‘(7) The Government will, by 30 September 2011, publish a report on—
(a) children’s savings accounts, and
(b) saving across society, including the impact of Government policy.’.
Clause stand part.
Mr Hanson, would you like to speak to your amendment?—[Interruption.]
I was just giving the Ministers an opportunity to decide which of them would respond to the debate. There seemed to be a bit of confusion, and as the Financial Secretary dealt with this issue on a previous Bill I thought he would do so on this Bill too.
The amendments are very political amendments to a very political clause. The clause sets a divide in Committee, which I hope we can explore in some detail this morning, over the replacement for the child trust fund. I hope we can also make progress on some issues that have been raised by the Government, but not answered by them to date, about what happens to looked-after children and children in care. The provisions of clause 40 are in place because the Government chose to end the child trust fund, which was established by the previous Labour Government, towards the end of last year, with effect from 3 January 2011.
Clause 40 is very political. The child trust fund—a universal benefit provided for all irrespective of income, with particular help to the poorest children and those with disabilities and in care—was a successful scheme established by the Labour Government. It was abolished by the Conservatives, with support from the Liberal Democrats, with effect from 3 January this year. Clause 40 contains the Government’s proposed replacement: a self-selecting benefit or child trust fund ISA, available to those who can afford to contribute. We need to explore the objectives, the possible take-up and how the scheme will benefit the many people who would previously have benefited from the child trust fund.
Hon. Members will know that the child trust fund was originally a savings and investment account for children born on or after 1 September 2002, and was established by the then Labour Government to support a long-term saving culture, with particular help for the poorest individuals. We spent some time with the Financial Secretary in Committee before Christmas debating the future of the child trust fund. I can see the hon. Member for Reading West nodding: he spent many a happy hour with me in Committee as we explored those issues.
The Government’s Bill was passed before Christmas, and they abolished the child trust fund from January 2011. The fund was worth more than £500 to all children over their lifetime and £1,000 to the poorest. The previous Government wanted to encourage saving, so that at 18 people had some savings towards the considerable costs they would face such as tuition fees. Children were also due to receive a £250 top-up on their seventh birthday—£500 for the poorest. All of that went under the Savings Accounts and Health in Pregnancy Grant Act 2010.
My hon. Friend anticipates what I am to say. The child trust fund was abolished in the face of a Conservative manifesto—on which every Conservative Member stood at the general election just over a year ago—which I read intently at the time and took in good faith. I believed they were honest individuals who would stand on their manifesto. The manifesto said they would
“cut government contributions to Child Trust Funds for all but the poorest third of families and families with disabled children”.
The Financial Secretary, when he was a shadow Minister in February 2010, committed to keep the child trust fund for disabled children and the poorest third of families. I give credit to the hon. Member for Brecon and Radnorshire: he went into the general election with a commitment to stop spending on child trust funds for the public at large. He stood on his manifesto. All 57 of the Liberal Democrats convinced 300-plus Conservative Members of Parliament, who jumped at the chance to cut public spending still further, to cut child trust funds and to break their manifesto commitment made only six weeks before announcing the coalition agreement.
I thank the right hon. Gentleman for his congratulations. The problem is that it is a universal benefit, and that it is received by families who can afford to provide for their children. Surely, it would be better for the money to targeted on those who really need it.
I do not want to revisit the Savings Accounts and Health in Pregnancy Grant Act 2010, which was passed before Christmas. We expressed our objections at the time, with a large number of Divisions in Committee—the most Divisions I have known in such a short time—and fought to maintain the child trust fund.
I pay tribute to the hon. Member for Brecon and Radnorshire for sticking to his manifesto. He was not supported by the two parties that said that they would keep the child trust fund for the poorest third and for disabled children. I give him credit for the fact that his 57 Members of Parliament managed to convince more than 570 other Members to support Liberal Democrat policy, even though he opposed it in Committee.
Good luck to the hon. Gentleman: I trust that when he goes back to Brecon and Radnor—I know the place well, as it is near my constituency—he will explain why the people there have lost that universal benefit. He should also explain why he may be supporting clause 40, which provides for a self-selecting contribution, probably from people who can afford it, including the hon. Gentleman and other Members, to support their children, while poor people in places such as Ystradgynlais in his constituency will not be able to contribute to the fund because they will no longer receive the universal benefit.
It would be interesting to consider that. We will shortly debate child benefit, and I look forward to the Liberal Democrats breaking the principle of universality yet again. They will have the opportunity to stand up to the Government once more, and I wonder how they will perform.
As always, my right hon. Friend makes illuminating points about what was in other manifestos. Not only did the Conservatives claim that they would keep the child trust fund for the bottom third, but things omitted from the manifesto, such as VAT increases and reforms to the health service, are now happening.
I believe that my right hon. Friend is drawing attention to the fact that the British people gave an overwhelming mandate for retaining the child trust fund and focusing it on the most disadvantaged families.
There was overwhelming consensus in the Conservative party on maintaining the child trust fund for the poorest third and for people with disabilities; and there was a consensus on our side for maintaining it as a whole. These are important matters.
We are debating amendment 97, which deals with looked-after children, and we shall come shortly to the principle of clause 40, under which the child trust fund is replaced. This is important because, in itself, the child trust fund was a successful scheme. During the last year of its operation, 2 million people were contributing to 4.45 million open accounts; and £2 billion of assets were under management, attracting £22 million of regular contributions each month. There was a 60% increase in tax-efficient saving over the period, and the next generation of 18-year-olds will have amassed some £3 billion every year through the child trust fund over the course of its operation. That is according to Save Child Savings, which made strong representations on behalf of companies operating child trust funds that they should continue. The Minister has to look at how much money in savings the replacement for the child trust fund will generate, and whether that will address in any way, shape or form, the important need to improve the savings ratio for people, for their children in particular, and for future savings activity.
The right hon. Gentleman is generous in giving way. I supported my party’s policy in the previous election because all the evidence that I have seen indicates that life-changing investment in a child’s development occurs very early in their life, which is why we preferred the pupil premium to the fund that the right hon. Gentleman advocates.
The hon. Gentleman makes my point, by walking completely into the fist that I will now put into him. Like me, he represents a constituency in Wales. As he will know, one of the Government’s arguments was to scrap the child trust fund and replace it with the pupil premium. As he will also know, the pupil premium does not apply to Scotland, Northern Ireland, or to his constituency. He has therefore voted to take money from his own constituents and transfer it to people in England.
The right hon. Gentleman knows how the Barnett formula works. Money that is allocated for the pupil premium in England will be transferred to Wales, and it will be up to his party, who form the Government in Wales, to decide whether they use it for children during their early years.
The hon. Gentleman knows that he has taken a universal benefit away from people in his constituency and transferred part of the resource—not all of it—to help and support people receiving the pupil premium in England. As he will know, the pupil premium, in itself, is not universal, because it does not deal with every borough in every part of England, so I will not take lessons from the hon. Gentleman on that point.
The Liberal Democrats use words such as “evidence”. They talk about universal benefit, which they opposed, and the hon. Member for Brecon and Radnorshire mentioned the importance of early-years support, which the child trust fund is aimed at—I do not know whether the hon. Gentleman is aware of that. The professor of social policy at the London School of Economics called the child trust fund
“the most successful government savings scheme ever”,
supporting not only early years, but families much later in life, and it also helped many better-off families in getting young people into further education.
The key point is that the child trust fund was designed to encourage a savings culture, and it did so . During the final year of its operation, 823,504 child trust fund vouchers were issued; there were 70,000 a month. The vast majority of families—74%—contributed over and above that to the child trust fund. This issue is important, not because I want to revisit the battles around the child trust fund—they were lost with the 2010 Act—but because clause 40 is about the replacement for the fund.
I want to check whether the Labour party would like to see the child trust fund reintroduced in the form that it had before the election. Is that the case, and if so, is that not a spending commitment?
The Minister again tempts me to talk about what the Labour party will do in four years’ time, when we are in government. I cannot give her a commitment, but as she will know, when we voted against the abolition of the child trust fund, we made it very clear that we wanted it to be maintained in the Budget. She will have to wait for the Labour manifesto before the next election in four years’ time. We will assess the commitment then, but at the time of the abolition, we supported the fund. We were committed to that £500,000 worth of expenditure, and we wanted it to be maintained.
I have listened carefully to what the right hon. Gentleman has said about the clause. In trying to rescue the hon. Member for Sefton Central, who said that it helped in early years—when of course, a person could not have access until they were 18—the right hon. Gentleman said that the fund was there to encourage saving. I say to him that the previous Government did nothing to encourage saving because, by simply means-testing anybody who had any savings, they completely disincentivised people from saving anything in this country.
Let me stick to the clause and the amendment. They indicate that we need to look at the replacement for the child trust fund, which is what clause 40 is about. The child trust fund was a success. Some 70,000 children are born into the UK each year and they were getting a contribution from the state towards a potential trust fund. Parents were matching that, and savings were generated for all sectors of society because of the financial incentive that the child trust fund gave. The fund was abolished. What savings have there been from individuals since January into the particular models that we have?
May I take this opportunity to congratulate the hon. Member for Elmet and Rothwell on his forthcoming nuptials? May he be better at doing the sums within a household than he is at doing sums for saving.
One of the challenges for us is whether the legislation will have the same impact that the child trust fund has had, particularly in encouraging saving among the poorer families in our communities. Does my right hon. Friend agree with me that one of the tests we should set for this child ISA is how well it does in encouraging those on lower incomes to save? As we have clearly seen, the child trust fund did that, and many of us on this side fear that the junior ISA will not.
My hon. Friend makes a valuable point. That is one of the points that I want to explore in our questions today—the junior ISA, in clause 40, replacing the child trust fund. The child trust fund was successful because it gave a financial contribution from the state and said to families from all sectors of society, “The state is in partnership with you to provide for your children’s future at the age of 18. Here is a financial contribution from the state.” In response, parents from across the social spectrum, from all incomes, rallied to that call and contributed to help build assets for the future.
Is it worth noting, on a day in which we welcome President Barack Obama to the UK, that there is also evidence from the United States of the growing recognition of the importance of asset-building in transforming social mobility? The Child Savings Account Coalition in the US reports that increasing numbers of states are moving towards similar schemes, where state injection of funds incentivises savings and transforms the life chances of young people.
My hon. Friend makes a valuable point about the experience in the United States. In our discussions before Christmas on these matters, that was the case that I, as the shadow Minister, was trying to make for the retention of the child trust fund. We need to look at how clause 40 and the replacement meet that similar objective; the state will not be contributing financially, and therefore not encouraging parental contributions through any financial contribution. The savings ratio within that group of people might be reduced.
Will the right hon. Gentleman forgive me? I would like to make a double intervention. May I ask him to return to the statistic he gave a few moments ago, because I missed it? He gave a statistic about how many people were investing into the child trust fund out of the total number of accounts.
That is what I thought the right hon. Gentleman said. I would like to probe him. Which people were investing money and increasing those savings? Was that 25% from the poorest in society, or were the more affluent contributing to the Government money? Effectively, the question raised by the hon. Member for Walthamstow was how we encourage the poorest to save. If they were among the 75% who were not investing in the child trust fund, they were not saving, but simply getting a Government subsidy.
It is a valid point, and we debated it long and hard before Christmas, when we considered the Bill that abolished the child trust fund. The figures show that considerable numbers of people in middle-income and well-off families contributed to child trust funds, but an increased percentage of people from lower-income families—sadly, I do not have the figures to hand—contributed because of the co-operation and partnership with the state.
Is that not the key point? Getting individuals to save for the future is a massive challenge, and child trust funds were an innovative way of meeting it. It is a great shame that they have been withdrawn.
It is. The key point—this is where we come to the clause; we have been dealing with the background so far—is that following the decision to abolish the child trust fund, the Government announced at the end of last year that they would establish a child ISA from autumn 2011. As part of that, they have said that they want to
“provide families with a simple, transparent, accessible and competitive product to save for children who do not have a CTF…and…create the conditions for families to save more for their children than they otherwise would.”
They propose that all UK-resident children under 18 who do not have a child trust fund will be eligible for junior ISAs. That includes children who were born before the start of child trust fund eligibility in September 2002, as well as people from before 6 January this year, who will be eligible for the child ISA when it commences later this year.
In making that proposal, what calculation has the Minister made of the savings the junior ISA will encourage, particularly among middle and lower-income earners? What calculations have Ministers made of how many additional savers will be created? How much new saving will be forthcoming, on top of what would have taken place anyway?
I ask that because in response to questions that my hon. Friend the Member for Nottingham East (Chris Leslie) tabled to the Chancellor of the Exchequer, the Financial Secretary to the Treasury said that the Government had estimated
“that 20% of eligible children will have a Junior ISA”.
The Minister’s own estimate, therefore, is that only 20% of people who are eligible for a junior ISA will take one up. Straight away, that compares with the figures I gave the hon. Member for Elmet and Rothwell, which show that 100% of children had a child trust fund. Of those child trust funds, 74% were opened by the parents, and parents contributed to 24% of them. On those statistics, 80% fewer people will have a junior ISA than had a child trust fund. There will also be less saving, because the Government’s estimate for the junior ISA says that fewer people—20%—will save than contributed to the child trust fund. How does the Minister marry those figures together? What is her measure of success for the junior ISA?
As my right hon. Friend says, the whole point of the child trust fund was that it capitalised the uncapitalised and incentivised and financed people who would not necessarily have the wherewithal to start a savings programme. However, even under the Government’s agenda for the junior ISA, it is not beyond the realms of conceivability that the Government could lend money for a time directly to the institutions that people want to set up a junior ISA. That would kick things off and increase the number of families who could start a savings programme for their child.
My hon. Friend makes the point that the purpose of the child fund was to incentivise people across the board to save. Lots of middle-class and well-off people saved, and more people on lower incomes saved. That is the key thing. Figures that the Minister provided in reply to parliamentary questions show that the Government expect 20% of eligible children to have a junior ISA, but 24% of parents contributed to the child trust fund. The savings ratio under the junior ISA is lower.
More importantly, the answer to the question from my hon. Friend the Member for Nottingham East said:
“The Government have made no estimates of the take-up levels of Junior ISA accounts among the income groups specified”.—[Official Report, 26 April 2011; Vol. 527, c. 323W.]
There is not even any estimate of whether it will effectively be a tax handout to richer middle-class families. Dare I say it? Many of the people in this room qualify for that status. Some of us have children who could qualify for the junior ISA. I declare an interest, having three children, including an eight-year-old son who could qualify. A tax relief for the junior ISA would be a potential tax relief for me. I do not need that tax relief to encourage me to save.
The challenge that it is clear the Government face is how to communicate to parents what the junior ISA will mean and how parents can take it up. Many parents, even if they have the money, will be understandably concerned about the range of financial products on offer, and might distrust financial institutions. The simplicity of the child trust fund was that parents could be confident that it was a Government-backed scheme, inasmuch as the Government encouraged it. I would like to hear from the Minister what plans the Government have to encourage parents to take up the junior ISA, if they have the money to do so.
I am grateful to my hon. Friend. That is important.
Again, in the absence of the child trust fund, what assessments has the Minister made of the take-up? How many people does she expect to contribute, how much does she expect to raise, what is the likely level of tax relief and where will it be directed? Will it be directed at the incomes of families making £50,000, £60,000, £70,000 or £80,000-plus or at lower-income families? What income band does she expect to contribute to the child ISA?
Rather than a direct financial contribution under the child trust fund, clause 40 will now effectively give a tax relief to people who voluntarily contribute to the child ISA. My hon. Friend the Member for Houghton and Sunderland South made a point about the range of ISAs and providers. That is important, and we need to explore it during this debate.
Does my right hon. Friend agree that it seems likely that the 20% of children who have the ISAs will be from the richer quarters of our society? At a time when families are struggling to save with increased pressures on their incomes, the measures will only increase the gap between the poorest and richest in our society and decrease social mobility.
My hon. Friend makes a valuable point that the Minister needs to answer. What is the banding of the people likely to contribute to the child ISA? If richer people contribute to it and establish it, good luck to them; that is fine. But what mechanism exists to make the scheme help encourage savings by the poorest in society? The children of the richest in society, when they reach the age of 18, may well have had further inheritances or endowments, or might have parents who can contribute to offset university fees, help with initial rents and so on. The people whom we are trying to encourage to save in a child ISA have no disposable income and low levels of contribution. Their children at 18 will face higher levels of tuition fees—another broken promise by the Liberal Democrats—and other costs. How will they finance those costs?
We are not sure that the child ISA is the appropriate vehicle to generate the savings ratio for the age of 18, particularly at a time when the Office for Budget Responsibility, the Government’s own independent forecasting agency, has said that household debt is expected to increase from £1.5 trillion in 2010 to £2.13 trillion in 2015. The Government are privatising debt to individual households while trying to cut public debt. Therefore, families, particularly those on lower incomes, will have less disposable income to put into the new ISA in the first place.
I am curious about how the right hon. Gentleman relates this issue to tuition fees, bearing in mind that tuition fees are paid afterwards under the new scheme and in line with earnings. They are not something that somebody would use an ISA for in the first place.
The purpose of the ISA was to meet costs that individuals face at the age of 18. The purpose of the child trust fund is the same. It is to build up a nest egg to meet costs at a particular time. Some people may wish to pay their tuition fees up front and not incur that level of debt.
That seems to be the point. People do not need to have the ISA to pay tuition fees up front. The whole point of the new tuition fees—the reason why they are fair and the reason why students will have to pay less money annually than they did under the old scheme—is that they are paid back in arrears, afterwards and only as and when those people can afford to pay them, depending on their professional position.
We can debate this issue for a long time. There are costs related to further education that the child trust fund was intended to help people meet at a particular time, as well as other costs related to accommodation and other charges. I am very happy to debate this issue with the hon. Gentleman and I think that the public know which side they are on in relation to it.
However, the key point today is that clause 40 replaces what existed before. The Minister needs to justify to the Committee what clause 40 will do and say who will benefit from the tax handout that she is giving to help support that level of savings. Given the Government’s own projection of 20% take-up, my assessment is that 80% of people are not expected to contribute to their child’s future ISA. I might be wrong, but my assessment is that that 80% of people will predominantly be people from the poorer sectors of society who are experiencing a squeeze on their household incomes because of the rise in VAT—another broken promise by the Liberal Democrats—as well as the rise in tuition fees and a range of other issues. Those rises mean that those people’s disposable income will be even less in future than it is now, making them less able to save money. Has the Minister focused on that issue?
I want to raise two points. First, as we keep coming back to election promises and manifestos, can the right hon. Gentleman reassure us that in all the time he was in government he only voted on Government Bills before the House if they had been expressly in his party’s election manifestos? Does his voting record reflect that, for example on issues such as the introduction of tuition fees?
Secondly, there has been reference to the importance of helping the most vulnerable children. I want to give the right hon. Gentleman an opportunity to applaud and thank the Government for introducing the savings account for looked-after children. I am sure that we all accept that they are the most vulnerable children in our society. They need that help and the savings account for them is a policy that has been welcomed by children’s charities—
I can give the hon. Lady one assurance—I can assure her that I did not ditch a manifesto promise three days after the general election, which is what her party did in relation to child trust funds. In fact, I can give her another promise. I can promise her that consideration of the issue of looked-after children, which I will come back to in a moment, was dragged out of the Government kicking and screaming, because of the objections that were raised. In a moment, I want to discuss with her the details of that scheme for looked-after children, because amendment 97 asks for details of it. The details of that scheme are still hazy and unclear. I hope that the Minister will give me an opportunity to withdraw amendment 97 by giving us details of that scheme today and not three months after the Bill gains Royal Assent.
I am most grateful to the right hon. Gentleman for giving way. To expand on the comment that he made just a moment ago, it is one thing to be unable to deliver a manifesto if one’s party does not have a majority; it is slightly different to go back on a manifesto promise if one’s party has a majority of 66 or 179.
However, the specific point that I want to make is that he said that the child trust fund was money to be used when children went to university, to meet the costs involved in that. Of course, he will accept that a great number of children do not go to university and they still have that trust fund available to them. What were they using it for? Surely, therefore, he welcomes the fact that we have not only gone further on tuition fees, as my hon. Friend the Member for Erewash outlined, but we have created thousands of apprenticeships. However, those apprenticeships have to be paid for somehow.
The trust fund was available for 18-year-olds to spend as they wished. Starting in 2002, when the child trust fund was launched, the first 18-year-olds would matriculate in 2020, which is nine years away. The nest egg, which would be for all parts of society and contributed to by the state and by parents, would help with the challenges that they will face then. Most importantly, it would also show partnership between the state and families in helping to support those 18-year-olds.
We can look at what those challenges are, but the fact of the matter is that the Minister’s figures, given in answer to my hon. Friend the Member for Nottingham East, show that we now expect fewer people to save under the junior ISA than we expected to contribute to the child trust fund. We now expect 80% of the eligible population not to contribute to the child ISA. As the first part of the discussion, before I come on to the looked-after children, I want to ask the Minister who benefits from the proposal in clause 40. Is it just people who will be richer and better off? If it is, that will not help poorer people to meet challenges in the future. It will be a tax handout to people who will use the child ISA effectively to support tax-efficient savings for their children, when that money could have been used elsewhere.
Of course, the cost of university education means not only tuition fees. There are other costs attached that the child trust fund could have been used to support. We are not, however, only concerned with young people going to university, and I know that my right hon. Friend will come on to looked-after children. There is, however, one interesting case study in the Barnado’s document, “On our own two feet”, which focuses on this issue and gives the example of a young woman called Jo. Jo was in foster care, and, unfortunately, she was in a car accident, for which she received compensation. That compensation allowed her to buy a car, which then allowed her to move away to university. That is precisely the kind of young person whom we want to support with savings schemes. The concern, however, is that, because of the lack of detail in the Government’s proposals, we are not sure that such people will be supported.
I am grateful to my hon. Friend, and I will come on to the question of looked-after children, so that I can raise that particular issue. Before I do, however, I want to end with a general point on clause 40.
The Labour party supported and introduced child trust funds. It wanted to see them develop, wanted to keep them and voted accordingly. That answers the Minister’s criticism initially. They were abolished, and that is a fact of life that we, in Opposition at the moment, have to face. The Minister has to make the case today for why the proposed junior ISA is better than the child trust fund, why it is more efficient, why it will contribute to a better savings ratio, who will save and how that resource will be used by individuals to help generate a pot to help meet the challenges of 18 years hence. I need to know the details of that. As part of the discussion today, she needs to look at that issue.
I will now move on to amendment 97, which is about the detail of the
“UK-wide Government contribution-based tax-free children’s savings scheme for looked after children.”
The hon. Member for Erewash has touched on that, and I am grateful to the Chancellor for announcing a pot of money—some £5 million—to support looked-after children. So that the hon. Lady knows the history, we tabled amendments in the Savings Accounts and Health in Pregnancy Grant Bill Committee before Christmas to exempt looked-after children from the abolition of the child trust fund. When those amendments were voted on, they were lost with 10 votes to seven. The seven votes came from Opposition Members and the 10 votes came from Government Members, supported by the Liberal Democrats, who continued to keep—even in the face of looked-after children—to their manifesto commitment to abolish the child trust fund completely.
We also voted for that in the House of Commons. I do not have the voting figures in front of me, but I suspect that the hon. Lady voted against the provision for looked-after children when we moved a clause on the Floor of the House. When she asks whether I should be grateful to the Chancellor for bringing forward funds for looked-after children, I say to the Chancellor, “Thank you very much.” However, it was after one vote in Committee, one vote on the Floor of the House, a campaign by Barnado’s, Save the Children and a range of other charities, and people being dragged to make that announcement through questions to the Chancellor about what provision was being provided for looked-after children. It dawned on the Chancellor that a child ISA, which is being proposed in clause 40, is for parental contributions to a tax-free savings scheme.
Gradually, after a vote in Committee and on the Floor of the House, and after parliamentary questions and a lobbying campaign, it dawned on the Chancellor that people in respite, residential and foster care are there because they do not have parents. Either the parents do not exist or they have had parental responsibility removed because of drugs, alcohol, prison or whatever.
So the Chancellor came to the conclusion that we needed to have a looked-after children child trust fund, because ultimately he realised—he should have realised when we first raised it—that the most vulnerable in our society needed support. They fall within the definition of the
“poorest third of families and families with disabled children” in the manifesto, which he supported, and they therefore needed to have an element of state support to help them meet the challenges of 18. Three of my children are over 18, but the one who is under 18 will have help and support from active parents and will have resources to meet the challenges of 18. The fact that a looked-after child is in care or in foster care means that their parents are either dead or have had parental responsibility removed. That is why we want a scheme for looked-after children.
In Treasury questions, the Chancellor announced:
“I can tell the House that the Department for Education will work with others to make the necessary funding available to ensure that we can provide the support that they deserve. We will work with charities and interested parties to develop detailed proposals funded by the Government, so that junior ISAs can best support these children.”—[Official Report, 22 March 2011; Vol. 525, c. 834.]
That was on 22 March; today is 24 May. Later today, representatives of Barnardo’s will have a meeting with the Department for Education. Barnardo’s produced “On our own two feet”, which presents the case for a savings scheme for looked-after children. The representatives e-mailed me yesterday to tell me about today’s meeting. It is their first contact with the Department since 22 March, and they are meeting to develop a scheme. I want to welcome the scheme today. I tabled amendment 97 because I want, within three months of the Act being passed, details of what the scheme means for the Economic Secretary and for the Committee.
I need to know three or four key issues: how much the Government intend to contribute to the potential child ISA for looked-after children and how they intend to operate it. The Chancellor has stated that the Department for Education will deal with it. I particularly need to know whether the proposed replacement will apply in my constituency in north Wales, in the constituencies of my hon. Friends the Members for Edinburgh South and for Airdrie and Shotts in Scotland, and in the constituency of the hon. Member for East Antrim in Northern Ireland, because, as the Committee knows, the Department for Education is an England-only Department. What was, before the abolition of the child trust fund, a universal UK-wide benefit could now simply be a matter for England. I tabled questions to that effect and the Government have said that they intend it to be a UK-wide provision.
So, again, I want to know the exact details of the scheme. We want it within three months, but I am happy to withdraw amendment 97 if the Minister can provide the information today. To deal with clause 40 and to assess a future child ISA, we need to know what the issue is for children in care. That is important because about 6,000 children are taken into care each year in the UK. There is currently a care population of about 86,000 children. Figures for 31 March 2010 show that 64,400 children are in care in England; 15,288 in Scotland; 5,162 in Wales and 1,653 in Northern Ireland. At the moment, I am still hazy about how they will be able to access the child ISA and about what the arrangements are. In the report “On our own two feet” Barnardo’s and others make a strong case for help and support. They call on the Government to contribute to the ISA for looked after children. Does the Minister intend to make a financial contribution within that £5 million, and if so, what it will be.
The report to which my right hon. Friend refers includes information from a survey conducted by Action for Children, which makes the point that 85% of the looked-after children in the survey would be encouraged to save themselves if the Government paid into a savings account for them. Some 70% thought that their carers or family would be encouraged to save for the future if the Government paid in for them. Is it not the case therefore that it is crucial that the Government give us an indication of their intention?
I am grateful to my hon. Friend for those points. I will put my hands up when I know that we have had a discussion. We lost the battle in Committee and in the House of Commons over the child trust fund, but eventually, through persistence both outside and inside this House, we have won the principle that there should be a support mechanism for looked-after children to help contribute to the child ISA. In particular, I pay tribute to my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) who assiduously raised this issue with the charities. As my hon. Friend the Member for Sheffield Central said, we need to know when the scheme will be up and running, when it will be UK-wide and whether there will be a minimum deposit in those accounts, which is something to which the Government have not yet committed themselves. Carers, supporters and people in local authorities need that information. We want a mechanism to ensure that we generate help and support for looked-after children who, at the age of 18, will leave residential care or foster care without the parental support that most others in society have.
“We have obviously felt quite frustrated about this slow progress.”
That is not me saying that; it is them saying it to me. They go on to say:
“Like you, we are of course keen to get the scheme up and running as soon as possible, and will be pushing for accounts for looked after children to be established in autumn 2011 when Junior ISAs are expected to be made available for other children…We are pushing for a guarantee that this scheme will be UK-wide…We are pushing for a guarantee of a minimum deposit for each savings account (something not yet committed to).”
We still do not have clarity from the Government over the potential scheme for looked after children. Will the Minister give us a commitment today as to how the £5 million that the hon. Member for Erewash mentioned is to be invested in looked after children? What is the provider mechanism? What is the commitment? Who will organise this? How do people access it? What is the role of local authorities? What is the contribution and who will run the scheme? We need to have answers to those questions. If this amendment is passed, I have helpfully given the Minister three months’ grace to provide that information.
Amendment 98 gives an indication of what we want to see in the broadest sense of the word. It proposes that by 30 September, the Government publish a report on children’s savings accounts and saving across society, which would include the impact of Government policy. We tabled the amendment because we are conscious that since the abolition of the child trust fund, no information has been provided to show whether savings are being generated for children under the age of 18 to the same extent that they were before the abolition. At the time, we suggested that the Government carry out a review of the abolition’s impact by the end of this year, but they rejected that proposal; the amendment provides another opportunity for them to consider it.
I am taking a chance here, but perhaps the Government will accept the amendment and produce a report that shows that all my fears were unjustified—that people on low incomes are still contributing and saving for their children. Perhaps their report will blow me out of the water in October this year. If they wish, they could even time the report for the Labour party conference to make a real hole in our proceedings. They can accept the amendment, look at the impact of the abolition of the child trust fund and show that the Opposition need not have worried because their fears were not real and everything is hunky-dory in the garden.
As an add-on concern in the report that my hon. Friend the Member for Sheffield Central referred to, seven out of 10 cared-for children are worried about not having enough money put aside for when they leave care. Is it not, therefore, a matter of urgency to settle this issue for their health and mental well-being?
It is. I am grateful for my hon. Friend’s comments on her concerns for looked-after children in care, which is a crucial issue.
Amendment 98 says to the Minister, “Let’s look at this issue in the round.” I have reluctantly accepted that the Government have had their way on the abolition of the child trust fund for all sectors of society, with the possible exception—details awaited—of looked-after children. Let us have an assessment this September of what the abolition has meant in real life. Has the savings ratio fallen? Are people from different sectors of society saving? What is the level of saving? What is the contribution? What has the abolition meant in real terms?
We do not necessarily want to reinvent the wheel. I have committed today, as every Committee member has heard, that the Labour party will look at the measure at the time of the general election and make our views clear then. We simply want to know whether the abolition has had any impact on the difficulties that we face in our savings ratio and on savings generally.
We face increasing levels of household debt, the VAT rise, the squeeze on living standards and reductions in child benefit. What is the Government’s long-term strategy to get people to save for their children at the age of 18? How will people build up their savings, which could be invested in growth, businesses and in manufacturing because of the savings ratio?
My right hon. Friend has returned to that crucial point several times. How do we persuade families to save for their children? My great concern is that unless a system is in place to help low-income families, in particular, given the tough economic times, they will simply have no spare cash to put into savings for their children. That is why the existing child trust fund arrangements have worked so successfully. My real concern is that the changes will help better-off families, but not those on low incomes.
I am sure that the Minister will provide figures that show that people on lower incomes did not contribute to the child trust fund. I am sure that she has such figures, because we debated this matter during the passage of the Bill. The fact, however, is that more people contributed to the child trust fund on lower incomes than will potentially contribute to the child ISA. The Government’s own figures show that. Amendment 98 simply asks the Minister to produce a report to look at the implications of the abolition of child trust funds, and to look at how we generate savings for the future.
My right hon. Friend is setting out the case well. Will he reassert the importance of creating the saving habit, and challenge the Government to explain how their proposals will create that habit for lower income families?
I am grateful to my hon. Friend, because that is one of the key issues. He knows that in the same Act in which the Government shamelessly scrapped the child trust fund—the Savings Accounts and Health in Pregnancy Grant Act 2010—they also scrapped the proposals for the saving gateway accounts. It had pilots across the country, it helped poorer people to contribute by matching savings pound for pound and it generated a massive amount of savings. There is no mechanism now for the state to encourage people and families on lower incomes to save. At a time of squeezed incomes, that worries me.
Amendment 98 simply says to the Minister, “Let’s look at this.” Let us have a discussion and by the end of September a report can be produced that tells us the impact on savings across society, including the impact of Government taxation policy, which is squeezing incomes so that families cannot save for the future. I pray in evidence the fact that only this week a survey by The Observersaid that six out of 10 families
“say they are struggling to pay bills. Savings are pitifully low—half have less than a month’s salary to fall back on—and two-thirds aren’t contributing a penny to a pension.”
That is the situation we face—half the population of the UK have less than a month’s salary to fall back on and two-thirds are not contributing a penny to their pensions.
We can argue about whys, wheres and whatevers for the rest of the day, but with that financial background, given that we abolished the child trust fund—fair enough, it has gone—and are looking at what the saving mechanism will be, how confident is the Minister that this mechanism will be a success? How confident is she that people will contribute to it, that it will raise the resources that the Government want and that the people who need it, who benefited from the child trust fund, will benefit from the child ISA?
I contend that low and middle-earners are unlikely to have spare money to invest in a junior ISA and so the beneficiaries of it will be those wealthy enough to afford to take advantage of an attractive new savings product, which this will undoubtedly be. Effectively, the policy change is ditching a universal benefit and replacing it with a tax product that will most benefit the richest members of society, which is why I said that this is a very political clause. I do not object to their contributions, because they could save under the child trust fund as well, but the Minister needs to answer my key point that this will disadvantage those on low and middle incomes.
It is misleading for the Government to claim that the junior ISA is some sort of successor to the child trust fund, when it blatantly is not. It is about giving a tax break to those who can afford to put money into it; it is not a universal benefit in the way that the trust fund was. Although no distributional or regional analysis or assessment of income bands is provided, the assessment is that only 20% of children will take it up.
We could debate for a long time various issues that the hon. Gentleman has mentioned, but my contention, which I base on information that the Minister provided me with in parliamentary answers, is that fewer people will save under the proposed child ISA than saved under the child trust fund. The Minister must answer that charge. The Government’s actions in abolishing the child trust fund and saving half a billion pounds of taxpayers’ money have resulted and will result in a reduced savings culture, and the savings culture created will be in a different band of the population than was previously the case.
Would the right hon. Gentleman like to comment on the need to change the cap from 1% on stakeholder products? Was that not in itself an admission that the previous Government had failed in its attempts to expand the savings culture?
No, I do not think that it was, but we will be ruled out of order if we discuss pensions and savings policy related to those benefits.
The Minister does not have to justify the change—we have argued about the move away from child trust funds—but to justify the benefits that are in addition to the new child ISA. She needs to outline them in detail, and give a clear explanation of how the ISA will help to generate those savings for the future. It would help in my withdrawing of the amendment if she gave the same level of detail about the contribution for looked-after children as she did under clause 40 about the child ISA—she managed to fill out several pages. The issue is not new; it was raised in Committee last October and November, and the Government committed to the child ISA at that stage. They could have worked on the looked-after children contribution then as well, and I want to hear the Minister’s proposals for that today.
I am grateful that I have had the opportunity to raise these issues, and I know that my hon. Friends will wish to continue to speak to them in due course.
It is a pleasure to serve under your chairmanship, Mr Hood, and I am grateful for the opportunity to speak in the debate.
I should like to focus my comments on the effect that the measures will have on children in care. We all know that children in care are among the most marginalised and disadvantaged people in our society, and face significant disadvantages in life. It is incredibly important, therefore, that we press the Government, with the amendment, to give much firmer details of what the scheme will do and what support will be offered to young people in care. Action for Children and Barnardo’s have published an interesting report on the subject, entitled “On our own two feet: The case for a savings account for looked after children.” It is only through the work of those organisations that the Government have been forced to reconsider their proposals for the scheme.
We are talking not about handouts to these disadvantaged young people, but about providing support to allow care leavers to flourish and become independent when they reach the age of 18, and I would have thought that Members from all parties would support that. The savings accounts would provide a financial asset, enabling young people to receive the additional support they need. In the absence of a parent, whether through a care order or difficult circumstances that have arisen, the state will act as a corporate parent to provide young people with the security and stability that they need, and it is therefore crucial that the Government make it clear what the proposals will do. Will they be UK-wide? How will the money be used? There are a number of areas in which questions need to be answered by the Minister. Many of those young people end up homeless, and any support in reserve would be of massive benefit in enabling them to go on and live fulfilling lives.
I have seen at first hand the challenges that many young care leavers face. The organisation that I used to work for ran an accommodation project for young women aged 16 to 18, who were homeless as a result of abuse. Many of them were care leavers who had left the care system at 16, and who would have benefited from any changes that had brought about further support to enable them to flourish. Many of them had experienced trauma and abuse, often at the hands of people who should have been caring for them—often their parents. Whether it was physical, sexual or emotional abuse, it was often perpetrated by the people who should have cared about them most in the world, and should have acted in their best interests. That is traumatic enough in itself, and it is important that we provide care leavers with the greatest possible support to help them to face all the difficulties that leaving the care system brings.
Care leavers and young people in the care system already face significant disadvantage, from finding themselves homeless or under-attaining in school for example, and they are far more likely to end up as NEETS—people not in employment, education or training. That failure to overcome serious disadvantage in their lives will increase the costs to the state in the long run, either through additional benefits, or through additional pressures on the NHS or on council services such as housing. The unfortunate reality is that many young people who leave care end up in prison because of the difficulties that they face throughout their lives. All of that brings huge costs to the state, and we want to avoid that.
I do not for one moment suggest that having a savings scheme that supports such young people will solve all those problems, but I want to hear from the Government what assessment has been made.