on the tiny issue of whether such children should continue to receive child trust fund payments, they overlook the much wider public policy issues. There are many other ways in which we can and do help looked-after children.
I should like to make two points. First, before the election in May, the Tories voted against introducing personal, social and health education-including economic and financial education-and making it a statutory subject in all schools. So, the Tory party should hang its head in shame. Secondly, on looked-after children, what are they doing as a Government-
Order. The intervention has gone on for far too long. The hon. Gentleman is making his points, but he must return to the issue at hand.
Thank you for that advice, Mr Deputy Speaker.
There are other ways in which we can and do help looked-after children. In particular, for example, there is a high correlation between looked-after children and poverty. That stands to reason, particularly in terms of their geographical location, but the pupil premium, which we announced recently, will go a long way to helping those children who are in education to make it as far as university in the first place. Finally, on the child trust fund, I welcome the notion of a children's ISA. I hope that I hear about it in a future announcement or Budget.
I should now like to apply my two tests to the health in pregnancy grant. It is what it says it is: it is about health in pregnancy. The former Prime Minister, when Chancellor, introduced the policy, saying that the Government had received "powerful representations" regarding the importance of good nutrition during the final stages of pregnancy. The grant was clearly designed to promote health in pregnancy, but, when the measure was going through its Delegated Legislation Committee, the then Health Minister, Mr Bradshaw, accepted that the bulk of health improvements occur when changes in behaviour occur earlier in pregnancy. Waiting until the seventh month is rather like shutting the stable door after the horse has bolted; it certainly does not encourage a behavioural change.
Order. Everything has to come through the Chair. We have to work through the Chair and not be distracted as we have been.
Improvements in diet are important, but the waiting times for those applying for the health in pregnancy grant have been anything up to eight weeks, by which point the money that was supposed to transform their ability to access an improved diet is simply not appearing. It would be very easy to dismiss-
Order. The hon. Gentleman has given way quite a lot, and if he does not wish to give way now, hon. Members must accept it.
It would be very easy to dismiss health in pregnancy grants, as some Opposition Members seem to think that we are doing. I am not doing that. My constituency has significant pockets of poverty, and if Conservative seats were ranked in order of deprivation, mine would be somewhere near the top. I spent a fascinating Friday a couple of weeks ago with our family nurse partnership, a pilot project that is working with young mothers-to-be in the most deprived quartile of the population in the most deprived areas of the constituency. They receive intensive support from the moment they become pregnant to beyond the birth. It is a fantastic project and it costs £3,000 per mother. The project also works with the father. It addresses issues such as self-esteem, improving literacy and numeracy, helping the father to get back into work and ensuring that the father feels part of the birth.
To my mind, the project achieves far more than a £190 health in pregnancy grant. One might argue that it is a significantly greater amount of money, but I would argue that it represents a different approach to policy making. Mr Allen is looking at early intervention on behalf of the Government and he is a strong supporter of the family nurse partnership. I think that it makes a much greater difference to outcomes if we have evidence-based policy. My hon. Friend Dr Poulter was correct to pursue the Opposition about the lack of medical evidence for improvements in the health of pregnant women-
No, and the quote that I heard from the hon. Lady did not pass the quality threshold for the British Medical Journal and nor was it ever likely to do so, coming as it did from a press release.
It is also worth bearing in mind that we give other targeted interventions for pregnant women that are designed to assist them. The Minister has referred already to the Sure Start payment and the healthy start payment, and the latter is specifically designed to support women who wish to improve their dietary health by purchasing fruit, vegetables, vitamins and other things that will assist them. Interventions must be properly targeted and not just handed out. It is all very well to oppose this measure, but not to do so by reference to generalities. These proposals have to be considered in the round, and those Opposition Members who may not like this proposal need to suggest what they would do instead and how they would seek to cut the deficit that they have left behind.
This Bill is the start of something new and radical. I am a great fan of Ronald Reagan, the former President of the United States-as we all should be. He always said that he lived on the sunrise side of the mountain and I always try to do so too. Although my glass is often half empty, when I consider things I try to take an optimistic view, and I consider this to be an important measure. It says that-unlike the previous Administration -no longer will we pass legislation year after year without bothering to ascertain whether it achieves its purpose. We will pass legislation based on the evidence of whether what has gone before has worked and whether it assists in meeting the wider challenges of public policy that we face-both economic and social. I urge the House to support this Bill, not just because it will assist us in reducing the deficit, but because it introduces the concept of evidence-based, high-quality public policy making, and that is sorely needed in this country today.
I am grateful for the opportunity to speak about clause 1 of this Bill today. In 2005, the child trust funds were launched in an attempt to build financial education and encourage habitual saving. The scheme was progressive in that it gave additional financial help to those who needed it most, with larger sums given to children from low-income families, children with no families-those in care-and disabled children.
The Government's decision to introduce this Bill to phase out and then stop all Government payments to child trust funds is short-sighted and unfair. It is short-sighted because it scraps a popular scheme that encourages young people to save, without putting a replacement mechanism in its place. It is unfair because it is part of a package of measures contained in the comprehensive spending review that asks children and families-and children with no families-to play a bigger role in reducing the deficit than the banks and large corporations.
Ministers have failed to say what they would put in place of child trust funds to encourage families, and low-income families in particular, to save specifically for their children's future. In answer to a written question on
At the moment, it seems inevitable that the winding down of child trust funds will reverse recent efforts to increase the financial literacy of young people in this country. Financial knowledge and education in this country are at a worryingly low level. The savings ratio, which measures what proportion of earnings people in Britain are putting aside as savings, recently fell to the lowest level in seven quarters. That is no doubt linked to the recession, with wage freezes reducing household income while the cost of living continues to rise. With more strain being placed on family budgets and people having to dip into their savings, families need more help, not less, to put money away for their children's future.
Child trust funds have an important role to play in helping young people engage with financial institutions early in their lives and to develop saving as a habit. The funds also provide young people with a level of financial independence and therefore responsibility. It is particularly important for children from low-income families, where such a significant financial asset accessed at age 18 can help with social mobility. Studies show that young adults with a small amount of capital at the beginning of adulthood had a significant advantage 10 years later over those who did not.
Child trust funds are a good way of reaching families who otherwise may not save. Stopping the child trust fund scheme will only increase the chance that social mobility will remain static. Parents with financial knowledge and greater means will likely continue to put money aside for their children's future and instil in their children the value of saving. The children of parents who lack these resources, or children with no parents, will fall behind. The Government say that child trust funds have not been successful, but as no recipient has yet reached the age of 18, I do not understand how that can be judged.
HMRC statistics show that 10,841 vouchers were issued in my constituency and more than 8,000 child trust funds were opened by parents or guardians, with the remaining ones opened by the Revenue on the child's behalf. So the initial take-up rate has been positive. The most important point that needs to be made in this debate is that the Government are not proposing to stop Government payments to child trust funds in order to reallocate the money for children elsewhere. The funding is simply being cut, with the relatively modest cost of child trust funds-£320 million this financial year-going towards reducing the deficit. Thus, a valuable scheme to help young people is to be sacrificed in the name of short-term expediency.
The Financial Secretary to the Treasury says that the eradication of the deficit is the Government's "top priority". However, if this is the Government's main priority, they would do better to look at the state of the UK tax system where the top five retail banks stand to cut around £19 billion from their tax bills in the future because of huge losses during the economic downturn, despite being saved by the UK Government through an £850 billion bail-out.
The tax payments that those banks are expected to contribute to the Government are nowhere near the expectations of most people in the UK. Banks are not being told to bear their fair share of the deficit burden that was run up because of their reckless behaviour. Instead, it is children and families, and children with no families who are being asked to bear the brunt of the cuts through the scrapping of schemes such as the child trust fund. The Chancellor used the word "fair" 24 times during his statement last Wednesday, but in reality his spending review takes more money away from children to help reduce the deficit than from the banks responsible for it.
On a personal note, as I stand here this evening, my youngest daughter is in hospital in Dartford, in labour with her first baby. She was born in 1979 under a Tory Government, and my granddaughter will be born in 2010, also under a Tory Government. The previous Tory Government came for my daughter's school milk, but at least she was five when they took it from her. From my granddaughter, however, they are taking away the child trust fund when she has just been born, and the health in pregnancy provisions before she is even born. It seems that the priorities of the Tory party are always the same.
Before coming here I read a document from the Save Child Savings alliance, which hon. Members might have had a chance to look at. I thought it would be helpful to run through some of its points about why it is so important to maintain and retain child trust funds, and answer them one by one. Its first major point is that child trust funds are all about fostering a long-term savings culture. I am sure that everyone in the House, from whatever party, will agree that that is a major national goal. However, the point about a long-term savings culture is that every form of fund or saving, including pensions, is exactly that-savings. So we cannot look at CTFs in isolation. The SCS alliance's second major point is that keeping CTFs will help to protect the savings culture in the UK. To that, we could add the CTFs' original goal of spreading financial literacy.
The question at stake this evening, therefore, concerns two main points: first, how effective have CTFs been in delivering either their original goals or the aims suggested by the SCS alliance? Secondly, what choices and other alternatives are available to provide the best for our nation's children? The results so far show that CTFs have, over their lifetime of just over five years, accumulated £2 billion of assets, which is a reasonable absolute figure on its own. However, £1.4 billion of that was provided by the Government, and only £600 million by the families and friends of those participating. As mentioned by my hon. Friend Paul Maynard, the take-up amounts to 70%, with 24% of open accounts having received no contribution from participating families or friends.
Many better forms of savings are available in the marketplace for achieving the same ends. In particular, I highlight the existing individual savings accounts, which came from the original personal equity plans of the 1980s. These provide significantly more investment options, have, by and large-although not altogether-delivered better performance and have much lower costs. They can be designated to children, which is important, and cost the taxpayer nothing.
Is that not an unfair comparison, because the ISAs have been in place for much longer than the child trust funds? It is extremely early in the life of CTFs for one to conclude that they will not achieve what they might achieve, and what we would hope they would achieve. A good point was made earlier about the point at which families tend to invest in long-term savings for their children. We can safely assume that more would have been paid in by families and friends at later stages, as more expendable income became available.
The hon. Gentleman is right that this is a short period of history over which to judge them, but the fact remains that the annual management costs for CTFs, at 1.5%, are significantly higher than most of us would need to pay for an alternative form of savings. That will not alter over time. In answer to the suggestion that, in time, parents, families and friends might put more into the accounts, there is nothing to prevent them from opening an ISA or, as the Minister suggested, a new denomination of children's ISA-if one becomes available-in their child's name. Although I think that half the point made by Owen Smith is right, I do not think that the overall impact of CTFs would be positive.
The hon. Gentleman made a point about accessibility and the fact that 25% of child trust funds set up by the state are not taken up by the individuals. How does he suggest that that 25% of people benefiting from those savings funds will benefit from ISAs, given that they are unlikely to walk into a financial institution to arrange one for their children?
I have a specific suggestion on that, which I will come to in a moment. Meanwhile, I am sure that the hon. Lady will have noted earlier the intervention from my distinguished colleague on the Work and Pensions Committee, Kate Green, who in an earlier career pointed out that CTFs do not necessarily reach the most vulnerable families. Arguably that was a flaw in the concept at the beginning.
It is important to clarify this point. I did not say that they did not reach the poorest. I said that it was difficult for the poorest to participate in the savings element. However, as my hon. Friend Catherine McKinnell just pointed out, with an ISA product there would not be any element of asset building for the very poorest, because they would be unable to save for themselves.
The only difference is that CTFs are funded by the Government, so we come to the argument about whether that funding can be used more effectively in the context of the goals. I was going to come on to that. I suggested that there are alternative forms of savings that are more effective than CTFs, have lower management fees and better performance, and come at no cost to the taxpayer.
I come to the next point made by the SCS alliance. It argues that CTFs have been
"one of the most successful government savings schemes ever".
Members will agree that everything is relative. Clearly, CTFs did better than the previous Government's attempt to create a savings scheme-the stakeholder scheme-which is a scheme that not even Mr Hanson, in one of his more elaborate flights of fancy, could conceivably describe as having been an outstanding success. However, by comparison with the success of other savings schemes not run by the Government, CTFs have done only a relatively modest job.
The important thing is that, although Governments can, do and should create the structure for savings schemes, their track record in running them is not good. For example, do Members believe that we should be paying people to work for Her Majesty's Revenue and Customs and spend their time advertising and promoting CTFs, or do we believe that they should be ensuring that benefits go to the right people and that we all pay the tax that we should do? HMRC should not be in the advertising business.
Order. If hon. Members are going to give way, they should give way quickly. If not, the hon. Member trying to intervene must sit down.
On the hon. Gentleman's point about HMRC officials spending their time promoting savings accounts to children and parents, the idea is to give a hand-up, rather than a handout. Rather than benefits being handed out to families, the idea is to encourage saving in a family and to make it accessible to families that would not otherwise easily access saving funds. That is a hand-up, rather than a handout, and I would have expected Government Members to support such a programme.
The answer is that we all want to encourage hand-ups to everybody, through whatever means possible, but that brings us to the second point about the difficult decision that the Government have had to take in their proposals-and which we as individual Members have to take-which is: what are the alternatives? I will come to that in one second, but on the Government's role in running saving schemes, one crucial lesson that I hope will be learnt from the stakeholder experience and, now, from CTFs is that the Government should operate such schemes at arm's length. When it comes to the creation of the national employment savings trust-or NEST-by the Department for Work and Pensions, I very much hope that that lesson will be taken on board.
The question then is one of choice. What could we do for our children with the money that the Government have been spending on CTFs that would be more effective? My belief is that the best investment that any of us can make as parents for our children is an investment in education. Therefore, Members need to focus on several crucial changes that have been made in the education of our children. Those changes will cost the Government and the taxpayer significant amounts of money, but that is an investment on which I believe we will all see a significant return. First, the retention of Sure Start children's centres, which were begun by Labour, is an important move by the Education Secretary. Secondly, there is an extension of the availability of free education to every three and four-year-old in the country. Thirdly and most significantly, there is the poor pupil premium, which will cost the Government some £7 billion over this Parliament and which comes on top of baseline funding for schools.
I really believe that the most important thing that any of us can invest in is education. This is not about money: I do not believe that there is any evidence that financial literacy in this country has improved as a result of CTFs, nor, in a sense, could it, because the children are not involved. Children benefit from financial literacy programmes that go into schools and talk about what type of mobile telephone package they should have and so on, not from being given a lump sum of money that goes into an account with which they have no involvement. From the choices available to the Government, the best way to spend the money was and should be in education. For that reason, I shall be supporting the Bill.
It is a sorry day on which we are debating this Bill on the Floor of the House. It is a sorry day too, when we realise that the people whom the Bill will hurt are those whom we have always had concerns about. Paul Maynard said that he could not see the real benefits of the schemes. As the elected representative for Strangford, I can quite clearly see the benefits for the people who come to my office-the people I help, the people I see every day. The attacks and the changes for children and pregnant women are wrong. The policy and the strategy that the Government have put forward will unduly hurt those who can ill afford it, and who will feel the impact more than most. I understand the need for the coalition-indeed, the need for us all-to look at how we can best save moneys, but the question has to be asked: is this Bill the best way forward? Is the best way forward to deprive those who can least afford it, and who will feel the impact more than most?
I did some research on Strangford-with the help of the staff in this place, of course. The number of parents or guardians in my constituency who have taken advantage of child trust fund vouchers totalled just shy of 6,800, with some 5,000 being for accounts opened by the parents or guardians and just under 2,000 being for accounts opened by HMRC. The figures for Northern Ireland are clear, and they send a message. Northern Ireland has taken advantage of the scheme, and the area that I represent is part of that. Some 123,000 vouchers were issued before April 2008. My constituency has the third highest take-up of vouchers by percentage. For me, and for where I work and live, that clearly shows that the child trust fund puts money into the pockets of those who will need it in the time to come. It also enables young children eventually-when they turn 18-to be presented with a tax-free fund. I believe that the child trust fund should and could have done that, if it had been given the opportunity.
The hon. Gentleman will recall, from his time in the Northern Ireland Assembly, the strong campaign that was fought there to ensure that credit unions in Northern Ireland could become providers of child trust funds. That campaign was fought in this House too, such was the demand to ensure that child trust funds were used in Northern Ireland and to improve direct take-up, with more choices being made by parents. That campaign was backed by all parties and all communities in Northern Ireland. That is how popular child trust funds were.
I thank the hon. Gentleman for his intervention. The credit unions facilitated that role for child trust funds, as other Members have mentioned. The scheme was extremely popular in the area that I represent and in Northern Ireland as a whole. The figures that have been released clearly show that.
Parents did channel moneys and savings through for their children, but with respect, I feel that the coalition-our Government-has stopped a worthwhile scheme, which will hurt the pockets of those who need help most. The ripples of that will come through in the next few months.
Paul Maynard, who spoke on behalf of the coalition a short time ago, suggested that the best way to encourage savings was to have a piggy bank in the bedroom. With the greatest respect, when we think about the amount of money that the parents of many of those children will have to pay and how much less they will have to spend on their children, we have to ask: where will they get that money to put into the piggy bank, and will that not increase the divide in our society and penalise its poorest members?
It has been mentioned by others that, for a great many in this House, there is an equality issue with this Bill. It will disadvantage those who can least afford it, and will give an advantage to those who perhaps do not need such schemes. We will eventually end up with inequality in our society. Northern Ireland was offering an example of how things could move forward, and the take-up of the child trust fund was an example of that.
The saving gateway account was a pilot scheme, and it never got as far as Northern Ireland-unfortunately. I was hoping that we could take advantage of the spin-offs for our constituents. There were certainly high expectations on the part of many, and that gave hope to a great many people. Again, the scheme was a savings account that involved the Government matching savers' moneys, which encouraged people to be part of the process. Unfortunately, if the Bill receives its Second Reading this evening, that scheme will also be knocked on the head, and that concerns me. I find it disconcerting that the saving gateway account should be banished to the dusty shelves somewhere, along with the opportunity that it could have given to those who need it most.
The health in pregnancy grant never was a good sum of money, but it did help those whom it was supposed to help. The hon. Member for Blackpool North and Cleveleys referred to the Ronseal test and the rhododendron test. The Ronseal test is whether something does what it says on the tin, and I have to say that the health in pregnancy grant did what it said on the tin. As a representative, I can honestly say that it did deliver.
There is absolutely no doubt that women's health during pregnancy is vital, but I really must take issue with the hon. Gentleman. The health in pregnancy grant was a universal benefit, so a mother of three children such as me could have received it and, in these extremely difficult financial times, we have to make difficult decisions to ensure that the available resources are targeted where they are most needed. The Government are really targeting support for families on lower incomes in a huge range of ways. Does the hon. Gentleman not agree that it is far better to target the limited resources at the families in the greatest need-
Thank you, Mr Deputy Speaker. I am sorry that the hon. Lady does not see this issue as clearly as I and many Members on this side of the House do. The grant did help people, because many of them came into my office and my advice centre, and I could see that they were benefiting from it. We have to target those people, but I do not believe that that will happen under the coalition's proposals. Those who need help the most will be disadvantaged and will feel the pain from the changes more than anyone else. I understand that qualification for the grant was conditional on the involvement of a GP, a midwife, a welfare officer or a social worker.
Will my hon. Friend tease this out a little further? I am not sure what part of the coalition's proposals targets the people Sarah Newton is talking about. The proposals deal with the removal of vital money, rather than with giving it to anyone.
I would like to respond to the question from Dr McCrea, because I can think of many clear ways of targeting people. We are absolutely committed to our investment in the national health service, to support for Sure Start centres and to the increased investment in district nursing through the Sure Start centres. As a result, a whole range of services will be available to pregnant mothers.
I thank the hon. Lady for her shorter intervention. I appreciate those opportunities for advancement, but the scheme we are discussing is targeted at a section of the community in which I can see its benefit. I have met many people who have been specifically targeted to receive the grant of £190. I dispute the view of those who think that many of the people who have received it should not have done so. That is certainly not my experience. Some coalition Members have referred to the grant as a gimmick, but I can tell them that it was not a gimmick to the people of Strangford whom I represent. It was something that they were able to use and take advantage of.
Household names such as the Royal College of Midwives have expressed disappointment at the decision to abolish the health in pregnancy grant, which, apart from providing pregnant women with much-needed financial support, provided an opportunity for midwives to communicate health advice to those women and their families. When such an astute body makes a statement like that, we need to take note. We cannot ignore it.
The National Childbirth Trust has also stated:
"At a time when families are trying to make ends meet, the Coalition Government has hit parents particularly hard."
That is not Jim Shannon speaking; that is a quote from the NCT. Cutting pregnancy and maternity grants as well as cutting child benefits and tax credits will make things even more difficult for new parents and those wanting to start a family. I am very worried that parents and parents-to-be have been singled out unfairly. The coalition Government should stick to their commitment to making the UK more family friendly, but I believe that the Bill will change all that.
What will these measures mean for those who were destined to gain advantage for their health and their children's health, and to stay out of the poverty trap? Some hon. Members have talked about the poverty trap today. The constituency that I represent has areas of deprivation, and I am sure that other Members are similarly disposed. I see my constituents regularly, and I have to tell the House that they will be disadvantaged by the proposals. I want to make it clear that I am here to represent them, and I hope that the Bill will be defeated. If it is, we will have done some good work here tonight.
I want the coalition Government to state exactly how they intend to stop even more people dropping into the poverty trap that I regularly see in my constituency. Will the Minister tell us what they are going to do to give hope to the people who will lose out as a result of the Bill? Are there any plans to fill that gap? Other Opposition Members have asked that question tonight. What is to be done to fill the gap, which has now widened? That question needs to be answered, and I am asking it on behalf of the people of Strangford and Northern Ireland whom I have the privilege of representing, and of the 123,000 people who took up the child trust fund and the 25,000 who benefited from the health in pregnancy grant. There are people out there who need that money and who benefit from it. I urge the coalition to think seriously about their proposals, because they will have a serious impact on the most vulnerable in society. That is something that I cannot support, and nor will I.
It is a pleasure to follow Jim Shannon. I am conscious of the number of Members who want to speak tonight, so I shall try to be brief. I want to make three key points. First, we need to draw breath and remind ourselves why we are having to take these measures. Secondly, I want to draw the House's attention to some of what I believe to be the flawed thinking underlying the measures that we are withdrawing. Thirdly, I shall touch on the lack of support for them from a number of independent commentators whom one might have expected to be more vocal.
We heard a lot from Opposition Members earlier, accusing us in somewhat hysterical tones-it is nice that they have now calmed down a little-of unwarranted glee at cutting back from the most vulnerable in society. Those accusations almost reached the point of suggesting that that was what we had come into politics for, which is the most appalling and, frankly, shameful accusation, and one that they do not need to nod their heads at now.
It is worth reminding the House, and those listening in the Gallery, why the coalition is having to take these measures. It gives us no pleasure at all, but the truth is that we have inherited from Labour an historic crisis in our public finances. We have a debt of £700 billion, and debt interest would be set to rise to £67 billion a year if we had not set about tackling it, which these measures are part of. Our current debt interest payments are £120 million a day. Opposition Members need to bear all that in mind before they accuse the coalition of irresponsible measures. The irresponsibility is illustrated by the deficit that they bequeathed to us and to the future generations that we are all trying to help.
Without a plan to tackle the deficit, there would be a real risk that confidence in this country's public finances would collapse, that international markets would lose confidence in our gilts, and that interest rates would start to rise. That would trigger the real catastrophe that we are trying to avoid. Everyone knows that we have to tackle the deficit. Surely no serious commentator, and no serious politician on the Opposition Benches, would suggest otherwise. It is simply disingenuous and mischievous to claim to be a serious party of government and then to scream foul when a responsible Government take the important measures to deal with the legacy that it has left us.
The flawed thinking behind some of the payments that the Bill covers can be seen as philosophical, economic and practical. First, as a number of speakers have highlighted, the measures do not target the poorest in society; they do not, in fact, do anything to tackle the really deep and challenging poverty traps into which many people fell through the complex layers of tax credits that the former Prime Minister insisted on imposing. They do nothing to undermine the dependency on the state, which all progressives in this House now seek to try to unravel. Anyone reading the work of Professor Giddens-new Labour's philosopher-king-would understand that that is not an accident. In his seminal book-I commend it to Labour Members who have not read it-he sets about defining modern citizenship as a dependency on the state. It should be no surprise to us that the last Government took every opportunity they could to increase dependency on the state. Those of us in the coalition who want to release citizens from dependency would take issue with that philosophy.
Economically, there has been some flawed thinking. At a time when Labour Members were building up historic debt to £700 billion, some of my constituents might well have considered it something of a gimmick to set about giving back small amounts of money that the beneficiaries will not receive for 18 years in some form of apparent largesse when what people were really going to inherit was a historic deficit and all that went with it.
I defer to my hon. Friend Richard Graham in respect of his earlier comments on the inefficiencies in management. I noticed in the Library briefing that management fees were running at £700 million, so it is odd to hear Labour Members defending putting money into the pockets of fund managers.
Finally, let me deal with the lack of support for these measures from independent commentators, whom we might have expected to be more vocal. When I went to the Library to find out what responses there had been to these cuts, I found two examples to which I would like to draw the House's attention. Barbardo's, commenting on the child poverty figures, said:
"We want to see child poverty reduced to 1.7 million by 2015-the missed 2010/11 target. The Government must now play catch-up. It can be done. Our Government has made the first step, by vowing to cut child tax credits to middle income families and the Child Trust Fund. To continue on the right foot all it has to do is invest that money saved in our country's poorest children."
The report of the Child Poverty Action Group-other Members have mentioned it-provides another example. Its briefing of 2005 pointed out that the child trust fund would not benefit children until they were 18, stating:
"Given ongoing problems with the administration of tax credits, and the much publicised inadequacies of the Social Fund, we believe it would be more appropriate and more effective to divert additional funds and administrative time and energies to improving elements of provision that are designed to support low income families rather than on a scheme which many commentators believe will disproportionately benefit higher income families."
On the grounds of the nature of the deficit we have to deal with, the flawed thinking behind the policy and the lack of support for it, it seems to me that, far from being an hysterical over-reaction, these measures are perfectly reasonable and sensible, particularly in the light of the coalition's commitment, set out in the Budget and the comprehensive spending review last week, to the retention of Sure Start, the introduction of the £7 billion pupil premium, the targeting of child benefit at the most needy families and tax credits. Some Members have already referred to them.
I am just wrapping up.
Also important is the Institute for Fiscal Studies' analysis, showing the Budget measures will not increase child poverty. Far from being irresponsible, I suggest to the House and to people more widely, that these are regrettable, but responsible, measures from a Government who take seriously their responsibilities to tackle the deficit left by the previous Government.
This is an incredibly serious debate and I would like to address what I believe are important points raised on both sides of the House. I shall deal with all three elements of the Bill-the health in pregnancy grant, the child trust fund and the saving gateway proposals-in the context of what I understand to be important drivers for this Government, such as reducing inequalities, improving social mobility and improving child outcomes. I shall also consider the extent to which the proposals meet the Government's own fairness test.
I start with the proposal to abolish the health in pregnancy grant. There is considerable evidence to show the impact of poor maternal nutrition-during pregnancy and, importantly, prior to conception-on low birth weight, and the impact of that on a series of outcomes for child development down the line, including educational attainment and health outcomes. I certainly agree with the Conservative Members who said that a grant in the seventh month of pregnancy was not sufficiently early to achieve everything we would want to improve the well-being of pregnant women and their unborn children.
For women on low incomes, affording a healthy diet is a challenge. Indeed, women reliant on safety net benefits will, if they are under 25, have an income of £51.85 a week; and if they are over 25, £65.45 a week. Those amounts are sufficient to meet the minimum income standard determined by the Joseph Rowntree Foundation-£44 a week in order to afford a healthy diet. However, once we take into account other expenditure that has to be met out of those benefit payments-fuel, clothes, travel, personal items, insurance utilities and so forth-it means in practice that women conceiving and bearing children on benefits could find themselves with as little as £10 a week to spend on food. Clearly, none of us could eat a healthy diet on that.
It is right, as Opposition Members have repeatedly pointed out, that despite its perhaps unfortunate name, the health in pregnancy grant has the potential to achieve much more than simply help with a healthy diet. It helps to meet a number of the costs associated with preparing for and coping with the arrival of a new baby. Obviously, parents across the income spectrum will be grateful for any help. Although I was rather pooh-poohed by the Minister when I suggested that such a grant is likely to be spent pretty readily so it will also help the economy, there is lots of evidence to show that if we give money to parents at a time when their costs rise, they will go out and spend it quickly-they need to; there are items that they must buy. This will make a modest contribution to our economic regeneration, although that was hardly the overriding reason for introducing the grant in the first place.
Does my hon. Friend agree that this is similar to other kinds of grant such as the winter fuel payment, which we award in cash terms to get people through what is an expensive time? It is most efficient not to cross-question what it is actually spent on, but these grants are important in recognising that people go through difficult and expensive times.
That is absolutely right on a number of fronts. First, as my hon. Friend says, this sort of grant is designed to help with specific expensive times in the course of people's lives. It is important to recognise that specifying what it gets spent on is not necessary to ensure that it does good. In fact, there is a lot of evidence to show that if we give more money to parents, particularly to mothers, they will spend it on things that will help their kids.
I understand the concerns of Government Members about universal benefits, but this is a universal benefit. It goes to people who are financially better off as well as to those in greater need. As Opposition Members have repeatedly sought to explain, universal benefits are the most effective for reaching the poorest. They are the easiest to administer and the easiest to claim; there are no complicated cliff edges or recalculations. As such, I believe it is important to retain a range of universal benefits within the totality of support for families with children. I therefore think that the health in pregnancy grant has a useful role to play.
But even if we accept for a moment Government Members' concerns that the benefit has been poorly targeted, that is hardly a case for scrapping it outright, especially when basic benefits are too low for the poorest women to be able to afford to eat healthily before their child is born. Surely, far from seeking to abolish the benefit, an ambitious Government who were keen to improve the outcomes of the poorest families and children would want to extend its scope or consider other ways of improving the adequacy of out-of-work benefits.
I am enjoying the hon. Lady's speech and I acknowledge her expertise. In recommending the extension of the benefit, however, will she explain where she would get the money from?
There is work to be done to consider the balance of taxation versus spending cuts, as Labour Members have repeatedly pointed out. As for where the money is taken from, it is notable that the coalition Government, whether by accident or design-I suspect that it is more by accident, but I give them the benefit of the doubt-have taken more from women and children. An evening up of the way in which the spending axe fell might provide more scope.
Far from seeking to improve the financial position of some of the poorest in society-those who are reliant on safety-net benefits-some of the coalition's measures will make matters worse: the changes to housing benefit; the VAT rise, which will reduce the spending power of the poorest; and the plans to link safety-net benefits to the consumer prices index, which will, over time, significantly reduce the value of those benefits to low-income families, and will therefore have an impact on the disposable incomes of the poorest women before conception, during pregnancy and after birth. I urge Government Members to think about how they would address that.
Does my hon. Friend agree that the policies pursued by the Con-Dem coalition will lead at best to the economy growing slowly, and at worst to a double-dip recession, which will result in a much lower income tax take for the Exchequer? Our proposals to improve, and support growth in, the economy would generate the tax revenues that would enable us to fund schemes such as the health in pregnancy grant.
I very much welcome the growth in the UK economy in the third quarter of this year, but, with respect, it is early days for Government Members to take all the credit for that. I suspect that it was the fiscal stimulus put into the economy by the previous Chancellor of the Exchequer that underpinned the ability of businesses to continue to hire and of people to stay in work. All Labour Members genuinely hope that that long tail effect will continue, but we feel that it is at risk.
On the savings aspects of the Bill, I cannot understand the Government's logic, given their stated ambitions to reduce inequality and to encourage a savings habit and, in the case of the Secretary of State for Work and Pensions, the strong focus on helping people to reduce, and stay out of, debt. The child trust fund and saving gateway have helped low-income savers to acquire a savings habit and have assisted their money management. As child poverty has fallen since 2005, the child poverty impact of the measures is beside the point, because they have not diverted money from successful strategies to tackle child poverty, but are in addition to those strategies. They were intended to take on board the evidence of the protective effect of having an asset, which is especially important in social mobility.
Does my hon. Friend agree it is vital that looked-after children have that asset built? Given that their parents are not in a position to do that, we have a responsibility, as corporate parents, to find another way, if the Government will not reinstate child trust funds.
I hope that Conservative Members and the Minister will hear that contribution in the spirit in which we all feel it. This country has a poor record on outcomes for looked-after children, who enter adult life singularly poorly provided for financially. The child trust fund was a small step towards beginning to rectify that. As my hon. Friend says-and I hope the Government heed this-if the child trust fund is no longer to be the mechanism through which looked-after children are given some sort of nest egg with which to embark on adult life, I hope that Ministers will look for another way to secure the financial futures of such children. It is not sufficient to say that we will improve education, health and Sure Start support, important though those are. Plenty of evidence shows the importance for young people, especially those from disadvantaged backgrounds-and looked-after young people most of all-of having a financial asset behind them.
Richard Graham, who I am sorry is no longer in the Chamber, cited the briefing that some Members had received from the Save Child Savings alliance. I was struck by the numbers he shared with us: 4.5 million child trust fund accounts are open; £2 billion is under management; and £22 million a month is saved in those funds. That is a lot of money being saved and set aside for our children's futures. I strongly urge the Government to take note of that success. The vast majority of families saving are on modest, medium or lower incomes, certainly of less than £50,000, and many of them on much less. The hon. Gentleman mentioned that, I think, 24% of families were not saving at all. He is right to draw attention to the position of those families, but I question what they will save with instead, if we remove the child trust fund. If the Government do not save on behalf of the poorest children, I very much doubt that a tax break, for families who probably do not pay tax anyway, will suddenly magic up savings for the poorest children. I ask the Government to address that point.
The child trust fund is well targeted for its purpose, which is to deliver an asset to young people as they start out on adult life. Better-off families can afford to support their children with university fees, renting their first flat, buying their first car, perhaps starting a business, having a gap year-all markers of social stability, and therefore at the heart of what the Government rightly want young people from low-income backgrounds to be able to participate in. I am genuinely at a loss to understand why a Government who repeatedly, and unjustly, lambast Labour's record in relation to social mobility and inequality, should totally dismantle a savings vehicle that has the potential to reduce inequalities, and instead propose a savings vehicle that will widen those inequalities by benefiting only those who are better off.
I am just as puzzled by the Government's attitude to the saving gateway. Pilots in different parts of the country have shown that, coupled with outreach and money advice, it helped to support a savings habit, provided low-income families with a cushion enabling them to cope with crises, allowed them to build up modest assets over time, and made possible additional savings that would not have been possible otherwise.
I am surprised-more than surprised; indeed, I am shocked-that a Government who are happy to extend tax breaks to savers and to maintain them on ISA savings, pension contributions and inheritance tax will not provide support to boost the savings of the poorest. I ask Ministers how that can possibly be fair.
I thank my hon. Friend for giving way again. She is making a comprehensive and excellent speech. Does she agree that what the financial services sector needs now are additional deposits, and that offering tax breaks to those who are already saving will not be half as effective as continuing programmes which, according to all the evidence, produced those additional deposits and improved the savings culture?
I think that the Government should be very wary about dismantling a scheme that has generated additional savings, for exactly the reason that my hon. Friend has given.
What concerns me most is the impact of the Bill on the Government's commitment to reducing inequality. We already have a significantly unequal distribution of assets. Up to 20% of households have no assets at all. The highest-earning 10% hold half the assets, and two thirds of households have savings of less than £3,000. I accept that we are not handing on a proud record to the incoming Government, but I would have expected them to conduct a rigorous equality impact assessment of their own proposals as a result of their determination to do a little better than that.
The equality impact assessment that accompanies the Bill is thin in the extreme. It fails in any way to recognise the lower earning power in the labour market of women, disabled people and members of ethnic minorities: a lower earning power that translates into a lesser ability to set money aside in savings, and ultimately, therefore, into lower asset holding. Its analysis of the saving habits of members of ethnic minorities is scanty, although research from the Runnymede Trust would have informed the Government quite quickly that at least 60% of Asian and black British families have no savings at all. The fact that that is twice the number of white households in the same position should concern us greatly.
I am just as passionate about the inequalities in our country as Labour Members, and I am sure that I speak for all Conservative Members. Our drive to enter politics was prompted by a wish to end the vast inequalities that have arisen over the past decade. Does the hon. Lady agree that the best way to help people to help themselves in that regard is through education and employment?
It is not a case of either/or. We should be doing everything possible. We should be maximising families' financial stability and security through education, employment and a redistribution of income and wealth.
One misconception should be properly analysed. It is absolutely not the case that inequality rose exponentially under Labour. In fact, it more or less flatlined. It rose a bit during the last couple of years of Labour government, but according to the Institute for Fiscal Studies-admittedly not the Government's favourite think tank-without the measures taken by Labour between 1997 and 2010, given the trends experienced under the previous Conservative Government, it would have been very much worse.
The hon. Lady and other Members on the Government Benches are right to say that we are all anxious to reduce inequalities; what I do not understand is how on earth the Government think that proposals of this kind will do that. How on earth do they think that removing the saving gateway will address the gender inequality involved in the fact that women have 40% less in savings than men? How on earth do they think that removing the child trust fund and the saving gateway-benefits that provided extra money or extra access for people with disabilities-will deal with the inequality of disabled people?
The hon. Lady asks how on earth the Bill will reduce inequality. It will do so by removing universal benefits and replacing them with targeted benefits.
First, let me remind the hon. Gentleman of what I said earlier about the effectiveness of universal benefits in reaching the poorest. Secondly, even if we accept the hon. Gentleman's contention on its own terms, it does not provide a case for abolishing those benefits. It may provide a case for retaining the existing structures and targeting them for a time. Obviously I do not want that to happen-I want us to maintain as much universal support as we can-but at the very least I ask Government Members why they want to rip the whole thing up and throw it out, rather than trying to target it more effectively.
I will not give way, because I am about to end my speech.
I urge the Government to reconsider their proposal to abolish these benefits. I ask them to examine ways in which they might be able to maintain structures that have been effective, and have the potential to continue to be effective, in supporting the poorest families in the immediate future and-this is also important-in the longer term. Unless they come up with credible alternatives to reduce and remove income and wealth inequalities, I will not support their proposals, and I will not support the Second Reading of the Bill.
Order. As hon. Members will have just observed, a number of them wish to speak in the debate. The winding-up speeches will begin at 9.40 pm. If everyone is to have an opportunity to speak-and I know that a number of Members have been present throughout the debate-I must ask those whom I call to exercise time restraint so that their colleagues can contribute as well.
Thank you for calling me, Mr Deputy Speaker. I feel slightly guilty that you have had to do so three times in almost as many days. I assure you that I am not modelling myself on Psmith-with a silent "P"-and his haunting of John Bickersdyke, which you will remember from the book "Psmith in the City". I am really not trying to do that, and I will be as brief as I can while discussing this important Bill.
Benjamin Disraeli famously said that the job of the Opposition was to oppose, and we have seen that today. Indeed, we have seen it all afternoon. We have seen rather specious opposition to the Bill. Whenever the subject of where the money is to come from arises, there is no answer. VAT should not go up to pay for our bills; benefits should not be cut to pay for our bills; so we must spend, and we must have no increase in taxation. What happens to the nation's finances at that point? What happens to the national debt? What happens to the deficit? We go down the sorry road towards bankruptcy. That really is what Opposition Members have been arguing for. It is the "do nothing" school, the argument that, like Nero, we should fiddle while Rome burns.
Will the hon. Gentleman at least acknowledge that before the economic downturn, the debt ratio in this country was lower than the debt ratio that the Labour Government inherited in 1997? The fact is that it was the Labour Government who introduced measures to keep people in their homes and in employment, and to prevent the appalling circumstances to which ordinary working people were subject in the 1980s when the hon. Gentleman's party cast people aside.
The hon. Gentleman's point is fundamentally flawed. In 1997, the socialist Government decided to stick to Conservative spending targets. That is the one sensible decision that they made. It is not surprising that they managed to reduce the public debt by doing what the Conservatives had said that they would do. As for the deficit that built up before the crisis hit, there was a structural deficit-probably equivalent to 7% or 8% of GDP-which had resulted from excessive and extravagant expenditure. That is the nub of what we are debating today. We need to examine these benefits, and establish whether they are right in principle.
I will declare an interest. My three children have been the fortunate beneficiaries of £250 each-£250 spent extraordinarily well, Members may think, beneficially and wisely, so that in 18 years' time my children will have something to spend when they are a little older. Is this really a sensible use of taxpayers' money? It is too small a sum to make a difference even with the benefits of compound interest, yet too large a sum for our public finances to stand when aggregated across the whole of the economy and the total number of children who will be born. It is a wrong benefit, which is rightly being abolished. To contradict Kate Green, who spoke before me, it is also a benefit that cannot be spent for 18 years; it will be of no economic benefit until the child is 18.
I apologise if I have misled the hon. Gentleman, but what I said was that the health in pregnancy grant would be spent immediately. I absolutely accept that the child trust fund moneys are locked up until the child reaches the age of 18.
I thank the hon. Lady for that useful clarification.
The health in pregnancy benefit is paid to ladies towards the end of their pregnancy so that they can eat properly. Again, my wife was entitled to it. I have in the past been mobbed up somewhat on nannies and issues relating to that subject, but the one type of nanny of which I most firmly disapprove is the nanny state. This patronising approach, saying to these ladies, "You ought to eat your greens and here's some money so you can do so," is not what government is about. The Government are here to allow people to lead their lives as freely as they possibly may, without interference from the state while also providing a safety net for those who fall on hard times, not to tell people how to lead their lives, at the expense of the taxpayer and the economy.
Does the hon. Gentleman agree that a "lady" of very low income who finds herself pregnant and expecting her baby in three months' time will have increased expenditure relating both to the pregnancy and the upcoming birth?
The hon. Lady makes a brilliant and inspired point with which I completely agree, and it is therefore wise to ensure that such benefits as there are are directed to the people who need them, not wasted on people who do not need them. [Interruption.] If Chris Leslie wants to say something, I am more than happy to give way.
The Bill does not achieve what the hon. Gentleman wants, however. While I am on my feet, may I ask him whether he knows how many children in the United Kingdom are born with spina bifida each year, possibly as a result of a folic acid deficiency?
The hon. Gentleman says the Bill does not say where the money is going to be spent, but that is an absurd point to make because the public finances are in such a weak condition that, at this moment, money needs to be saved. The first principle for the Government-their first ambition and intention-must be to get the finances of this country on to a stable footing so that they can then, with economic growth, ensure that the money is there to help people in the future.
My hon. Friend makes an extraordinarily good and important point. The payment of this £190 comes too late in the process to be of benefit to people whose children may be at risk of spina bifida.
I would be surprised if many mothers-I certainly include my wife in this, when we were having our daughter-were able to discover that folic acid is available on the NHS. A multivitamin and folic acid supplement costs about £10, I think. Do the hon. Gentleman and the hon. Lady really think it is absolutely essential that these women having children should potentially be deprived of help to pay for that folic acid supplement because of this deficit reduction strategy?
The whole issue of maternal health is incredibly important. The problem with this benefit is that how the mum is to spend the money is completely unspecified. There is absolutely no guarantee whatever that the money will be spent in the way that has been suggested. It is far better, therefore, that a mum is supported through comprehensive care in the NHS so that she is informed of the choices and provided with the resources to enable her and her baby to thrive.
My hon. Friend is absolutely right and spot on. That is a most helpful intervention. There is no point in giving money late in the day to everybody-those who need it and those who do not need it alike-for an unspecified purpose when other ways of spending money may prove to be more useful.
The hon. Gentleman is saying that benefits should be targeted rather than universal and that they should be for a very specific purpose-that the state should dictate what the benefit money is spent on, which contradicts what he said earlier about the nanny state. Given his support for targeting benefits, how does the hon. Gentleman justify the Government's continued support for winter fuel allowance?
The winter fuel allowance goes to the elderly, many of whom will have paid full national insurance contributions, and it is therefore in some sense a recompense for what they have paid in. I think that to look after the old in society is an important and virtuous thing to do. It is right to give that help so that people can be warm in their homes, but we are talking at present about £250 for children when they are born that will give them a pitiful amount a few years later. We are talking about £190 given to every woman who is going to have a baby for no necessary benefit to her because she may not need the money or it may be received too late for her to address some of the problems referred to earlier. Those two benefits are therefore unnecessary and wrong.
The third benefit is the Government's matching of personal savings, and there is a misconception here. Saving from a deficit is a dis-saving to the economy because there are costs associated with allocating that saving. To put that more simply, if someone borrows money from one account to put into another account they will pay a higher rate of interest on their borrowings than they will receive on their savings so, net, the country is dis-saving by topping up savings accounts. Opposition Members are therefore wrong to say that this is an encouragement to saving.
We need to look at all that is being done in the broader context. We have this phenomenal deficit-our highest peacetime deficit-which the Government have, in a workmanlike and serious-minded way, decided to tackle. They have decided to bring the deficit down so that we may have the conditions for economic growth. The essence of good government and of a sensible Treasury policy is to ensure that there are the conditions where business can thrive, jobs can be created and money can cascade through the economy. That is what really lifts people out of-
The hon. Gentleman referred to job creation. Will he therefore comment on the fact that almost 500,000 jobs will go in the public sector as a direct consequence of the comprehensive spending review, followed by a further 500,000 jobs at least to go in the private sector? How does the hon. Gentleman square that circle?
I am not going to try to square circles, which I believe is not possible, but those figures are fundamentally contentious, and it is also worth bearing in mind that outside the private sector the country has no income. Every penny spent by the Government either has to be raised in taxation or borrowed.
The hon. Gentleman knows the figures are contentious because he cited the figure of how many jobs will go in the private sector but he is ignoring the jobs that will be created. We find ourselves in the extraordinary situation that 700,000 public sector jobs were created by the last Government without the money to pay for it. We cannot run a system under which we employ people and pay them what are essentially tokens because we have no real money. Are we to follow California and pay servants of the state IOUs because there is no proper currency with which to pay them? Are we going to so debauch our currency and print even more of it that there are no funds with which to pay people? Are we going to destroy our gilt market so that the Government are unable to raise money? No, Her Majesty's Government have been brave, courageous and right, and they have taken tough decisions. They have taken decisions mocked by Labour Members because they dared not do this; they talked quietly in secret rooms about how much they were going to cut. These cuts then get leaked in the newspapers because Labour Members dare not come boldly to this House to say what they want to do.
I beg your pardon, Mr Deputy Speaker, and that of the House for continuing to intervene on the hon. Gentleman, but I cannot allow him to get away with his remarks. I wonder whether he studied history at all when he went to school and university, and whether he would care to ponder on what happened in the 1930s in America, when its plans put people back into work, compared with what happened then in this country. The prospectus that is being followed by this Administration was similar to what was done in the 1930s and saw mass unemployment.
I am grateful to the hon. Gentleman for his kind and helpful intervention, because I happen to have with me some economic data from the 1930s. I believe they will prove helpful because they are from the United Kingdom. It is a common error-if I may say so, it is a schoolboy error-to confuse the situation in the United Kingdom with that in the United States in that decade. In 1931, public spending in the United Kingdom was £1.174 billion, a figure that had been cut to £1.061 billion by 1934. Unemployment peaked in 1932 and gross domestic product grew from £4.399 billion in 1931 to £4.813 billion in 1934. So there was a percentage cut of nine-odd per cent. in public spending accompanied by a 9% rise in GDP, and unemployment peaked long before the cut in public spending was at its maximum point.
So in fact this Government are rightly following what the British Government did in the 1930s, and the key thing, which I will give credit to the Labour Government for, was coming off the gold standard. In 1931, having an active monetary policy meant that the economy could grow even while public spending was being cut. Her Majesty's previous Government, the one that she dispensed with on
I was listening closely to the hon. Gentleman's comments. Given what he was saying, will he support a further round of quantitative easing if that is necessary to stimulate the economy, given the possibility of a prolonged-
Order. This is going rather wide of the mark and now may be an appropriate time to remind colleagues that we have the wind-ups at 9.40 pm. I would be grateful if Mr Rees-Mogg could show some restraint, as well as everybody else that follows.
I would have finished by now, but I have taken a number of interventions, which it is a privilege to do. [ Interruption. ] It is a privilege, because the interventions are very interesting and they allow us to get to the nub of this difficult matter. Of course it is not popular to take something away. Of course it is easy to stand up raging about £190 being taken away from women who are about to be pushing prams. Of course the decision to take £250 away from their children is a hard one, but it is right, because the country cannot afford this. If the economy is to grow, we must have sound public finances. If that happens and if people can keep their own money, rather than have it taken from one pocket by the Government to be put into another pocket by another Department of the same Government, we can get economic growth and we can see what we saw in the 1980s, when the economy boomed, individuals got increasingly prosperous and Britain was back among the top world nations. That is what I want to see, that is what the Government are doing and that is why I am thrilled to be supporting the Bill.
I wish to turn my attention to the child trust fund, in particular, and to start by quoting the Chancellor. In a speech made just 12 months ago to the Conservative party conference, he said:
"We should continue paying them to the poorest families who often have no savings, and encourage them to use them more".
As we have heard tonight from Conservative Members, many of them believe that the benefits we are discussing tonight should not be universal and that we should target them much more closely. That has been a common theme throughout this evening's debate.
Only the Liberal Democrats have never really been in favour of the child trust fund. They have continually proposed to scrap it, although they have not had the decency to turn up to this debate in number. So we have to ask ourselves what the situation really is. Who is the driving force in the coalition Government in terms of punishing the poor? Is it the Conservatives, who want to target their benefits more closely, as we have heard today, or is it the Liberal Democrats, who are happy and enthusiastic about increasing VAT, raising tuition fees and cutting the child trust fund?
The reality of the Chancellor's logic in scrapping the child trust fund is that the most vulnerable will be hit hardest. I can tell colleagues that the child trust fund is neglected in terms of the attention it gets, as has been shown by Conservative Members during today's debate. The fund is a very important tool to encourage saving, particularly for the less well-off. I know that from speaking to parents across my constituency, particularly mothers. It has continually encouraged them to start saving on behalf of their children and it has started them thinking about the future for their children. We cannot underestimate the importance of the child trust fund in that regard. Although I readily accept that what children will receive is between £500 and £1,000, which is never going to pull people out of poverty in a short time, there is absolutely no doubt that it has been a catalyst to get people to start saving. As has been said, it has also encouraged families and friends to start contributing to the savings of young children.
I have described the trust fund as one of the best hand-ups, rather than handouts. As has been said, the Save Child Savings alliance has described the child trust fund as
"the most successful saving scheme ever."
There is irony in the Government cutting the child trust fund at this time, because one of the key reasons for its introduction was to encourage people to engage with financial institutions. People are suspicious of such institutions and, if ever there were a time when we needed to encourage them, it is certainly now. Yet, the Government are scrapping this initiative and the other initiatives dealt with in this Bill, which actually encourage that engagement.
The Government's decision to scrap the child trust fund will, in effect, create a situation where-we heard about this just before I spoke-the elite in society will be continually pumping and stashing thousands of pounds into the personal, private child trust funds that many of the wealthy already have. That dichotomy will continue. What we will have in poorer communities-in parts of Rochdale-is poor families who will be unable to get that start in life for their children, with no £250 or £500 to kick-start their saving. Although the wealthy will continue to have their opportunities in life, the poorer and more vulnerable will not have those opportunities. Come 18, when the children from the wealthier families have the chance to have a good time at university and have a better opportunity to go off on a gap year, to buy a car or take driving lessons, which is all well and good, the reality for the poorer people and the more vulnerable, whom we often see in Rochdale, is that because of these cuts, which could have been avoided, they will not have those opportunities. They are being taken away from them by the Conservatives, ably assisted-especially in this instance-by the Liberal Democrats.
The contrast could not be more obvious. In many respects, the axing of the child trust fund defines the differences between the Labour Government and the coalition Government. The Labour Government were intent on providing a hand-up and not a handout, whereas the coalition Government are not prepared to provide either a hand-up or a handout.
I am trying to follow the intellectual train of the hon. Gentleman's very powerfully expressed argument. I noted that it had something to do with targeting and Liberal Democrats, but perhaps I am picking up the wrong sequence of words. He started with an eloquent argument in favour of universal benefits. Does that mean that he is in favour of continuing to give these grants to my hon. Friend Jacob Rees-Mogg?
I will be quite clear about the position I take in that regard. Let me clarify my point: I was stating that many Conservatives have identified tonight that they do not believe in universal benefits and that they are prepared to have more targeted benefits. If that is the case, why did they not put that in the Bill? That is the reality. My point is that the only people in the coalition Government who want to scrap the benefits altogether are the Liberal Democrats, so is it the Liberal Democrats who are pushing the Conservatives more to the right, towards scrapping benefits completely?
This type of Bill, like the CSR, will confirm to the people of Rochdale that the coalition Government are not on the side of fairness, but are on the side of the wealthy.
Despite what we have heard from those on the Government Benches tonight, it is still very clear that with today's Bill, the coalition will deliver yet another blow to hard-working families and the most vulnerable.
The Prime Minister said he wanted this Government to be
"the most family friendly Government we've ever had in this country".
So, I want to know why the coalition is again hitting families with children the hardest. That is not my analysis or the analysis of my colleagues on the shadow Front Bench, but the conclusion of the Institute for Fiscal Studies. The Deputy Prime Minister spent last week attacking that much respected think-tank for daring to tell the truth about the coalition's damaging cuts, describing its methods of measuring the fairness of the controversial spending review as
"distorted and a complete nonsense"- but that is what is nonsense. The Deputy Prime Minister argued that the rich will pay the most as a result of the spending review and that anyone who argues otherwise is "frightening people".
Perhaps I could refer the Deputy Prime Minister and other Ministers not to the latest IFS report but to the Christian Bible and the story of the widow's mite. It will be familiar to many, and tells the story of a widow quietly giving her last mite to the temple while a rich man makes a great show of handing over a considerable sum, but a sum that is insignificant as part of his overall wealth. It seems that the poor in our country need to give their all and stay quiet, too.
Although the rich of this country might pay more both in terms of actual cash and as a percentage of their overall income than those on the lowest incomes, their pain will be negligible in comparison with that of a family in my constituency who might lose £10 or £20 a week, which could be the difference between feeding themselves properly and missing meals. I doubt that they will be quiet, like that widow, when they have nothing left and still have mouths to fill.
Hard-working families in my constituency do not need Labour MPs or the Institute for Fiscal Studies to frighten them; they can see for themselves the damage that the coalition Government are doing. They remember how Teesside suffered under the last Tory Government and they are frightened that the Government are cutting harder and faster than we have ever seen.
Others have highlighted these points. We have heard about the cuts to child benefit, cuts to housing benefit, the scrapping of the education maintenance allowance, and the cut to the child care element of working tax credit that equates to a loss of up to £1,560 per year for families who are already struggling with the burden of extortionate child care costs.
Does the hon. Gentleman agree with the helpful suggestion made by my hon. Friend Jacob Rees-Mogg about the fact that these grants have been going to people like him? He argued for a change in favour of more fiscal rectitude, which would mean that children growing up in the constituency of Alex Cunningham would not have such a burden of borrowing in the future.
I think that the point that Jacob Rees-Mogg made was that perhaps families such as his do not need that sort of income. If he wants to forgo it, that is all well and good, but there are hard-working families in my community that need that money.
Let us add to all that the impact of the 27% cuts on local authorities and the effect that will have on services, including initiatives such as breakfast clubs, and again we see the family under attack. In the north-east, we already know that family dependency on benefits will grow, with some 43,000 public and private sector jobs lost over the next few years. People will see few jobs for them to chase as unemployment undoubtedly soars.
Today, the Government attack again. I object to the scrapping of both the child trust fund and the saving gateway and I believe the Government are making a big mistake by getting rid of them.
The hon. Gentleman strikes me as a very enlightened individual, and I am sure that he is very aware that every Government have to make difficult choices. If he were to keep these areas of expenditure going to fund the benefit, what areas of Government expenditure would he cut?
No, I will not.
Both the child trust fund and the saving gateway were Labour initiatives, put in place by a party that understands the importance of fostering a culture of saving. Asset-based welfare can make a huge difference to the opportunities of the least well off in this country who often do not have access to the resources that many others are lucky enough to have, whether through inheritance or the generosity of family or because they recognise the importance of saving a little of their salary each and every month for a rainy day. The saving gateway aimed to encourage those from low-income households who do not save, for whatever reason, by promising the incentive of a Government contribution of 50p for every pound saved over the two-year life of the account. It had been trialled, and was due to be rolled out across the country in July.
We will not see the difference that the saving gateway would have made to thousands of low-income families at the relatively tiny cost to the Government of £100 million a year. The response to the trials was largely positive-one pilot saw the number of people saving rise from 16% to nearly 80%. In total, more than 22,000 people took part in two successful pilots, achieving more than £15 million in savings. Those people demonstrated that the scheme could generate both new savers and new saving, because individuals continued to save beyond the end of their gateway accounts.
Encouraging people to save promotes self-reliance and stability, allows long-term planning and provides security from sudden financial shocks. Saving just a few pounds a month makes a person feel in greater control of their life, and it can be transformative and provide a psychological boost. The difference that that can make to families and their quality of life should not be underestimated.
You are making a very powerful speech for us this evening, and I completely agree with you about the importance of savings and of encouraging a savings culture. However, I am rather disappointed by the glib response to my hon. Friend Gavin Williamson, who asked how Labour Members would pay for those benefits. Every time that question is raised, Labour Members say that we should tax the rich. What calculation has the hon. Gentleman made of the effect of increasing taxes to 70%, 80% or 90%? Is that where you would like to go? And what estimation-
Order. I gently say to the hon. Lady, first, that I am not going anywhere-the debate goes through the Chair-and, secondly, that interventions from now on must be short, because there is a lot of pressure on time and several hon. Members want to contribute.
I have never had a problem with taxing the rich a little bit more. If that means a penny on income tax, I would be fine with it, although I do not know what encouragement I would get from my Front Benchers.
No, I will not. We need to raise taxes and target the results at the poorest people.
I hoped that the saving gateway would squeeze some of the doorstep lenders out of low-income communities, which is an issue close to my heart. Those companies charge outrageous interest rates, and if people had some money saved for a rainy day, such monsters would see their customer base shrink.
I also want to speak out in defence of the child trust fund, which acts as an incentive to save by adding to a Government contribution of either £250 or £500 at birth depending on a family's income. The child trust fund was well established, having been introduced for all children born since September 2002. At a cost of around £500 million a year, including additional contributions when a child reaches the age of seven, this universal yet progressive fund ensures that all children, regardless of their family income, have a pot of money that they can access at the age of 18.
According to the Save Child Savings alliance, some industry data suggest that the child trust fund has seen the number of people saving for their children's futures almost treble. More than £2 billion is currently being held in child trust funds. That form of asset welfare opens doors to young adults, particularly those from low-income families. No young person has yet benefited from this fund-the first recipients are just 8 years old today-but I would have hoped that when they can start accessing it in 10 years' time, that money would go some way to improving social mobility, which is an issue that some hon. Members highlighted earlier.
A policy that spreads wealth to the asset poor should be backed by anyone who is dismayed by the lack of social mobility in the UK today. Yes, education plays a major role in tackling that problem, but so do assets, which is something that the Liberal Democrats have failed to address in recent years. The Deputy Prime Minister spent some of the summer discussing the Government's programme for social mobility, but this measure goes against it. The child trust fund was one way in which the previous Labour Government hoped to tackle this issue, and scrapping it will be a step backwards.
At a time when the coalition propose to increase university tuition fees, I would have thought it wise to defend child trust funds as one way in which young people could choose to shoulder at least a tiny bit of the burden of those costs. But even if they do not go to university, any funds available to 18-year-olds must give them a better start in life, which the better-off take entirely for granted. It may only help to fund their driving lessons, but that will give them the mobility and employability which would otherwise be denied.
Instead, having promised huge and unnecessary cuts over the next four years, the Government must cancel valuable programmes that are relatively inexpensive. Scrapping the child trust fund is a decision made with an eye on the short-term political goal of cutting the deficit, not the long-term responsible goal of encouraging families to save for their children's future. The age group facing the most debt is 16 to 34-year-olds. Surely a responsible Government should be seriously considering measures to help the next generation of young people, particularly given that university fees are set to rise to eye-wateringly high levels.
The Government are intent on pressing ahead with these family cuts, but when will the Minister tell us how the plans to fund and retain the infrastructure of the fund to enable contributions to be restarted when the economic position improves will work? I am told by the Save Child Savings alliance that it would cost £2 million a year to do so-a very small fraction of the total overall cost. There is an alternative to these draconian cuts, despite what the coalition says. Labour would deal with the deficit by halving it over four years. Yes, there would still be cuts, but we could cut carefully and always with an eye on the human impact. I am not confident that I can say the same about the coalition.
There is no formal time limit on Back-Bench speeches in this debate, but it might help the House if I mention that no fewer than nine hon. Members-all, as it happens, on the Opposition side of the House-are seeking to catch my eye. The Front-Bench winding-up speeches will begin no later than 9.40 pm. I know that hon. Members can do the arithmetic for themselves and I am sure that they will want to help each other.
Let me start by addressing a point that George Freeman made. He implied that there was no glee on the Government Benches last Wednesday at the comprehensive spending review announcement, but I was in the Chamber and I clearly remember the cheering and waving of Order Papers when those vicious cuts were announced.
I am not going to give way.
I also take issue with Jacob Rees-Mogg, who reminded me very clearly why I am on the Opposition side of the Chamber and of my commitment to a modern, enabling welfare state that not only meets needs but opens opportunities to the poorest and extends people's life chances and opportunities. Those were key objectives of the progressive politics behind the child trust funds, the saving gateway and the health in pregnancy grant. I want to tell hon. Members why, for my constituents, the decision of the Liberal Democrats and the Tories to scrap these three policies is short-sighted and fundamentally wrong.
I have heard Ministers and Government Members talk at length about the economic environment and about cuts being inevitable, but the cuts disproportionately affect children and families, and that is not fair. All the decisions that the Government side is making are choices of the coalition Government. The cuts are not inevitable: the Government are taking those decisions. They decide where to allocate funding and what their priorities are-and their priorities clearly are not women and children.
We have also heard a lot from Government Members about wanting to target benefits more, but that is not what the Bill is about. It is about the wholesale scrapping of three important policies. As an MP in Hull, I know only too well that people often struggle to provide for their families on a day-to-day basis. They often live week to week, juggling as best they can paying bills and meeting their commitments. In Hull, the average household income is just £21,623 compared with the English average of £35,544 and the Yorkshire and Humber average of £29,902. Since 1997, there has been a 5% increase in average household income, but it is still a low-income area. The opportunity provided by child trust funds of a savings vehicle for Hull children and a nest egg for young adults is something that many families have never been able to provide no matter how much they wished to do so.
A few years ago I held a child trust fund surgery at a children's centre in my constituency-it is worth reminding Government Members that there is no ring-fenced funding for Sure Start, so we will wait to see whether those centres continue-and there was clearly a lack of financial literacy among many of the parents to whom I spoke. The child trust fund provided a real opportunity for families to think about finances and about having some capital set aside for their children when they reached the age of 18. Many families are able to save regularly for their children so that there is a capital asset that their children can use when they reach 18 to pay for driving lessons, buy a car or pay for higher education. Having assets and savings is something that more privileged people, such as the 20 millionaires in the Cabinet, take for granted, but in my constituency that is not the case. That is why the child trust fund was such a good idea: it was universally progressive-I am glad that we have been able to teach Government Members what that means-as poorer children received more.
Cutting the child trust fund and cutting the saving gateway are just two examples of how the coalition's spending review attacks families, and attacks women and children from poorer backgrounds with special venom. They have already seen child benefit frozen and cuts to the child tax credit, and in the comprehensive spending review the education maintenance allowance is going, there are higher tuition fees for universities and now there will be tuition fees in further education colleges. The pupil premium, the Deputy Prime Minister's fairness fig leaf, turns out not to be new money within the schools budget, and will do little to mitigate cuts in schools, including the switch of funds to free schools. There will also be cuts to local authority budgets, particularly in children's services. We have heard lots of warm words on the coalition Benches about looked-after children, but looked-after children are paid for out of local authority budgets for children's services, so let us see what the outcomes are for those looked-after children after the 30% cuts to local government finance.
To be fair, before the general election, as my hon. Friend Simon Danczuk pointed out, the Lib Dems made it clear that they wanted to abandon and abolish the child trust fund. Even though the Conservatives had indicated that they wished to make the fund more targeted, the Bill would scrap the whole lot.
The coalition of those who now say that a child trust fund, or something very similar, should be reinstated includes the Daycare Trust, the Family and Parenting Institute, the National Childbirth Trust and think-tanks such as ResPublica, whose director Phillip Blond is often in the media as the red Tory mentor of the Conservatism of Mr Cameron. Abolishing the child trust fund will be a regressive measure, and will not promote social mobility and equality of opportunity-something that Conservative Members go on and on about. This measure will not deliver that for them. It will also be a backward move.
Many of those groups argue that we should promote a savings culture. It is ironic that when the Secretary of State for Business, Innovation and Skills, Vince Cable, was on the Opposition Benches he used to speak at length about the need to promote a savings culture in this country, and yet he is part of a Government doing exactly the opposite. That links in with the saving gateway policy-a scheme that was successfully piloted in Hull. It was designed to promote a savings habit among people on lower incomes, with the Government incentive that every pound saved by an individual would be matched, and to encourage people to engage with mainstream financial services. That latter point was very important, as loan sharks and doorstep lenders are a real problem in parts of Hull, and it is vital to promote the excellent work of credit unions, such as the Hull and East Yorkshire credit union, managed by John Smith in Hull. Individuals would be passported in to the saving gateway if they were in receipt of certain benefits and tax credits. All that has fallen by the wayside, and it is such a shame for constituents who could have benefited from that excellent scheme.
The health in pregnancy grant was a clear example of an enlightened potential spend-to-save policy, paid to expectant mothers from the 25th week of pregnancy on condition that they had received maternal health advice from a health professional, and paid for the first time from April 2009. I have always been concerned about health inequalities in Hull compared with other areas of this country, and we need to focus generally on maternal health and the early years of life. It has been very important to focus on good nutrition, for example. In July 2010, 86% of pregnant women and mothers of young children in my constituency were eligible for the healthy start programme, which is a targeted programme, compared with a Yorkshire and Humber average of 82%. In the light of that statistic, if the Government are willing to listen and think about targeting the health in pregnancy grant, it seems to me that a vast number of my constituents would be eligible.
I asked Ministers how many people in my constituency were receiving the health in pregnancy grant, but I was told that information was not available. It is ironic that a Government who are requiring councils to list all spending over £500 are not keeping that kind of information, which would help us in our decision making. The grant is also important in helping with the additional costs incurred by families when a new baby is on the way, and it is the link with the health advice that is so important. We heard the quote from the Royal College of Midwives, which was quite clear about the importance of that health advice.
Finally, the Government are making the wrong choices. There are alternatives. There are different ways to deal with the deficit. It is unfortunate that the Government will not listen and are taking an ideological view of where the cuts fall, and it is unfair that women, children and babies are being penalised.
I wish to speak in the debate tonight because of my deep concern that these proposals will ensure a bleaker future for many young people and their families in our country. In particular, I am deeply concerned that cutting the measures that promote savings and financial stability for many of the poorest families in our society saves comparatively little for the public purse but will have a massive long-term impact on social mobility. I want to make my remarks in three stages: first, my concern that we need to do more to help families to manage their finances and plan for the future, which measures such as the saving gateway and the child trust fund help support; secondly, the evidence that those products were achieving the aims that they set out to achieve; and, finally, the wider social consequences of failing to support action on social mobility.
Members may know of my concerns about affordable credit and the financial hardships of many of the families in my local community. My concern that the Government should act to support measures that will help to tackle the causes of debt and improve access to affordable credit are expressed in the ten-minute Bill that I will table in the House next week. I fear that the forthcoming cuts to public services, which have already impacted on the incomes of families in Walthamstow, will make such problems worse, given the high number of local residents who work in the public sector.
To give some flavour of the financial planning problems that families in areas such as mine are facing, I want to refer to a survey recently undertaken by the Children's Mutual society on the impact of the credit crunch on family finances. It found that one in four families in this country claim their household income is not enough to pay their bills each month. Given many people's fears about redundancy and the impact of the cuts that the Government plan to their livelihoods, it will not surprise many Opposition Members to learn that one in 10 families fear that the main breadwinner will be made redundant in the next six months. Three quarters of them have debts in the shape of credit cards, loans and overdrafts, and a quarter of them have borrowed money from their parents in the past year. Without intervention, those cycles of debt will continue and deepen as these cuts bite.
Helping parents to plan for the financial future of their families is not just about a stable economic platform in Britain, but about the quality of life itself. Some 29% of British families admit that they are already arguing over their family's finances. A third of parents are suffering from sleepless nights because they are worried about money.
There is therefore a deep irony that the Chancellor makes comparisons between household debt and national debt, and then scraps the measures that help to address the former in the name of addressing the latter. Thinking of the future when the present is so fragile is tough at the best of times for such families. Taking away the mechanisms by which the Government can help them indeed makes the worst of times, but that is exactly what the Government are doing with the Bill to families such as those in Walthamstow whom I represent.
Abolishing the child trust fund and the savings gateway will do nothing to secure the culture that the Chancellor said he wished to see in this country just 18 months ago in a speech to Reform about a nation that supports savers. He is not the only member of the Government who wanted to support a savings culture in the UK; even after the election, when we know that many pledges have been broken, the Financial Secretary to the Treasury argued that the Government
"is committed to curbing unsustainable lending and helping individuals manage their finances better".
Those are laudable aims. They are aims that I share and that also motivate my ten-minute Bill, but that is why I find this legislation all the more heartbreaking: it stops in their track programmes that we know have a proven track record in improving savings for some of the poorest families in our nation, including many in my own constituency of Walthamstow.
I wonder what analysis the hon. Lady has done to demonstrate that the programmes help in the way she suggests, to enable people in low-income households to save for the future, because I understand that very few families have made any additional contribution to the child trust funds.
I am glad that the hon. Lady asks about an Opposition Member looking for evidence. If she listens to me, she will find that I can refer to many different research points that can bring out exactly that. It would be useful in these debates to move from the examples given to what the independent academic research tells us about what the child trust fund has done in increasing savings in this country. I direct her to the work being done by the university of Bristol on this matter in particular.
As an MP in Walthamstow, I cannot help but see the impact of the Government's decision. The latest figures tell me that more than 10,000 families in Walthamstow have a child trust fund voucher-well above the national average for a constituency. Nationally, we know that 70,000 of these are issued each month, including the top-ups, at a cost of just £500 million to the taxpayer. It is a relatively small investment compared to some of the other mechanisms that we have, but we know that it is money well spent, because until they were stopped, child trust funds were the most successful Government savings scheme ever.
My hon. Friend Kate Green admirably set out the evidence that we have. It is worth repeating because of the questions being asked by Members on the Government Benches. Two million people were contributing to 4.5 million open accounts, resulting in more than £2 billion in assets, with £22 million in regular contributions. Critically, those are from families on less than £50,000 a year. In London that is not a high target rate to meet.
To get the full sense of what abolishing the scheme will mean, it is worth looking at the sums involved. Thanks to the Revenue's child trust fund calculator, I was able to do just that. It tells me that a child born on my birthday this year eligible for just that basic payment of £250 from the Government and whose family saves just £100 a year, which is not even a tenner a month, could get about £3,000 in 2028. If the family started saving £20 a month, the figure could rise to £8,000. At £4 a week, it would be nearly £10,000.
With respect, I have given way once.
We do not need to wait until 2028 to see the impact that such funding will have on the choices that young people could make. We know that in 2020 the first generation of child trust funds will mature. That means there will be 18-year-olds with access to £3 billion of investment for our nation. That may not be the riches of Croesus that some on the Government Benches will be able to bequeath to their children, but for the families that I work with in Walthamstow those first funds maturing in 10 years will transform the choices that their children are able to make.
In the context of the other debates that we have had in the House recently-on tuition fees, home ownership and entrepreneurship-we all know the difference that that kind of money will make. Putting that £3,000, the lowest sum, into context, it is worth reflecting that evidence shows us that parents are spending on average £4,000 on financing their children through university. We know, too, that more than half of 25 to 34-year-olds still rely on their parents for financial help. With tuition fees set to rocket under the present Government, that debt, that dependency and that distress for the parents concerned are only set to rocket.
Countless research studies show us that low income families aspire to saving for the long term, and that they want a nest egg for their children. The child trust fund is helping to make that ambition a reality, with almost 30% of the children who get the child trust fund also getting the top-up endowment of £500, meaning that their nest egg will be even bigger.
My hon. Friend makes a good case for the evidence for saving, particularly in low-income families. Is she aware of the House of Commons Library research which predicts a £4 million saving from the abolition of the three schemes, which compares rather unfavourably with the amount to be saved by the levy on the banks? Will she comment on that?
I thank my hon. Friend for that question. He precisely answers the point that many on the Government Benches wish to raise about where else money could be raised. There are ample other ways that we could raise money to reduce the deficit, such as the bankers levy.
I shall make progress, as Mr Speaker has pointed out how many Members want to contribute.
I want to put on record my concern that children who will have the child trust fund removed-those 30% who are getting the extra payment-are kids from the families most likely to be hit by the cuts in public spending, as the housing benefit, tax credits, jobs and services that their parents rely on are also slashed by the Government. These are the kids of families who already struggle to make ends meet and for whom the scheme represents a lifeline of opportunity for their children in later life.
But Members do not need to take my word for it. Let them look at the reports from the Treasury and the Institute for Fiscal Studies. They make it clear that the poorest will bear the brunt of the cuts. The Bill ensures that the burden will carry on to their children as well. This is not fantasy or wishful thinking, as some on the Government Benches may wish to claim. Since the scheme has been running, there is clear evidence that it works in encouraging saving and supporting aspiration.
It is not fantasy to think that that money would be spent on the future of those young people. The research commissioned by the Treasury shows that families of all incomes see the money as the key to their kids getting on in life, whether it is used for higher education, setting up home or even having driving lessons. The research reflects the ample evidence and common-sense proposition that possession of even a small pot of money in early adulthood improves one's life chances later on. It shows the strength of the economic argument for retaining the child trust fund, and that a savings culture can be ingrained in people from the early years of their lives. It shows also how counter-productive it is to cut the fund now, because the funding that would have been available to our economy in later years will also be absent from the choices that children are able to make.
The strength of the scheme, and what I want to concentrate my final remarks on, is the evidence that a small amount of capital at the beginning of life had a significant advantage for children 10 years on in life, even when accounting for employment, higher earnings and better health. At the heart of the scheme, and the reason why the previous Government introduced it, is a concern for social mobility, something that Government Members say that they too care about. If they do care about it, however, they will understand that assets are the key to social mobility.
Labour Members understand that if a child is born with a silver spoon in their mouth, it means not just nice baby clothes or a wonderful pram but the money, resources, confidence and networks that help to turn potential into reality. If a child does not have those assets, at every stage in their life their choices will be limited, and the decisions they make will be that much harder, whether they are about where to live or the lifestyle their family can afford, or whether they can even take the chance to go on to further and higher education. That is why Labour Members fought for the scheme and had planned to extend it if Labour won the election. It encourages not just savings, but aspiration.
We might look at our debates, and those that the UK Youth Parliament will have on Friday, about the right to vote and citizenship, but surely a truly progressive society is one in which we ensure that people have access to the capital endowment that gives them the same social power and responsibility of all their peers. I know that some Government Members agree. Only one day has been allotted to this debate, and attendance is low, but I hope that the country takes note of the fact that this Bill reflects the real impact of the Liberal Democrats on the coalition.
I urge those Government Members who consider themselves to be compassionate Conservatives to hold true to their own manifesto and to protect against this onslaught of Liberal callousness. The Conservatives' manifesto at least pledged to protect the child trust fund for some children, so I urge them not to listen to the siren voices of the Liberal Democrats who, by abolishing the child trust fund, want to see the poorest families decimated.
The Liberals cannot even decide why they do not want the fund. Their claims run from "We can't afford it," to "It's not the best way to secure asset-based mobility." But as the former Chief Secretary to the Treasury said-
I accept that the hon. Lady may be confused, but let me be clear that I am talking about the former Chief Secretary to the Treasury who claimed that the Government could not afford to continue with the child trust fund because it would burden future generations with a bigger debt. Some Opposition Members think that burdening future generations with no opportunity in life at all is not a price worth paying.
If we are to continue looking at what Chief Secretaries to the Treasury have said, we will find it worth considering what the current one said back in 2008, when he agreed that asset-based welfare was the true path to social mobility. He argued that there needed to be an alternative to the child trust fund, but tonight we have not heard about any measures to replace the asset that people would have had. We have heard nothing from Government Members; the silence has been deafening. Opposition Members have clearly explained why an ISA is not the same as a child trust fund.
My private Member's Bill next week will call for a levy on financial institutions to help to support debt counselling and advice services. That is why I welcome the Financial Secretary's remarks that the Government would back a consumer financial education body to begin that process of supporting financial advice services. However, it is no good on the one hand offering help and support for families who get themselves into debt, and on the other taking away the savings vehicles that keep such families going.
Given my proposal, I hope that the Minister will agree to meet me and other campaigners to discuss what more can be done to address the causes of poverty and ensure that families have access to affordable credit. Whether we are talking about the child trust fund, the health in pregnancy grant or the saving gateway account, I urge the Government to rethink the Bill and recognise that it is not in the long-term interests of families throughout Britain to support such measures.
A nation which ensures that every young person and their family has financial assets at key stages in their lifetimes is one in which potential stands a much greater chance of being realised. If the Bill is overturned and the scheme kept, a world of possibility will open up to many of our young constituents. I urge the House to reject the Bill and to sustain these vital instruments of social progress.
Order. We have just over 40 minutes, and I still have seven names on my list.
To take a gamble with your own money, especially if you are a millionaire, is a reasonable choice to make, but to take a gamble with other people's money-or, worse still, other people's livelihoods and futures-is reckless in the extreme. But that is what the Government are doing. It is not Labour MPs who are saying that, but respected commentators such as Andrew Rawnsley of The Observer. On Thursday, the Financial Times described the Government's plan as "an audacious gamble". With economics Nobel prize winners queuing up to say that the policy of this naive Tory-Liberal coalition Government will have us floundering on the rocks of high unemployment and economic stagnation, we are in very difficult times.
Paul Krugman, the 2008 Nobel prize winner, said:
"The best guess is that Britain 2011 will look like Britain 1931."
It is hardly surprising therefore that the Chancellor of the Exchequer most evoked by the policies being pursued is Philip Snowden, whose policies plunged the country into recession in the 1930s. At least Jacob Rees-Mogg was frank when he said that the Government are following the policies of the 1930s. The Bill is part of an overall picture that shows that this Government are targeting their cuts at families and children, making them pay more than the banks whose proclivities got us into these difficulties.
The Bill will remove child trust funds, abandon the savings gateway and abolish the health in pregnancy grant. The Institute for Fiscal Studies clearly demonstrated in its analysis that the Government's plan will have a more severe impact on the lowest- income households. These proposals are further proof of this Government's desire to penalise children and jeopardise the nation's future.
The child trust fund is a savings account for children born in or after September 2002. The Bill will end new child trust funds-worth £1,000 in their lifetime for the poorest children-from January 2011. The poorest children who were due to receive a £500 top-up on their seventh birthday will now not do so. Child trust funds have not only given children, especially the poorest children, a financial start in life, but shown the state encouraging saving and investment by example. These are habits that we need to establish in as many people as possible. If such habits are formed and nurtured, they will help us to address many of the great challenges of our age.
The savings gateway was designed to build on the child trust fund by promoting a savings habit among those of working age on lower incomes by providing an incentive to save. There would be a Government contribution of 50p for each £1 saved. That would promote financial inclusion by encouraging those most at risk to get involved with mainstream financial services. More than 22,000 people took part in the two very successful pilots, achieving more than £15 million in savings. A letter from the Save Child Savings alliance to The Sunday Times said:
"For a government that claims to want to promote savings, the decision to abolish the Child Trust Fund along with the Savings Gateway is short-term and misguided."
The investment in the UK's savings culture is under threat from these measures. Supporting and creating a national environment in which people are encouraged to save for their future should be a fundamental goal of any responsible Government. However, with overall savings ratios close to their 2009 all-time low and, according to the Office for Budget Responsibility, set to fall to 5.5% by 2015, the UK under this Government is sleepwalking into a situation in which the culture that we are encouraging on savings is exactly the opposite of the one that we need. Whatever their politics, all hon. Members surely agree that the fostering of a long-term savings culture is something that the UK badly needs. The process of achieving that must start with the initiatives that this Bill seeks to remove.
Even if one accepts the repealing of those positive initiatives, there can surely be no financial or policy logic in scrapping the core infrastructure of the child trust fund scheme, given that it demonstrably works. It would surely be far more sensible to leave that infrastructure in place to support future schemes that might be introduced. When introducing the Bill this afternoon, the Minister said that future initiatives would be coming forward. I ask him and the Government to consider leaving this infrastructure in place, because it is proven to support initiatives and, as mentioned earlier, would enable the state to show its corporate parenthood, via child trust funds, at least for looked-after children.
The other casualty of the Bill, if Liberal Democrats and Conservative Members, who tell us they care about children, troop into the Lobbies and vote for it, will be the health in pregnancy grant, which is a one-off, tax-free payment for mothers who are 25 weeks into their pregnancy. My hon. Friend Kate Green gave a full and cogent explanation of why the grant is effective and makes a difference, and if we cannot invest to ensure that our babies and children get the best start possible in life, what on earth are we about? Belinda Phipps, chief executive of the National Childbirth Trust, whom my hon. Friend quoted, said recently:
"At a time when families are trying to make ends meet, the Coalition Government has hit parents particularly hard. Cutting pregnancy and maternity grants, as well as child benefit and tax credits, will make it even more difficult for new parents or those wanting to start a family."
The Bill is part of a pattern of penalising families and children for the economic problems caused by the meltdown of the global economy. [Hon. Members: "It was caused by Labour."] No, it was caused by the meltdown of the global economy. Conservative Members cannot rewrite history and pretend that there was no global financial crisis and that their party in opposition did not support every spending plan up to the end of 2008. It was only when the global meltdown came that they did not want to spend the money to save this country from recession. That is the sort of party we are up against.
Withdrawing the child trust fund, ending the saving gateway and abolishing the health in pregnancy grant is bad enough, but add to that reducing tax credits, the withdrawal of the future jobs fund, the destruction of the education maintenance allowance and the hike in tuition fees, not to mention the significant cuts in funding to schools and colleges currently camouflaged by the smoke and mirrors of Government chicanery, and this represents a devastating programme. The Government are making families with children pay more than double what the banks are to pay to bring down the deficit-hardly fair, Mr Speaker, hardly fair at all!
We have heard tonight two main arguments from Government Members. The first, which may be familiar to Members on both sides of the House, is that there is no alternative, but the absurdity of that position should be clear to everyone. Budgets are inherently political acts, and the notion that the Government have no choice is ridiculous. It is nonsense. The House of Commons came into being over the issue of supply. The modern House of Commons emerged because there were debates about how money should be appropriated. So let us nail that myth.
Listening to Government Members, we realise that this argument is only a front for their real argument. We have heard an attack on universal benefits that has been repeated throughout this debate, to which I have listened closely. These attacks have continued despite the fact what we have heard continuously from my hon. Friend Kate Green, who has forgotten more about these issues than anyone on the Government Benches even knows.
I turn quickly to something that Jacob Rees-Mogg mentioned. I am sorry to see that he is not in his place. He might be an historian-I personally will reserve judgment on that-but he certainly is not an expert on asset-based policies, because he suggested that the child trust fund and the saving gateway in particular are examples of nanny-state socialism. I have a message for those on the Government Benches: they are not examples of nanny-state socialism; they are examples of liberalism.
The child trust fund is a policy whose objective is to promote social mobility. It is a starting point-a symbol and a recognition of the fact that massive inequalities of wealth exist in our society, and that these inequalities exist in addition to the massive inequalities of income. The child trust fund is also a policy with a long history. Thomas Paine first proposed the idea of state-backed assets for all individuals reaching adulthood at the turn of the 19th century. No nanny-state socialist he. Thomas Paine suggested such payments because he understood that inherited wealth unfairly tipped the scales of life in favour of those who were born lucky, rather than those who worked hard-something that I am sure Members on both sides of the House agree with.
The child trust fund operates on that principle, by hopefully making it possible for young people from ordinary backgrounds to go out into the world in future with savings to their name. I say "in the future", because nobody is suggesting that the child trust fund was a perfect policy or that it had achieved everything that we hoped it would achieve, but it has hardly bedded down and now it is being abolished. The child trust fund allows ordinary kids going out into the world to ask themselves a basic question that we have all asked ourselves, as we went forward in our lives: what do I want to do with my life?
As such, I am afraid to say that abolishing the child trust fund represents another nail in the coffin of a once great tradition of social liberalism. Social liberals used to recognise-indeed, social liberals still do-that in the absence of a fair distribution of income and wealth, real freedom is impossible for most individuals. "Assets for all" is an inspiring cry that we used to hear from those on the Liberal Benches. No longer do we hear it.
That may well be the case; I could not possibly comment.
I know that a number of people are waiting to speak, so I shall be brief. However, I want to reiterate the point that the child trust fund is about freedom and opportunity. It is not about nanny-state socialism; it is about trying to enable young men and women who are not from privileged backgrounds to go out into the world when they turn 18 and have a chance to make something of themselves. I would have thought that that was something that everyone, in all parts of this House, would support. And please, let us not hear again from those on the Government Benches that there is no alternative. The Government are spending, on behalf of us all, £697 billion this year. Abolishing the programmes that we are debating this evening will save around £4 billion. Are the Government really telling us that there is no alternative? I for one do not believe a word of it.
I know that time is short, so I intend to be quite brief, although I apologise in advance for not allowing any interventions, as a number of colleagues still wish to speak.
I endorse and echo the sentiments expressed by my right hon. and hon. Friends, who have explained in detail why the child trust fund and the health in pregnancy grant are important and why we need to retain them. I want to deal with the three reasons given by the Government for why they have brought forward this piece of legislation. The first reason is that they have to make these cuts and that the Bill is the only way to do so, because of financial difficulties. Paul Krugman, who was mentioned by my hon. Friend Nic Dakin, recently said that the Government's cuts are ideologically driven, not driven by economic necessity. Therefore, economics has nothing to do with the reason for making the cuts in this Bill.
Secondly, we are told that the schemes are being cut because they are universal benefits, benefitting the rich and poor alike. However, if that is the argument, why should the Bill not be amended to say that such benefits should means-tested, so that those who need them can keep them? That would make the Government's case more logical. I suggest that the Government are using the argument about this being a universal benefit, even though they do not do so in regard to the winter fuel allowance-I want to put on record that I am not against the winter fuel allowance being universally available-because it is well known that people of pension age are the most likely to vote, while those who receive income support have the lowest tendency to vote. Perhaps there is an element of self-interest there. That would explain why the Government think it is fine to abolish one universal benefit, the child trust fund, but wrong to abolish the winter fuel allowance.
It has been said that the child trust fund has not led to an increase in the savings culture in our society, and that it was intended for children to use when they reached 18 and were grown up. We know that the savings culture has gone from our society over the past 20 or 30 years and that people are saving less and less. However, many people in their early 20s to mid-30s find that having children is an encouragement to save, and that is bringing saving back into our society. To suggest that the argument about the savings culture does not apply because a child does not benefit from the trust fund until they are 18 is also wrong.
The child trust fund continues to be among the most successful Government savings schemes ever. Two million people are now contributing to 4.5 million accounts, resulting in more than £2 billion of assets under management and attracting more than £22 million a month in regular contributions. As my hon. Friend Stella Creasy pointed out, the majority of this activity is undertaken by families with an income of less than £50,000. We have seen that the number of people saving has increased, and the Government should be thinking about how to make that very successful programme even better. We should be trying to find ways of extending and improving the system, not abolishing it.
I shall turn now to the health in pregnancy grant. If someone is well off, so be it: becoming pregnant probably causes no inconvenience or difficulty for them. Having a child results in many extra expenditures, however, and the Government should surely be able to afford giving even a little extra money to those on very low incomes. They have told us that they have introduced a levy on bankers' bonuses, but if this is all about finance, why can they not increase the levy just a little more? I am part of a group called the Robin Hood tax alliance, which contends that if we were to tax the bankers a bit more, we could easily get £45 billion. That would be more than enough to pay for the child trust fund and the health in pregnancy grant. The money is there is the system; it is just a question of whether there is any will on the part of the Government to use it in the right way.
The argument that we have to make these cuts just does not wash. This is really sad, and I am surprised at Members on the Government Benches. I thought that there were more compassionate Conservatives out there who would think that these benefits could be retained. If they really do not want to provide them on a universal basis, they could at least target them at people on lower incomes.
Early in the Minister's introduction to the debate, one of the reasons he gave for not going ahead with the savings gateway account was that there had not been enough take-up by banks. He also argued that credit unions did not exist in every deprived community, and that they would therefore be unable to operate the savings gateway accounts adequately. I think that he was putting the cart before the horse. The savings gateway would have given the credit unions a huge boost and allowed them to develop.
The credit union in my constituency is fragile, because it serves an area in which people have difficulty saving. They might wish to borrow, however, and to do so through a credit union is much better than using some of the other methods on offer in the area. It is difficult for credit unions to balance their savings and their borrowings, even without taking into account their administration costs and all the other expenses that they incur, and they need to get volunteers to do the work. So, if we want the credit unions to grow, we need to assist them, and retaining the savings gateway account would have been one way of putting credit unions such as the one in my constituency on to a firmer footing.
If a credit union is not an example of "the big society", I would like to know what is. I believe this illustrates a fundamental incoherence, which we can see in many of the policies presented by the coalition Government. They have a lot of the words and a lot of the language-in fact, I sometimes think that Government Members are stealing our language-but if we look at what is being done as opposed to what is being said, we see the truth. Here is an example of something that should be encouraged as part of the big society, which we are all supposed to be supporting, but some of its lifeblood is being cut off through this policy.
Another incoherence is seen in considering what types of benefits we should have. As I said before I was elected, we all need to discuss that-I am not suggesting that my party has no need of further discussions-and I shall carry on saying it. Do we want universal benefits or not? If we have them, yes, there are costs. Personally, I would have been happy to see child benefit made part of taxable income in a more coherent way. If we want universal benefits, yes, there are tax implications.
There are some strange inconsistencies around. I may have imagined it, but I thought I heard the Secretary of State for Business, Innovation and Skills extolling on the radio yesterday-several times throughout the day on the BBC-a policy that he claimed the Government would adopt over the next few years: providing pensions and giving the current rate of means-tested pension credit to everybody over pension age. I think that would be fantastic, especially if we could further reduce the dependence on means-testing. Many of my constituents, particularly those just over pension credit level, would feel that that was fair. There is a huge cost, however, which would have to be paid for. Is that really the policy of the coalition Government, or only that of one party trying to distract attention from the comprehensive spending review? Can it be the policy when we have heard today all sorts of arguments against universal benefits being made very strongly by Conservative Members? I found it quite offensive to hear some Conservative Members describe what they thought people might use their health in pregnancy grant for-it is not necessarily eased by other benefits. That is why I have referred to incoherence in the policy, which needs to be sorted out. It is right for us to expose it.
We have different views on how the economy works and on how to get out of the recession. We could go into all sorts of history lessons. The 1930s are often mentioned, but we have to go beyond 1931, 1932 and 1934. There is a strong economic argument for saying that we did not get out of the recession until re-armament started before the second world war. It can also be argued that the UK went through a double-dip recession in the mid to late-1930s. Economists disagree, of course, but none of us should take such an absolutist position as to suggest that we are simply right. We have a view; you have a view- [Interruption.] I am sorry, Mr Speaker, you do not have a view. The coalition Government have a view, but we should be prepared to listen to alternative points of view.
It is always a pleasure to follow my hon. Friend Sheila Gilmore. Unsurprisingly, I shall speak against the Bill. As mentioned earlier, the Bill contains three main provisions: the abolition of the £190 health in pregnancy grant and the phasing out of the child trust fund and the saving gateway provisions.
The £190 pregnancy grant should be uncontroversial in its effect. It is a simple measure to ensure that, at this important time of their lives, women who face a huge physiological upheaval in their bodies as they nurture a new life, receive this additional money. They need it. We become deficient in many things-calcium and iron, to name but two-and this simple grant enables women to put back these vital foods to enable the proper growth of their unborn child and to ensure that they remain healthy when their baby is born. I have heard many Government Members, mostly men, say that we do not require decent food throughout the nine months, but in fact we do, because soon after that we have to feed growing children. The provision can be seen as an attack on women at their most vulnerable. As if that was not enough, the attack is on children as well.
By all accounts, the child trust fund has been a successful savings scheme, and I believe it will teach children to be fiscally responsible. The beauty of it is that every child, irrespective of the circumstances of their birth, has a trust fund. The facts are these: £2 billion is held in child trust fund accounts; 74% of parents have opened an account-sadly, in my constituency, the figure is down to 64%; and almost £470 million is paid in by grandparents. No one can touch that money except the beneficiaries, when they are 18. The money is there for them whatever their circumstances-whether they are looked-after children, the children of two-parent families, or the children of single parents-and no stigma is attached. It is not, as the Deputy Prime Minister said in 2009, a few hundred pounds in the hands of 18-year-olds; it is a solid account of savings over 18 years.
We want our children to grow up to be independent, fiscally aware and responsible. How much does the child trust fund cost? The answer is £524 million. In contrast, during four months in 2009, £2.3 billion was levied through the one-off tax on bankers' bonuses. The new levy coming into effect will raise £2.5 billion. As the slogan goes, Mr Speaker, you do the maths.
Above all, the child trust fund fosters a savings culture in which children know that something has been put aside for them. In my view, that will make them better citizens. To paraphrase a slogan that is used, we can say to them, "This is what the state has done for you. What can you do for the state?"
My biggest concern is that the proposal was not put before the electorate, and the people did not have a say. Our children are our future. Let us give them a future, for the good of the country. I urge all hon. Members to vote against the Bill.
Over the past few days, weeks and months, there has been a lot of talk about "fairness", which is an easy word to use. Who is the judge of what is fair? Whose standards of fairness are being applied? Many believe that the measure of a civilised society is how it treats its weakest members. If so, the Bill clearly fails the fairness test, because it lets down families and leaves our children to take the strain.
When the Prime Minister spoke about "mending our broken society", he did not say that he would go around breaking it first.
"I want the next Government to be the most family friendly Government we've ever had in this country".
It was a broken promise, one of many, with more to come. Then we have the Chancellor's hollow promise of fairness:
"A fair Government make sure that those with the broadest shoulders bear the greatest burden."-[ Hansard, 20 October 2010; Vol. 516, c. 955.]
Today we see the Liberal Democrat and Conservative idea of fairness.
Anyone who has young children running around knows how expensive bringing up a family can be. As we are discussing the removal of a grant of £190 to encourage health in pregnancy, I want to talk about how expensive simply being pregnant can be. There seems to have been a lot of debate and misunderstanding about the value of the grant. My hon. Friend Valerie Vaz made good points about the physical nourishment required by a pregnant woman, especially in the later stages of pregnancy. On a physical level, however, a pregnant woman needs clothes to go to work, shoes for her swollen feet, vitamin supplements-I craved fresh fruit salad. I know mothers who have suffered from chronic back pain and chronic pelvic pain. They have struggled to sleep because the later stages of pregnancy are so uncomfortable. All those conditions can be helped by customised cushions, back supports and other aids, none of which is available on the national health service, all of which must be purchased, and all of which I was fortunate enough to be able to purchase, although many on lower incomes would not be able to. The health in pregnancy grant was designed to ease the final stages of pregnancy, and to ensure that a child is not born to a broken mother.
All that arises before we consider the huge impact of the link between the health visitor, the midwife and the pregnant woman that is currently required for the grant to be obtained. The financial pressures during pregnancy are difficult for all women, but teenage mothers suffer a particular burden. The Institute of Education has found that they suffer a lifelong financial disadvantage, with a lifetime family income £12,000 lower-or an annual income 2% lower-than the family incomes of those who become pregnant in their mid-20s.
My hon. Friend is making a compelling case. Does she agree that, whatever we may have thought about the upper-class buffoons whom we may have considered to constitute the Conservative party, they always seemed to have a sense of gallantry? When they said "Women and children first", it was supposed to be a good thing. Nowadays, however, when they say "Women and children first", they mean that women and children should be in the front line, facing a battering from the cuts. It is women and children first who are losing the benefits, it is women and children first who are losing the payments, and, most of all, it is women and children first who are paying the costs for these upper-class buffoons.
My hon. Friend ably makes a point that I was about to make myself. Families are being asked to bear the brunt of the mistakes made by bankers. The Government plan to take £190 away from the pregnant mothers who need it most. I believe that that constitutes a shameful attack on the most vulnerable and needy in our society. The Government tell us that the banking levy would bring in £2.4 billion, but my hon. Friend the Member for Walsall South set out the economic case-the "you do the maths" case-very clearly.
I promise that my intervention will be briefer than the last one.
How fair does the hon. Lady think it is that those with money in child trust funds pay £25 million a year in fees at the last Government's prescribed rate of 1.5% a year, which reduces the amount of money in the funds?
Does my hon. Friend agree that one of the crucial reasons the child trust fund is so important is that if a parent can save the maximum amount, the £18,000 or so would probably pay for one year's tuition fees under the Liberal Democrats' new plans?
I am grateful for all these interventions, but we had a discussion earlier about the benefits of the child trust fund scheme as opposed to the establishment of a potential ISA scheme. We dealt at length with the arguments in favour of the current scheme, which is targeted at everyone, including the most vulnerable and disadvantaged. The ISA scheme would not necessarily achieve that. However, I fear that we are becoming lost in figures.
The point that I am trying to make concerns the real-life cost of the decision to remove the health in pregnancy grant, to freeze child benefit and to cut the child trust fund, tax credits and the Sure Start maternity grant. It is clear that, as a result of those and other cuts, low-income families will bear the greatest cost of many of the Government's policies. The average household income in the north-east is £12,543 a year. According to a recent report by Citizens Advice, the combination of the Government's proposed cuts could cause a low-income family with a new baby to lose up to £1,235 a year-10% of the average household income of someone in the north-east. Is it really fair that children should be paying this price, rather than bankers?
Because of the establishment of the child trust fund, both my young children have bank accounts, and that is the start of saving for their future. I know of lots of families who are saving through child trust funds, regularly topping them up with birthday and Christmas gifts. Many people have admitted to me that they would not have started saving without the impetus to set up the account. We have discussed at length the benefits of the trust fund in encouraging a savings culture in this country; I think Members on both sides of the House agree that that is a positive development.
Since the child trust funds were introduced in 2005 there has been steady growth in the opening of new accounts, from 3 million in 2007 to 4 million in 2009. The current number is about 5 million-that is 5 million families saving up for their children's futures.
The child trust fund was a universal and progressive policy that recognised the importance of children. It allowed families to open an account, but it gave greater assistance to those on lower incomes through additional payments from the Government. Abolishing child trust funds will lead to the next generation paying for the mistakes of the City bankers and financiers who caused the global economic crisis.
I beg the Government seriously to review this decision, and to accept the analysis of the independent Institute for Fiscal Studies that the spending review is regressive and that families with children will lose out the most. I also ask the Minister to consider some of the suggestions that have come out of the debate-such as keeping the savings mechanism in place while, perhaps, reducing the amount being put in, or means-testing if necessary-in order to hold on to this credit saving system that has already been so heavily invested in.
The Government are taking a terrible risk-that of reversing so much work that has been done to remove so many of our children from poverty. The Government have chosen to pursue this policy, and in my view and that of all Labour Members it is the wrong choice for our future generations.