House of Commons

Monday 22nd November 2010 Commons Chamber

Monday 22 November 2010

The House met at half-past Two o’clock

Prayers

Monday 22nd November 2010 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Monday 22nd November 2010 Commons Chamber

The Secretary of State was asked—

[Paul Uppal (Wolverhampton South West) (Con)]

1. What recent assessment he has made of the effect of trends in longevity on his Department’s expenditure on pensions.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Between 2004 and 2008, our estimates of life expectancy at pension age rose by more than a year. For those who reach pension age this year alone, that will add £6.5 billion to their expected pensions over their lifetimes.

[Paul Uppal]

Does not increasing longevity make even more urgent the Department’s plans to get more people saving for their old age?

[Steve Webb]

My hon. Friend is absolutely right. We have taken forward plans introduced by the previous Government for automatic enrolment into workplace pensions, so that as people are working for longer, they can still retire on decent pensions, through more workplace saving.

[Tony Lloyd (Manchester Central) (Lab)]

Everybody recognises that increasing age has an impact on the funding of pension schemes, but does the Minister accept that there is a huge difference between a population such as the one that I represent, in which life expectancy is some 10 years less for males and roughly the same for women, and those populations with the highest life expectancy in the country? Simply increasing the state retirement age has an unfair impact on communities such as mine.

[Steve Webb]

The hon. Gentleman raises an important point, and it is one that we are aware of. However, he will be encouraged to learn that in the past decade, life expectancy for both manual workers and non-manual workers, for example, has risen by two years for men. Although there are still differences, both groups are seeing improvements in life expectancy.

[Mrs Anne McGuire (Stirling) (Lab)]

2. What steps his Department plans to take to assist employers to provide real-time pay data for universal credit computations.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

Her Majesty’s Revenue and Customs is continuing to consult with employers on how best to collect real-time pay information. I should stress that the information required for the universal credit is already being collected by HMRC as part of its reforms to the pay-as-you-earn system, which are on track. The adoption of the new real-time information system, for the benefit of employers, universal credit customers and taxpayers, is already well on track.

[Mrs McGuire]

Can the Secretary of State tell the House what proportion of the £2 billion allocated in the comprehensive spending review to implement the universal credit will go to support HMRC’s IT project, and what proportion will go as compensation, so as to avoid losers in the transition to the new universal benefit?

[Mr Duncan Smith]

The right hon. Lady will forgive me if I do not give her the absolute details. We will be publishing the details shortly—well, soon, anyway—but I can tell her now that she can expect to see a significant amount, as a proportion, for the computer change. All this is covered by the money already granted through the settlement in the spending review—more than £2 billion—which will go to protect those who would have nominally been losers and to implement all the necessary IT changes, and to cover every other detail too.

[Mr Julian Brazier (Canterbury) (Con)]

I welcome my right hon. Friend’s earlier answer. In the light of several terrible cases in my constituency, does he agree that it is extraordinary that the whole system of credits was introduced at all without a proper real-time information system?

[Mr Duncan Smith]

The PAYE system is ultimately the responsibility of my colleagues at HMRC, although we will obviously require an element of that to implement the change. That change will make life considerably easier for us in delivering those benefits without the normal mistakes that are made—mistakes that have caused overpayments to people, followed by attempts to claw them back that cause hardship for many people on low incomes. I believe that in due course the change will deliver a net benefit to everybody.

[Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)]

Under the Secretary of State’s proposals, councils are to use the real-time data to calculate entitlement to council tax benefit, although the entitlements will vary according to each local authority. What is his estimate of the cost to the Department for Work and Pensions of supporting councils in creating their own mini-benefits system in each locality?

[Mr Duncan Smith]

I will give those details soon. I will not give them today, but I can say that we have already been working on the issue. We believe that, as things stand right now, we will manage the cost within our present budgets—it will not require anything extra for us. Of course, as the right hon. Gentleman said, it forms a challenge to us—I accept that—but localising elements of benefits is important to local people, and councils have very much wanted to do this. I will definitely give him the figures for that in due course, but we believe that we will be able to manage it, and I am more than happy to discuss that with him.

[Hazel Blears (Salford and Eccles) (Lab)]

3. What steps he is taking to encourage social enterprises to become providers under the Work programme.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

As the right hon. Lady knows, involving the specialist skills of the voluntary and social enterprise sectors in delivering the Work programme is extremely important, particularly where they have expertise in helping the hardest-to-help groups. Across the summer, we held a series of consultation events across the country, and we have had meetings through some of the professional organisations that represent different elements of the voluntary sector. The Minister for Welfare Reform—Lord Freud—and I have held meetings in the City to try to encourage financiers to support the voluntary sector in its approaches to the Work programme. I cannot give the right hon. Lady information about the specifics of the process today, because we will be publishing more details in due course, but I can assure her that we are keen to keep those organisations present.

[Hazel Blears]

I am grateful for the Minister’s reply. He knows that many social enterprises, such as Work Solutions, which does a fantastic job in the Ordsall area of Salford to get people back into work, have very tight margins, and often struggle with cash flow. If the national system is to be about payment by results, what measures will he take to ensure that small organisations, which are often without a financial buffer, can survive within the system and provide the specialist services that only they can provide?

[Chris Grayling]

We have introduced the Merlin standard, a new code of conduct for suppliers to the Department for Work and Pensions, which will apply to the prime contractors for the Work programme. They will be obliged to do the right thing to support their subcontractors appropriately financially. If they fail to do so, and treat their subcontractors financially inappropriately, they could lose their contracts. The system has just won an award for its role across Whitehall—there is potential for it to be used elsewhere in Whitehall—as best practice for dealing with small subcontractors. We must protect them, because they have a huge role to play.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

Will the Minister join me in congratulating Progress Recruitment on its work in Blackpool? It is a social enterprise that works with many of the hardest-to-reach people in my constituency to get them back to work. Will he do all he can to encourage local government, when it again considers its service provision, to look at whether it can spin off organisations such as Progress Recruitment as social enterprises, as part of reconceptualising that service provision?

[Chris Grayling]

I certainly praise the work that has been done in Blackpool, and I praise my hon. Friend’s work in supporting that activity. Not many people understand the scale of the social challenge in Blackpool, and the work that is done by organisations such as the one in his constituency is extremely important. I very much hope that the framework that we are creating for the Work programme will give local authorities and local organisations the scope to work alongside providers to deliver local solutions to some of the problems. I have no doubt that social enterprise should be and will be part of that. Local authorities can help to make that happen.

[Mr Frank Field (Birkenhead) (Lab)]

Does the Minister accept that there is considerable support on the Labour Benches for the point that my right hon. Friend the Member for Salford and Eccles (Hazel Blears) raised? Does he accept that if we are to protect social enterprises, and if they are to play a greater part in welfare reform, that will require almost a total change in attitude from the big providers? Birkenhead had one of the best organisations—A&P Group—but it did not win the larger contract, and did not want to, and the large provider had no interest in making sure it survived. It was a huge loss to young people in the area who, until then, had had a Rolls-Royce service.

[Chris Grayling]

I am grateful to the right hon. Gentleman for highlighting such an important point. I have been very clear to people who are bidding for the Work programme that we expect them to demonstrate their ability to assemble a consortium or organisations with the specialist skills to help the hard-to-help groups. Many of those organisations are in the voluntary sector or the social enterprise sectors. If they do not demonstrate that ability and if they do not have those networks, they will not get the contracts. It is as simple as that.

[Mrs Helen Grant (Maidstone and The Weald) (Con)]

4. What plans he has to increase parental responsibility for child maintenance.

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

The coalition Government are determined to ensure that all parents meet their financial responsibility for their children. At present, around 50% of separated parents have no maintenance arrangements in place. We are working with colleagues in the Department for Education, the Ministry of Justice and the voluntary sector to ensure that we deliver a seamless approach to supporting parents pre- and post-separation.

[Mrs Grant]

What plans does the Minister have to improve the Child Support Agency?

[Maria Miller]

First, I pay tribute to my hon. Friend’s immeasurable work, particularly with the Croydon family justice centre. She is an expert in such matters, and raises an important matter. The Child Support Agency’s performance is improving, with more children benefiting from more money collected. However, the present system does not do enough to provide effective child maintenance support as soon as possible after parental separation, nor does it do enough to promote positive relationships between parents. Making those improvements to the system is in the best interests of children, as is ensuring that we have more enduring financial support for them.

[Mr Frank Roy (Motherwell and Wishaw) (Lab)]

5. What recent discussions his Department has had with disability organisations on proposals to remove the mobility component of the disability living allowance from residents in publicly funded care homes.

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

I have had discussions with a number of disability organisations on the proposals to modify eligibility for DLA following the Chancellor’s spending review announcements. Specific spending review measures, along with those in other Departments across Government, have not been subject to public consultation, but they will of course be subject to full parliamentary scrutiny.

[Mr Roy]

Of all the proposals on welfare reform, this is absolutely the most brutal and cruel. Disabled people in publicly funded care homes deserve much better than is being offered at the moment. What will the Minister do when she has to meet a disabled person in one of those homes face to face, and how will she explain why she is taking away their much-needed lifeline to the outside world?

[Maria Miller]

I think that the hon. Gentleman is referring to the measure on mobility. Local authorities, working with care homes, have a clear duty to promote, where practical, independence, participation and community involvement for every single disabled person living in such care homes. The proposed change to DLA eligibility should not leave disabled people more isolated. Importantly, we have to ensure that there is clarity in funding streams as we move towards personalisation, which is something that almost every disabled person welcomes.

[Duncan Hames (Chippenham) (LD)]

Constituents of mine in Atworth have come to see me about their 30-year-old daughter who suffers from cerebral palsy and will be affected by the changes. In her care home, different residents have very different mobility needs to maintain their independence, as well as experiencing different challenges. Can we expect care homes to meet those needs in an individually tailored way?

[Maria Miller]

My hon. Friend raises an important point. It is important that we have personalised care for disabled people. Every disabled person has different needs and, working with colleagues in the Department for Communities and Local Government and the Department of Health, we will ensure that the correct level of support is being delivered locally.

[Miss Anne Begg (Aberdeen South) (Lab)]

Will the Minister take this opportunity to clarify exactly who will lose the mobility element of their DLA? There is quite a lot going around the blogosphere about who might be affected. Will the changes affect children in residential schools? Will they affect those in residential care who are self-funders as well as those who are funded by the local authority? Will there be exemptions, or will everyone in residential care lose the mobility element of their DLA?

[Maria Miller]

I thank the hon. Lady for her question. This does not affect self-funders, and we will be making clearer as we get towards the Bill exactly how the measure will affect all other groups. I reiterate that it is important to get clarity in the funding streams as we move towards personalisation, which is overwhelmingly welcomed by disabled people.

[Richard Fuller (Bedford) (Con)]

My hon. Friend makes a good point about the need for clarity and clarification as we move towards the universal benefit, but we must also consider the issue of decency. The measures that she is taking are having deleterious effects on the well-being of people in my constituency. Many of the families concerned have looked after their children for many years outside care. Will she take the opportunity to meet me so that we can discuss some of these constituency issues?

[Maria Miller]

I thank my hon. Friend for his question, and I am very happy to meet him to discuss this matter further. I would draw hon. Members’ attention to the fact that colleagues in the Department of Health have put £2 billion into social care, which will be available to ensure that local authorities and social care providers are able to meet people’s needs.

[Margaret Curran (Glasgow East) (Lab)]

The spending review said that this measure would apply only

“where such costs are already met from public funds.”

Perhaps the Minister will take the opportunity to reassert that this afternoon. However, Scope and other leading disability organisations have established that removing the mobility component will hit thousands of disabled people. They have described the change as “callous”, and called on the Government to think again. Will the Government listen to those organisations, or do they believe—and can they guarantee—that there will be “no losers” as a result of this policy?

[Maria Miller]

I thank the hon. Lady for her question. She will obviously realise that one reason for having to look at these sorts of measures is that we were left an immense fiscal deficit by the previous Administration. I can confirm to her today that we will, of course, listen to the concerns and thoughts of voluntary organisations and disabled people—indeed, I am already doing so—and that the measure we are putting in place will ensure that the existing duties of care homes and local authorities, which are to ensure that disabled people are able to live independent lives, will be fully enforced so that the correct level of support can be delivered locally.

[Michael Dugher (Barnsley East) (Lab)]

6. What estimate he has made of the likely effects on his Department’s expenditure on out-of-work benefit payments to residents of Barnsley East constituency of implementation of the changes announced in the comprehensive spending review.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Although estimates of expenditure savings are not available at constituency level, the impact of the changes has been published at the UK-wide level on the website of Her Majesty’s Treasury.

[Michael Dugher]

Is the Minister aware of last week’s report by Professor Steve Fothergill of Sheffield Hallam university, which showed that in areas like my own, private sector employment is unlikely to rise significantly in the next few years? Is it not the case that unemployment will increase, as will benefit payments, in areas like my own, because of the ending of the future jobs fund, the ending of the working neighbourhoods fund and the massive cuts to the local authority, with consequent effects on local employment?

[Steve Webb]

The hon. Gentleman is right to stress the importance of private sector employment, which is why I looked at the situation in Barnsley East. I found that the year to March 2010 saw an increase in employment of more than 3,000. I therefore think that it is vital not to talk down economic growth, because the private sector is creating jobs, including in Barnsley East.

[Jenny Willott (Cardiff Central) (LD)]

7. What discussions he has had with representatives of the social care sector on the cost of mobility support for disabled people.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The Government remain committed to involving disabled people when developing their policies, and I can tell my hon. Friend that we discussed the care homes measure with a number of disability organisations at the Department for Work and Pensions policy and strategy forum on 16 November.

[Jenny Willott]

We have already heard a number of concerns raised today about these particular proposals. I understand the Government’s rationale, but what consideration has been given to ensuring that residents in care homes who currently receive mobility disability living allowance will still be able to buy Motability cars, and scooters where appropriate, so that they can remain as independent as possible?

[Steve Webb]

My hon. Friend has raised an important facet of these changes, and I can assure her that the Department is already in discussions with Motability about how it might be handled.

[Ms Margaret Ritchie (South Down) (SDLP)]

Have the proposals for disability living allowance been subject to an equality impact assessment, and if so, what has been the result?

[Steve Webb]

As the hon. Lady may be aware, when elements are included in primary legislation, statutory equality impact assessments are published at the time that the legislation is published—and will be available to the House.

[Henry Smith (Crawley) (Con)]

8. What recent progress his Department has made on delivering its Work programme.

[Richard Harrington (Watford) (Con)]

13. What recent progress his Department has made on delivering its Work programme.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The commercial delivery of the Work programme is on track. Before the end of the month, we will be releasing a list of those organisations that have successfully bid to be part of the framework for employment-related support services. Shortly after that, in early December, we will publish the full invitation to tender for the Work programme. We are still on course to launch the programme next summer.

[Henry Smith]

Regrettably, my constituency has one of the worst records for its over-50 unemployed people ever getting back into work. I would be interested to hear some specific advice about what the Government are planning for that age group.

[Chris Grayling]

Of course, this was one of the great failings of the Labour Government, who failed to understand the challenge that older workers faced. Their employment programme offered none of the personalised support that is necessary to deal with the specific challenges that my hon. Friend mentions. What we will do through the Work programme is offer personalised support by paying providers by results; they will have a full incentive to do the right thing by older workers and ensure they get into work.

[Richard Harrington]

Last week, Leavesden studio in my constituency was given a £125 million investment by Warner Bros. Will my right hon. Friend assure me that the Government’s new Work programme will help local unemployed people to get off the register and get jobs in this fantastic opportunity?

[Chris Grayling]

That is a great example of new private sector investment in the United Kingdom, which proves that the private sector can indeed create the jobs that we all want to see for the future. I congratulate my hon. Friend and his constituents on the work that they have done in bringing the investment to the United Kingdom. I hope that the local provider for the Work programme will forge a close partnership with Warner Bros to ensure that it delivers people with the right mix of skills and capabilities to fill vacancies, and I hope that my hon. Friend will help to facilitate that partnership.

[Anas Sarwar (Glasgow Central) (Lab)]

In the last four months alone, an employment agency in my constituency has helped more than 300 long-term jobseeker’s allowance claimants and single parents into work under the employment zone programme. Four such agencies operate in the constituency, but long-term JSA claimants and single parents will no longer be able to apply for that extra support after 31 December as a result of the transition to the Work programme. What specialist support will the Minister give thousands of my constituents, and thousands of others throughout the country, to help them back into wok?

[Chris Grayling]

We will provide enhanced support for people in that position through Jobcentre Plus for a short period, but I hope and expect that providers who are already in the framework and who win Work programme contracts will be able to take up some of the challenges that those people face and help them before the formal launch of the programme in the summer.

[Stephen Timms (East Ham) (Lab)]

There are some good ideas in the Work programme, and all of them were in the last Government’s flexible new deal. What proportion of the payment to be handed over to a Work programme provider in respect of a jobseeker will be handed over when that person obtains work, and how long will he or she need to remain in work before the whole payment is handed over?

[Chris Grayling]

I will publish the full details of the contractual arrangements for the Work programme in a few days’ time, but I can tell the right hon. Gentleman that we will not be paying up front as the flexible new deal did. Last year, the flexible new deal paid providers £500 million for 16,000 starts. That is £30,000 per job start, and in my opinion it was an inefficient use of public money. Even as the programme becomes more mature, the previous service fee arrangements would still mean a huge up-front cost. We will do things differently: we will pay providers when they succeed, and not before they have done so.

[Mr Robert Buckland (South Swindon) (Con)]

9. What steps he is taking to help disabled people into employment.

[Jackie Doyle-Price (Thurrock) (Con)]

10. What steps he is taking to help disabled people into employment.

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

15. What steps he is taking to help disabled people into employment.

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

The Government are committed to increasing the employment rate for disabled people by giving them the help that they need to follow fulfilling, mainstream careers whenever possible. The Work programme will provide more personalised back-to-work support for unemployed people, including disabled people, from next year. Work Choice, which began on 15 October, provides specialised support for disabled people who face more complex barriers, and the access to work programme provides financial help with reasonable adjustments for the workplace above and beyond what the employer could reasonably provide.

[Mr Buckland]

Does the Minister agree that for far too many disabled young people, both in my constituency and elsewhere, the transition into adulthood and the jobs market can be very challenging? What steps are her Department taking to ease the process into adulthood and jobs?

[Maria Miller]

The transition from education to work can be difficult for all young people, but particularly for disabled people. I am impressed by the work that has already been done by employers whom I have visited in recent months, who are already focusing on the importance of disabled young people in their work forces, but the specific support that the Government have provided through Work Choice and the Work programme will help—particularly the differential pricing that is available through the Work programme, which will enable more organisations to work with disabled young people to get them into work.

[Jackie Doyle-Price]

My constituent Nigel Freeman has suffered a very aggressive bout of cancer, and his best efforts to re-enter the world of work have been frustrated by the operation of the benefits system. Can my hon. Friend assure me that she will end the “one size fits all” approach to health conditions, so that people no longer find themselves trapped on benefits?

[Maria Miller]

My hon. Friend has raised a subject about which we are all eager to hear—people who are committed to returning to work despite very difficult personal circumstances. Under the Work programme, we shall be able to provide more personal and individual back-to-work support for those who face more significant barriers. We want to provide a system of Government support that treats people in a dignified way and assesses them for what they can do, not for what they cannot.

[Eric Ollerenshaw]

I welcome Government moves to help those who can work to get back into work and off incapacity benefit, but how will the Minister use the expertise of existing disability organisations such as One Voice in my constituency, which is run by the disabled for the disabled, so that we can begin to end the present waste of talent?

[Maria Miller]

Local user organisations have a vital role to play in providing that sort of grass-roots support, and the Shaw Trust and other organisations are already bringing their expertise into play in Work Choice. Several of them will also be involved in making the Work programme available next year.

[Mr David Lammy (Tottenham) (Lab)]

May I draw the Minister’s attention to the case of Mr Spivack in my constituency, who is autistic and relies on his mobility scooter? Is it not fatuous of her to suggest that she is keen to help the disabled into employment if she is withdrawing the means for them to get to work?

[Maria Miller]

I can assure the right hon. Gentleman that the support his constituent will need in order to get to work will be available through either his disability living allowance or access to work. There are clear opportunities for his constituent to get the support he needs.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

How do the Government believe that removing the mobility component of DLA for people living in residential care homes helps disabled people back into work, or enables disabled people who—like a number of my constituents who came to see me in my surgery last week—currently depend on their mobility allowance to get to and from work, to stay in work?

[Maria Miller]

The hon. Lady is right to be concerned that constituents of hers should be able to get to work, and that is why we have support in place for those not in residential care through DLA and also through access to work. That is an important programme that helps many thousands of people get into employment, and we will be supporting more people into employment through access to work this year than last year.

[Clive Efford (Eltham) (Lab)]

The Government have stated their intention to reduce the number of people on incapacity benefit in order to reduce the welfare bill, but some of us were concerned that the tests the previous Government applied for incapacity benefit were already very strict. What checks and balances will the Minister put in place to ensure that people with severe disability are not impoverished by stricter guidelines for staff conducting assessments of those on incapacity benefit?

[Maria Miller]

Obviously, this is a situation that we inherited, and my right hon. Friend the Secretary of State will soon bring forward proposals to address just the sort of issue the hon. Gentleman raises. I am very aware of the fact that we need to make sure we have an assessment process that identifies people’s real needs for support, and I know that my right hon. Friend is committed to that too.

[Tracey Crouch (Chatham and Aylesford) (Con)]

11. what recent progress has been made on the work capability assessment independent review led by Professor Malcolm Harrington.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

Professor Harrington will publish his report on the work capability assessment tomorrow. He will be available to take questions and I hope Members will come forward and put any issues and concerns to him, and indeed to me, during the course of the day.

[Tracey Crouch]

I thank the Minister for that reply. Can he assure the House that those who have varying support needs because they have fluctuating conditions will be considered accordingly during the assessment process?

[Chris Grayling]

I am very happy to give my hon. Friend that assurance. This issue—along with that of people with mental health issues—has been of paramount importance to me, and it is one of the subjects to which I asked Professor Harrington to pay the closest attention. I hope my hon. Friend will see tomorrow that he has recommended a number of measures that will help in that respect, but I can also assure her that we will continue to review this issue. We will continue to study the process as it unfolds, and we will make further improvements as and when necessary.

[Rachel Reeves (Leeds West) (Lab)]

I thank the Minister for that answer, which we welcome. He knows that there is support from both sides of the House for Professor Harrington’s review and Labour will support the Government in taking forward meaningful reform, particularly in identifying mental health problems such as depression and schizophrenia. What assurances will the Minister give the House that reforms to the work capability assessment will better support people with mental health conditions get back to work?

[Chris Grayling]

One of the things I made sure to do when we set up the review was invite the chief executive of Mind to take part in one of the support groups for Professor Harrington. That input has been hugely valuable. I have also invited the mental health charities to make recommendations about possible changes to the descriptors, which might also help enhance the process. They are due to respond shortly. We will make sensible changes as and when we can. I intend to brief the hon. Lady and her colleagues about the contents of the Harrington review tomorrow morning, and perhaps we can talk briefly behind the Speaker’s Chair about how best to arrange that. I want them to be part of the process, and I am very happy to take suggestions from Opposition Members as well. As the hon. Lady rightly says, this is a cross-party issue. We have to get it right. It is in all our interests that we get it right, and I think we share the aspiration that this process should be fair and firm.

[Karen Bradley (Staffordshire Moorlands) (Con)]

12. What assessment he has made of the effect of the proposed universal credit on work incentives.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

We believe that universal credit will make work pay. We have done some assessment and we can announce that we believe we should reduce by 1.3 million the number of workless households facing a participation tax rate of more than 70%. We also believe that we will improve earnings incentives for some 700,000 people and that we could reduce the number of workless households by about 300,000.

[Karen Bradley]

I thank the Secretary of State for that response. Caudwell Children is a charity that has significant experience in helping the parents of disabled children back into work. Could he give some assurances as to how the universal credit will make that process easier?

[Mr Duncan Smith]

I hope and believe that if we implement universal credit correctly, it should allow people with caring responsibilities to meet those responsibilities with greater flexibility in the number of hours they can work. At the moment, it is very difficult for many of them to work the sort of hours they need to work without damaging their ability to fulfil their caring responsibilities. We think that flexibility would be most effective for them and, strangely enough, for lone parents.

[Ms Karen Buck (Westminster North) (Lab)]

The universal credit has the desirable and indeed the shared objective of reducing the rate at which tax and benefits are withdrawn as earnings rise. But for every pound that will go into the universal credit, £8 is being removed as a result of the June Budget and the comprehensive spending review. When the Secretary of State says that nobody will be worse off, is he making the comparison with the period before or the period after those cuts come into effect?

[Mr Duncan Smith]

What I said originally was that we believe that from the position we inherited, the implementation of the universal credit will have a net beneficial effect for the poorest people in this country who are trying to achieve work. So it is not just a case of people not being worse off; we believe that people will be far better off than they were when the hon. Lady’s Government left us.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

14. Whether his Department plans to publish a gender impact assessment of the changes to be made to the benefits regime as a result of the comprehensive spending review.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The Department for Work and Pensions assesses the equality impacts of any new policies or changes to existing policies and practice. In line with that commitment to transparency, equality impact assessments are published when they are available, and gender impacts are included as part of those documents.

[Cathy Jamieson]

I thank the Minister for that answer. What assessment are the Government making of the needs of vulnerable women, particularly those who receive housing benefit and are aged between 25 and 35? How will the Government ensure that their needs are met and, in particular, that if they have disabilities, they do not end up inappropriately in shared accommodation?

[Chris Grayling]

As the hon. Lady will know, exemptions are already in place for the most vulnerable people, and those will continue. The package of reforms set out in the spending review, particularly the introduction of the universal credit, will make a huge difference to women on some of the lowest incomes, particularly lone parents seeking to get back into work. The credit will make that journey much easier and mean that they are better off going back to work than they would otherwise have been.

[Stephen Hammond (Wimbledon) (Con)]

16. What assessment he has made of the likely contribution of the proposed universal credit to his Department’s objective of encouraging people to work.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

I refer my hon. Friend to the answer I just gave.

[Stephen Hammond]

I listened carefully to my right hon. Friend’s previous answer. Given the benefits for so many of the introduction of the universal credit, what chance is there that the Government might be able to accelerate its introduction beyond the 2017 time scale currently announced?

[Mr Duncan Smith]

I will resist the temptation to accelerate anything. I simply say to my hon. Friend that the plan we have put in place allows us to spend the right amount of time making sure that we are integrating those on the current benefits correctly and that we are not making any mistakes. We do not plan to accelerate that, but clearly we hope that this process will go smoothly—we believe it will. That is the most important thing.

[Graham Jones (Hyndburn) (Lab)]

Can the Secretary of State give an estimate as to how many parents with young children will return to work under his universal credit, and can he explain the incentives?

[Mr Duncan Smith]

We believe that we will lift some 350,000 people in that category out of the poverty that we inherited. I am not going to give any significant answer to the second part of the hon. Gentleman’s question, simply because I am happy to write to him in due course and give him the figures. His party says it accepts and supports this process, and the reality is that the universal credit has the biggest effect on the poorest people trying to get back into work. That surely has to be welcomed by him and the whole of his party.

[Jo Swinson (East Dunbartonshire) (LD)]

17. What assessment he has made of the likely effects of the Work programme on unemployed people who volunteer.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

My message to my hon. Friend would be that we are doing everything we can to promote volunteering for jobseekers, both before they enter the Work programme and, once the programme is in place, after they enter it. We have set out plans to allow jobseekers to do up to eight weeks’ work experience and I think that that gives them an important opportunity to take a step into the workplace that they would not otherwise have taken.

[Jo Swinson]

I thank the Minister for that reply. Many people who are out of work or who have fluctuating medical conditions already undertake part-time voluntary work but that was not previously recognised by Jobcentre Plus officials as part of the flexible new deal. What assurances can he give me that those people, who are already participating in the big society, will have their voluntary work positively recognised under the new Work programme?

[Chris Grayling]

I see volunteering as extremely important, particularly in helping those who have been on sickness benefits or incapacity benefit in the long term to make the step into work. I can assure my hon. Friend that we will give Work programme providers maximum flexibility to use volunteering as one of many vehicles to help people get into employment.

[Mr David Ward (Bradford East) (LD)]

18. What assessment he has made of the likely effects of his proposed reductions in housing benefit entitlement on jobseeker’s allowance claimants who have been unable to find work for more than 12 months.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The detailed design of the measure is still being developed and we are carefully considering its impact. We will publish a full impact assessment to accompany the relevant legislation when it is introduced in Parliament.

[Mr Ward]

The proposal is obviously designed as a work incentive measure, but it could be argued that any claimant affected will represent a failure of the measure to get people back into work. What steps is the Minister taking to ensure that anyone who is affected is genuinely unwilling to find work?

[Steve Webb]

My hon. Friend raises an important point. The key is to try to stop people being unemployed for 12 months. He will be aware that 90% of those who come on to JSA flow off before the end of 12 months. My right hon. Friend the Minister of State is bringing forward the Work programme, which will help the most hard-to-help groups before the end of the 12-month period to give them the maximum chance of not being in that position in the first place, which is our priority.

[Glenda Jackson (Hampstead and Kilburn) (Lab)]

There are already single parents in my constituency—not exclusively but in the majority female—who are experiencing serious difficulty in convincing employers that they must have flexible working to maintain their child care. What are the Government doing to ensure that employers are aware of their responsibility, given the draconian effects of the proposed reduction in JSA?

[Steve Webb]

The hon. Lady is right to point out the importance of a flexible jobs market. The good news is that a large proportion of the new jobs that are being created are part-time jobs that will be of particular benefit to lone parents. The Government will consult on the right to request flexible working in the coming year.

[Hywel Williams (Arfon) (PC)]

The number of job applicants and the number of posted job vacancies varies widely from constituency to constituency and country to country. Is it fair to apply a universal rule to all claimants when their ability to comply with that rule varies so widely?

[Steve Webb]

The hon. Gentleman will know that Jobcentre Plus advisers already have a good deal of discretion in how they respond to individuals to reflect individual circumstances. We are keen to see that measures such as the Work programme are tailored to the individual so that they can address the particular problems that they face. If those problems involve transport or a lack of very local job vacancies, they can be addressed through the Work programme.

[Caroline Dinenage (Gosport) (Con)]

19. What recent assessment he has made of the value for money delivered by the flexible new deal programme.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

The flexible new deal began in October 2009. Results of its full evaluation will be published in 2012. However, the initial figures, published last week, certainly give rise to concern that it represented poor value for money and that the arrangements set out by the previous Government were extremely expensive.

[Caroline Dinenage]

People in my constituency are concerned about the transition to the Work programme. What assurances can the Minister give me that the Government will take measures to ensure that people are not disadvantaged during the transition period?

[Chris Grayling]

I can absolutely give my hon. Friend that assurance. That is a priority for me at the moment. As it becomes clear who is on the framework and who is not, it will become increasingly clear where we might have issues with the transition. In those areas where the flexible new deal will continue to run until the summer, it is not an issue, and in those areas where the flexible new deal does not exist, it is a concern. We will take urgent measures in the next few days, as we have completed work on the framework and identified the gaps, to ensure that we put in place the necessary support, probably through Jobcentre Plus, to ensure that we look after those who are affected.

[Simon Danczuk (Rochdale) (Lab)]

20. What effects he expects the introduction of the proposed universal credit to have on marginal deduction rates experienced by households currently in receipt of tax credits only.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

I repeat that the universal credit will benefit a large number of people, improving work incentives for some 700,000 people who will see their marginal deduction rates fall from about 96% to 76%. The specific group that the hon. Gentleman is talking about will have their withdrawal rates rise marginally, although that will be met by our guarantee that nobody will be a loser in the course of this.

[Simon Danczuk]

I genuinely welcome the Secretary of State’s attempts to get more people incentivised and back into jobs, but does he accept that his proposals are more likely to fail because the regional development agencies that created many jobs in Rochdale and other parts of the country are to be replaced by what Lord Heseltine has called a “high-risk” regional growth fund?

[Mr Duncan Smith]

I do not accept that point. We recognise that it is critical to create those jobs and we expect them to be created as the economy grows. The big problem with creating jobs under the previous Government was that 70% of all the jobs created in 15 years went to people from overseas and not from the UK. The big issue for us is getting people in the UK ready and able to do that work, which the Minister with responsibility for employment, the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), is busy doing through the Work programme.

[Andrew Bridgen (North West Leicestershire) (Con)]

The Opposition seem convinced that the introduction of the universal credit will be dogged by IT difficulties. Does that not reflect their lamentable experience in this area? What reassurance can the Secretary of State give us that we will succeed where the previous Government failed so badly?

[Mr Duncan Smith]

The previous Government had problems with IT development, as did lots of Governments—both sides accept that. To be fair, I have spoken to the shadow Minister, the right hon. Member for East Ham (Stephen Timms), who has been very positive about general developments. In his time, the development of the employment and support allowance computer was a very positive development, for which I compliment him. That is a very good example of the scale of computer development that we can undertake with the universal credit.

[Nicky Morgan (Loughborough) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

We are busy working very hard on employment programmes. I draw my hon. Friend’s attention to the very positive employment figures from last week, which indicate that the Government’s direction of travel places employment growth at the heart of all we do.

[Nicky Morgan]

I thank the Secretary of State for his answer and I note the earlier comment by the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), that economic growth should not be talked down and that jobs are being created. How are the providers of the Work programme going to work with employers to identify those jobs and make sure that people are placed in private sector jobs as we go forward?

[Mr Duncan Smith]

My hon. Friend is absolutely right. The difference between this Government and the previous Government will be that the Work programme—the most comprehensive, integrated work programme in existence, certainly, since the war—will make a huge effort to get those who have been out of work for the longest periods ready for work so that they actually get to work. As the economy grows, those jobs will be greater in number. A key point that I made earlier is vital to her question: for all the growth under the previous Government, prior to the mistakes they made that brought us the recession, most of those jobs went to people from overseas because British people simply were not capable of doing that work. That has to change.

[Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)]

May I take the Secretary of State back to his claim that job creation will be vital and ask him specifically about what the Office for Budget Responsibility has stated will be the estimated saving from threatening the long-term unemployed, about whom he has just spoken, with the 10% figure? Do the OBR’s estimates on how much that policy will save include an expectation that it will move more people into work, or is no significant saving in terms of work incentives expected? Do the calculations simply show OBR figures for the number of people who are going to continue with no job but less money? What do the OBR figures indicate?

[Mr Duncan Smith]

The OBR figures show two things: significant growth during the course of this Parliament and significant growth in private sector employment. Our changes in housing benefit will get rid of a disincentive to taking those jobs, which a significant number of people failed to take under the previous Government, who failed to do anything about it.

[Mark Lancaster (Milton Keynes North) (Con)]

T2. My constituent Rachel Clark, who has learning difficulties, enjoys working as a volunteer at a coffee shop run by the charity MacIntyre. Until recently, she received a therapeutic allowance but unfortunately that practice has had to stop for fears that it is in breach of national minimum wage legislation. Given that all parties were happy with the arrangement and that Rachel is happy to carry on as an unpaid volunteer, can we look into this grey area of the law?

[The Parliamentary Under-Secretary of State for Work and Pensions (Maria Miller)]

I thank my hon. Friend for his question. We can be clear that individuals such as his constituent are able to undertake volunteering opportunities. Indeed, that is something we have been encouraging as part of the Olympics and Paralympics, and it does not cause any problems if they are in receipt of state benefits.

[Miss Anne Begg (Aberdeen South) (Lab)]

T4. May I ask Ministers to look again at the proposal to reduce housing benefit by 10% for people receiving jobseeker’s allowance for a year? The Minister for Housing and Local Government said this morning that people in social rented housing will be kicked out of their homes if they go into work, and under the proposal on housing benefit, people will be kicked out of their homes if they do not go into work.

[Mr Duncan Smith]

I always appreciate the hon. Lady’s advice. We certainly keep all that under review and intend to do so all the way through until we introduce the Bill. However, having said that, there is a lot of good evidence out there to show that we have to give people some sort of incentive not to decide to refuse that work. We believe that that is one of the areas where a lot of international evidence shows that such a spur actually helps people to do that.

[Karen Bradley (Staffordshire Moorlands) (Con)]

T5. What can the Secretary of State do to assure unemployed people in Staffordshire Moorlands that the Work programme will help them to find not just employment, but sustainable employment?

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

One of the key differences in the Work programme, compared to previous programmes, is that it will pay providers not simply for getting someone into work, but for supporting them while they are back in work over an extended period. That is crucial to ensuring that people do not come off benefits, stay in work for a few weeks and then return to the unemployment registers, as has so often happened in the past.

[Mr William Bain (Glasgow North East) (Lab)]

T9. Is the Minister aware that his own Department’s statistics show that the impact of restricting local housing allowance to the 30th percentile in Glasgow is that 92% of recipients in one-bedroom properties will lose out by, on average, £7 per week? The Glasgow Housing Association told me on Friday that that is likely to lead to higher levels of rent arrears and lower levels of available investment for its properties. Does not that show how unfair and badly designed the proposals are?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I can only agree entirely with the hon. Gentleman on the manifesto on which he stood for election, which stated that we have to cap the rents that we are paying. His analysis assumes a static situation in which rents do not change. The Department puts more than £21 billion into the local housing allowance. If we changed the rules for that, we would change the market. We are trying to put pressure on rents so that they will go down, which will improve the situation.

[Guy Opperman (Hexham) (Con)]

T6. The whole House will welcome the news that unemployment is on the decline and look forward to the introduction of the Government’s Work programme. However, my right hon. Friend will be aware of the particular issues facing the north-east. What steps is he taking to ensure that there is support in the meantime for those seeking employment in the region?

[Chris Grayling]

My hon. Friend will be aware that I am always extremely concerned about the employment situation in the north-east. I was therefore extremely pleased this summer to see an increase in private sector employment of 17,000 in the region. I was disappointed, however, that the number of people claiming jobseeker’s allowance barely changed, which simply underlined for me the need for the Work programme to deliver real change in that area. However, the introduction of the new enterprise allowance and some of the other measures that we are taking to support small businesses, as set out in the Budget by my right hon. Friend the Chancellor of the Exchequer, will help to continue the process of job creation in the private sector in the north-east, which is what we all want.

[Malcolm Wicks (Croydon North) (Lab)]

As the Secretary of State and his team develop their longer-term thinking on social security, including for state pensions, what emphasis and importance will they place on the contributory principle?

[Steve Webb]

I am grateful to the right hon. Gentleman for his question. We believe that a link between what people put into the system and what they get out of it is important, and we are looking at ways of modernising that principle. He will know that the contributory principle, as it currently exists, was invented in the 1940s when the assumption was that men worked and women stayed at home. We live in a modern world and need to modernise the contributory principle.

[Julian Smith (Skipton and Ripon) (Con)]

T7. What measures will be contained in the Work programme to ensure that the unemployed in rural areas get the help they need?

[Chris Grayling]

One of the benefits of working with smaller organisations as well as the larger prime contractors is that we can get the input of specialist organisations with expert knowledge of the rural community and the rural jobs market. I believe that the contracting structure we have set up maximises the likelihood of prime contractors identifying the right organisations to deliver support in rural areas.

[Fiona O'Donnell (East Lothian) (Lab)]

My constituent, Mr Edwards, is in receipt of the independent living fund, which empowers him to buy services to meet his needs. Uncertainty over the future of the fund is causing him and his family great concern. When will the Government end that uncertainty?

[Maria Miller]

As the hon. Lady knows, the uncertainty is a result of the previous Administration not having correctly financed the independent living fund. That led to the trustees of the fund having to close it to new applicants. We have already undertaken an informal consultation about the future of the fund, and will shortly come forward with a formal consultation. My overwhelming requirement will be to make sure that existing recipients continue to be well supported.

[Richard Ottaway (Croydon South) (Con)]

T8. Will the Minister confirm that barriers to employment vary from one part of the country to another, that he has abandoned the one-size-fits-all policy of the previous Government, and that personalised help is being given to people seeking to get back into the employment market in accordance with their needs?

[Chris Grayling]

I can absolutely give my hon. Friend that assurance. It is particularly true for areas of the country that have high levels of incapacity benefit dependency. For the first time, we will be attempting to provide real support to people who have been on incapacity benefit long term and are found fit for work or potentially fit for work through the work capability assessment. I am convinced that the specialist support that we can bring to bear for those people will make a particular difference in those parts of the country where the problem is substantial.

[Kate Green (Stretford and Urmston) (Lab)]

Most jobseekers will become eligible for entry into the Work programme after they have been on jobseeker’s allowance for a period of 12 months. Can the Minister explain how it is sensible that at precisely the moment at which they become eligible for the extra support of the Work programme, they will see a cut in their housing benefit because of the period that they have spent on JSA?

[Chris Grayling]

The hon. Lady must understand that we are seeking to maximise the incentives in the system. What we inherited from the previous Administration is a system that is full of disincentives to go back to work. If we do not remove some of those disincentives, create a push to get people back into work and combine that with support to do so, we will end up with the same 13 years of failure as we saw under the previous Government.

[Alun Cairns (Vale of Glamorgan) (Con)]

T10. The Barry branch of the mental health charity Mind often advocates in favour of service users at work assessment appeals, with a very high success rate. This demonstrates the difficulty in assessing people with mental health illnesses. What action is the Minister taking to ensure that they are treated fairly in the new work capability assessment?

[Chris Grayling]

My hon. Friend will see tomorrow, with the publication of the Harrington review, some innovative suggestions about how we can deal with that problem. It is a very real problem. I am determined to ensure that we do everything we can to avoid people with mental health problems being wrongly diagnosed by the assessment. I pay tribute to Paul Farmer of Mind, whose input into the process has been hugely valuable.

[Toby Perkins (Chesterfield) (Lab)]

May I bring the Minister back to the question asked by my hon. Friend the Member for Glasgow North East (Mr Bain) about the cuts to housing benefit? The cuts to local housing allowance are the same cuts that will make people in Chesterfield up to £11 a week worse off. Will the Minister confirm that that was not in the Labour party manifesto and is nothing to do with the cap? Will he set the record straight?

[Steve Webb]

On the contrary. The Labour party manifesto said that people who were in work should not be in worse accommodation than people who are out of work. That implies the 30th percentile change, and that is what we have implemented.

[Dr John Pugh (Southport) (LD)]

What are the Government doing to prevent hardened drug addicts with consequent mental health issues claiming DLA in the normal way, which goes straight into their veins and up their noses? What are the Government doing to improve the situation and stop this waste of public money?

[Maria Miller]

As my hon. Friend knows, we are undertaking a thorough review of the assessment process concerning DLA. Those are just the sort of issues that we will be looking at in detail.

[Chris Williamson (Derby North) (Lab)]

Does the Secretary of State accept that the Government’s plans to accelerate the increase in pension age will come as a cruel blow to a whole generation of women in this country, because the financial reality of motherhood and family life makes it much harder for many women to build up a pension comparable to those of men? What provision is being made for women aged 54 to 59?

[Steve Webb]

I can assure the hon. Gentleman that no woman aged 59 or 58 is affected at all by the changes. However, we are equalising men’s and women’s state pension ages somewhat more rapidly. No one will be affected until 2016, and those who are most affected and who have the longest increase in working life will have a period beyond 2016, so they will have at least seven years’ notice of the change.

[Greg Mulholland (Leeds North West) (LD)]

I warmly welcome the long-overdue review of the work capability assessment, but does the Minister agree that there are problems after the assessment, and that the time spent going through appeals and tribunals is far too long? What steps is his Department taking to rectify that?

[Chris Grayling]

There are two aspects to what we are doing. First, we are seeking to improve the process not simply within the assessment itself, but before and after, in the way that individual cases are handled. I hope that that will make a difference. Secondly, my Department is working with the Ministry of Justice to ensure that we streamline and improve the appeals process, create extra capacity to deal with any appeals that result from next year’s migration and have a system that works as effectively as possible.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

The Secretary of State knows how vital Remploy and other supportive workshops are in helping people back into work. Will he outline the steps that the Government are going to take to promote that through public procurement, and will he or one of his Ministers meet me and trade union representatives to discuss the matter?

[Maria Miller]

The hon. Gentleman knows from the recent spending review settlement that Remploy’s modernisation plan and funding are in place, and we will continue to monitor its performance against that. I have already met trade union officials about Remploy’s future, and I will continue to do so as we move forward with the modernisation plan.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

I, like many other hon. Members, have been contacted by a number of constituents whose pension provision has been seriously affected by the collapse of the former Ford UK parts manufacturer, Visteon. Will the Secretary of State meet me to explore how we might best help those who have been most adversely affected?

[Mr Duncan Smith]

I will, indeed, and my hon. Friend must give me a date.

NATO Summit

Monday 22nd November 2010 Commons Chamber

15:31

[The Prime Minister (Mr David Cameron)]

With permission, Mr Speaker, I would like to make a statement on the NATO summit in Lisbon, which I attended at the weekend.

No one can doubt that NATO has played an absolutely critical role in preserving peace in Europe since it was founded in 1949, but the test for NATO now is whether it can meet the challenges of the present and of the future. That means real change—not just signing communiqués about change, but showing real political will to bring the necessary changes about. I believe that NATO can be just as relevant to protecting our security in the future as it has been in the past, and my interventions were focused on that future.

Effectively, there were three summits: a meeting of all the coalition countries involved in Afghanistan; a summit on the planned reform of NATO; and a NATO-Russia Council. I want to take each briefly in turn.

First, on Afghanistan, the summit with President Karzai, the UN Secretary-General and countries from across the globe represented there was a powerful visual reminder that Britain is part of an international coalition of 48 nations in Afghanistan. We are there because the Afghans are not yet capable of securing their own country from terrorists, and those terrorists threaten the security of the rest of the world. So, it is for our own national security that we help them.

At the NATO summit, each and every one of the 48 nations in the coalition reaffirmed its “enduring commitment” to the mission in Afghanistan. Britain is the second-largest contributor to that mission, with over 10,000 troops, many of them risking their lives in the most dangerous parts of the country. The arrival of additional international security assistance force troops in the south has allowed us to transfer Musa Qala and Sangin to the US Marines. That in turn has allowed us to focus our forces in central Helmand, sharing the burden more sensibly and removing the overstretch our forces have suffered since 2006. Working alongside Afghan forces, that has helped us to drive the insurgents out of population centres in central Helmand, and, as hon. Members have heard in the House from reports by my right hon. Friends, we are making good progress.

We want to transfer security responsibility for districts and provinces to Afghan control as soon as the Afghan security forces are ready, and the summit reached important conclusions about the timetable for this transition. It will begin in early 2011 and meet President Karzai’s objective for the Afghan national security forces to lead and conduct security operations in all provinces by the end of 2014.

This commitment on transition is entirely consistent with the deadline we have set for the end of British combat operations in Afghanistan by 2015. By 2015, Britain will have played a huge role in the international coalition and made massive sacrifices for a better, safer and stronger Afghanistan. We will have been in Helmand, by some way the toughest part of Afghanistan, for nine years—a period almost as long as the first and second world wars combined. Last week, we lost the 100th member of our armed forces in Afghanistan this year. This is the second year running that we have reached such a tragic milestone.

The bravery and sacrifices of our forces are helping to make this country safe. But having taken such a huge share of the burden, and having performed so magnificently since 2001, I believe that the country needs to know that there is an end point to all this, so from 2015 there will not be troops in anything like the numbers there are now, and, crucially, they will not be in a combat role. That is a firm commitment and a firm deadline that we will meet.

The NATO summit also committed to a long-term relationship with the Government of Afghanistan, and Britain will be at the forefront of this commitment. Beyond the end of combat operations in 2015, we will go on having a relationship with Afghanistan based on aid, development, diplomacy, trade and, if necessary, military training and support.

On the reform of NATO, we agreed a new strategic concept to equip NATO for the security challenges of the 21st century. Just as in our new national security strategy, NATO will shift its focus and resources still further from the old, cold wars of the past to the new, unconventional threats of the future, including counter-terrorism, cyber-security, failing states and the proliferation of chemical, biological and nuclear weapons. Crucially, NATO agreed to develop a new ballistic missile defence system for Europe. This will help to protect the UK and our other European allies from the growing threat from countries such as Iran that are developing ballistic missiles. It will be in place by the end of the decade, paid for within NATO’s existing resources.

Just as Britain’s strategic defence and security review set out plans to make the Ministry of Defence much more commercially hard-headed in future, and to adopt a much more aggressive drive for efficiencies, so this summit agreed significant efficiencies for NATO itself. These include cutting the number of command posts from 13,000 to fewer than 9,000, reducing the number of NATO agencies from 14 to just three and ensuring that all decisions taken at this summit are funded from within NATO’s existing resource plans. These changes will save Britain tens of millions of pounds and will allow NATO to focus its efforts on the front line.

There was also a discussion at the summit on co-operation between the EU and NATO. It is crazy that, because of procedural wrangling, the only security issue these two organisations can discuss when they meet is Bosnia. Everyone wants a solution to the Cyprus problem, but we simply should not allow it to go on holding up practical co-operation between the EU and NATO.

It was a very powerful sight to see countries that came together to protect themselves from the Soviet Union now sitting down and discussing sensible co-operation with Russia and with the Russian President. Although the Soviet Union broke up years ago, relations between NATO and Russia have been strained in recent years. Two years ago, missile defence for Europe caused a major split in relations with Russia, but now it is an issue on which we are actually working together.

The NATO-Russia Council also agreed practical co-operation on Afghanistan, enabling NATO to use routes through Russia to support our armed forces on the ground and working together to develop improved helicopter capabilities for Afghan security forces.

There will remain challenges in working with Russia. President Obama and I both raised the issue of Georgia. Two years after that conflict started, it is time for Russia to abide by the ceasefire agreement and withdraw its troops from Georgian territory, but I judge it right that we do not let this and other bilateral concerns prevent us from working together where it is in our interests, so we will work with Russia on countering drug trafficking, on tackling Islamic extremism and on countering proliferation, and in the G8 and the G20. The summit also praised the courage that Presidents Obama and Medvedev have shown in agreeing a new strategic arms reduction treaty, and agreed that early ratification would be in all our interests.

In 1949, the alliance first said that “an…attack against one” is “an attack against…all.” Today, the threats that we face are different, and the world is more uncertain, but NATO remains the bedrock of our collective defence. The future of this alliance is vital for our national security, and the summit was focused on that future: on securing an Afghanistan able to look after its own security; on reforming NATO for the 21st century; and on establishing co-operation with Russia on our vital security interests. Above all, I believe that this summit has shown that our alliance remains rock solid and that Britain’s commitment to it is as strong as ever. I commend this statement to the House.

[Edward Miliband (Doncaster North) (Lab)]

I thank the Prime Minister for his statement. As the main part of it focused on Afghanistan, I want to take this opportunity to pay tribute to all our troops, including the 345 who have died during the conflict. They showed the most extraordinary courage, and we honour them. I also pay tribute to the thousands who have been wounded; they cope with the most serious injuries with an extraordinary bravery and courage.

The best way we in this House can support our troops is by seeking at all times to build unity of purpose, and I am determined to do that on the issue of Afghanistan. In that context, we support the outcome of the NATO summit on Afghanistan. We strongly support the Afghan security forces taking full security responsibility in 2014, which was originally agreed at the London conference at the beginning of this year and was reiterated at the NATO summit. I also agree with the Prime Minister that his objective of ending combat operations by British troops by 2015 is right, and indeed is a logical counterpart to the plan that was set out for full security responsibility.

I do, however, have three questions to ask the Prime Minister about Afghanistan. First, as I am sure he will agree, the point is not simply to set a timetable but to ensure that it can be set successfully, so we must do all we can to improve the conditions on the ground. He mentioned the difficulties in Helmand province and said it was one of the hardest provinces to hand over to Afghan control. May I therefore ask him to tell the House what milestones he will use to track progress in the transition plan for Helmand? Clearly, key to that will be building up the Afghan army and, indeed, making it more representative. That has been a particular issue in the south, including the under-representation of the southern Pashtuns.

Secondly, the Prime Minister said after the summit that we might continue to play a training role for Afghan forces after 2015. May I ask him to say a little more about that? As he will know, the nature of training in Afghanistan is such that it often involves front-line exposure, so perhaps he will say more about whether troops may effectively be in some fighting role beyond that date.

Thirdly—I know the Prime Minister will agree with this, as well—a political settlement is clearly essential to achieving a stable Afghanistan by 2015. We warmly welcome NATO’s endorsement of the Afghan-led reconciliation programme. Does he agree that that requires reconciliation with those elements of the Taliban willing to abide by Afghanistan’s constitution, as well as engagement with Afghanistan’s neighbours, including, of course, Iran and Pakistan? What discussions has he had with President Karzai about ensuring that that reconciliation moves forward rapidly over the next 12 months?

I turn to the other major item of discussion at the summit, the relationship between NATO and Russia. The Prime Minister is clearly right that we should seek to improve our relationship with Russia but continue to raise the concerns that he mentioned, including on Georgia. We welcome the joint work on the new missile defence system, and he is right to say that that development shows how the world has changed since the cold war, as it will involve co-operation with, rather than the isolation of, Russia.

Britain is of course a nuclear power, and in our view will remain so in a world in which others possess nuclear weapons, but that also brings responsibilities. Does the Prime Minister agree that the starting point for the discussion on nuclear weapons should be serious and committed multilateralism, with the ambitious long-term aim, originally set out by President Obama in 2009, of a world without nuclear weapons? May I not only invite the Prime Minister to give support to the new START treaty with Russia, but ask him what his position is on the aim of removing tactical nuclear weapons—essentially a cold war legacy—from continental Europe and Russia?

Finally, the “new strategic concept” for NATO, as it is called, is also to be welcomed, because it understands the new threats that the world faces. The post-war Labour Government, as the Prime Minister indicated, were a founder member of NATO, and our belief in the importance of multilateral co-operation is enhanced, not diminished. Does he agree, though, that the lesson of Afghanistan is that although NATO is a military alliance, when it comes to dealing with fragile states and preventing terrorism, it must pursue its objectives in the knowledge that military means can be successful only alongside political, civilian and humanitarian development?

I end by saying to the Prime Minister that we welcome the outcomes of the summit and will work co-operatively when he seeks to do the right thing, working through NATO for British security and international peace and stability, most importantly in Afghanistan.

[The Prime Minister]

I thank the right hon. Gentleman for his questions and for the way in which he put them. He is absolutely right to pay tribute to our armed forces and to mention the wounded. It is absolutely clear that people are coming back from Afghanistan with very bad injuries—often they have lost one, two and, sometimes, three limbs. We must not just look after and rehabilitate them now, but be thinking now about how we are going to help these people for the rest of their lives. They want to lead extremely active lives, and so they should.

The right hon. Gentleman said that he wanted to have unity of purpose on Afghanistan. I hope that we can keep that up. I will do everything I can to try to help make that possible. It is very powerful, when we go to speak to our troops in Afghanistan, and in maintaining public support, that there is genuine bi-party consensus.

The right hon. Gentleman asks three questions; let me try to answer each of them. First, on the milestones for progress between 2011 and 2014, there are, effectively, three different things. We have to look at the build-up of the Afghan army and police, and check that that is on track. We have to look at the progress of governance in the districts and provinces of Afghanistan. We also have to ask ourselves whether what we are about to transition is genuinely irreversible. What we do not want, which is why I have avoided setting short-term deadlines, is to make a move that is then somehow reversed.

On the future training role, we have done very well to staff up the training mission—allies made a lot of commitments on that at the NATO summit. Britain has added another 320 trainers. I very much see this as training and not combat. By that stage, we will be looking at something that is much more a training mission, and not quite as much embedding as we have now.

Reconciliation is vital. Almost all insurgencies the world over have been ended by a combination of military means and a political settlement. It is the moment at which one is hitting the nail very hard in a military sense that one should be taking steps towards reconciliation. This is for the Afghans to lead. The three vital things are that anyone who wants to reconcile must break with al-Qaeda, must renounce violence and must accept the broad outlines of the Afghan constitution. I discussed this with President Karzai at some length. He is enthusiastic about this agenda. If we follow those guidelines, we can make real progress, and that is exactly what we should aim to do.

On Russia, yes, I think we should be serious and committed to multilateral disarmament. The statement spoke about moving towards a world without nuclear weapons. I have always believed that Britain should not give up weapons in the hope that it might somehow unlock this process and make it come about. We should be absolutely clear: we are a nuclear power for very good reason. We should work towards that goal, but we should not be naïve in throwing away our weapons in the hope that others will do so.

In terms of Afghanistan, there are many lessons to learn, but one of the points that the right hon. Gentleman made is absolutely right: we need to make sure we are effective militarily, but at the same time we always have to look at development, governance and political processes. I think NATO is quite well equipped to do that. We should be thinking also about how we can make sure that we reform what we do so that the battalions that we send in are able to do so-called “hot” development, as well as actual war fighting. It is in the early days when the military goes in that it can form a real impression that it is going to be digging wells, building schools and making a country more pleasant to live in, at the same time as securing it from terror. That is one of the big lessons to learn, as the right hon. Gentleman says.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Understandably, there is much interest, but there is also pressure on time, so economy, both in questions and answers, is vital if we are to make some progress.

[Sir Malcolm Rifkind (Kensington) (Con)]

While we can warmly welcome the NATO-Russia agreement to co-operate on ballistic missile defence, is it not disappointing that NATO and Russia have not yet decided to begin talks on the multilateral disarmament of tactical nuclear weapons in Europe? Does the Prime Minister recollect that it was the previous Conservative Government who abolished British tactical nuclear weapons on the grounds that they had become militarily useless? Is it not now time for NATO and Russia to look at that at the European level?

[The Prime Minister]

I think that is possible. The problem has been, as my right hon. and learned Friend well knows—he has great expertise in this—that relations between NATO and Russia have been extremely strained in recent years. At the weekend, I observed a proper thawing of that situation, with President Medvedev happy to sit down and discuss what NATO and Russia could do together. I think his view is very much that this should be an expansive agenda whereby we can look at more and more areas that we can discuss.

[Mr Bob Ainsworth (Coventry North East) (Lab)]

I agree with so much of what the Prime Minister has said, but there is one area about which I continue to be concerned. Why did he feel he had to say publicly that there would be a deadline of 2015? A timetable for 2014 had already been set, and he knows that some Government Members, including even some Ministers, have struggled and still struggle to use the same words as he does. Why did he feel that he had to say publicly that there is to be a complete end to the combat mission in 2015?

[The Prime Minister]

That is absolutely the right question to ask; let me answer it as clearly as I can. I think that the British people, having paid such a high price in Afghanistan, want some certainty that there is an end point. That is the first reason. I wanted to be clear that the operation will not go on for ever. I am confident that we will succeed in our goals by 2014, which will enable end-of-combat operations and much lower numbers in 2015, but I wanted to make it clear to people so that they can see that there is an end point.

There is a second reason. I think the alternative to having that deadline is endless pressure to set very short-term deadlines for transitioning this province or district at this time. I would rather we had a proper, worked-out process and plan to deliver that. I think that the 2015 deadline helps us to do that and that it gives people confidence that, 14 years after going into Afghanistan in 2001, there is an end point. I am glad I think I heard support from the Labour Front Bench for that.

[Sir Menzies Campbell (North East Fife) (LD)]

May I press the Prime Minister again on the deadline? Can he conceive of any circumstances in which he would modify or depart from the deadline for the withdrawal of British combat troops that he has again confirmed today?

[The Prime Minister]

No, I do not see any reason to modify it—that is part of the reason for setting it—but I am confident, looking at the tactical progress that we are making on the ground, where the concentration of forces in central Helmand has made a real difference, and with the increased number of US forces and the great commitment made by the 48 ISAF partner countries, that we will be able to complete that transition between 2011 and 2014. However, the deadline is a deadline.

[Tony Lloyd (Manchester Central) (Lab)]

The Prime Minister rightly emphasised that NATO is committed to a world without nuclear weapons, if that is achievable, but he also mentioned biological and chemical weapons. Is NATO as seized of the importance of getting rid of those weapons systems, because in many ways they—certainly biological weapons—are far more likely to fall into the hands of terrorists?

[The Prime Minister]

I can give that assurance, and not just NATO but the G8 has a good programme on that front. That is vital, and it is exactly the sort of forum in which such weapons can be discussed.

[Mr James Arbuthnot (North East Hampshire) (Con)]

Please will my right hon. Friend clarify the extent of the agreement between Russia and NATO on ballistic missile defence, because having a jointly developed and jointly deployable system would be a major breakthrough?

[The Prime Minister]

Let me clarify this point. For some time, NATO has wanted a defensive system, partly because of the threat of new ballistic missile states such as Iran. We believe that it is in NATO’s interest to provide that territorial defence for our own countries. That was a great source of tension with Russia, but now it is a source of co-operation. Russia has its own ideas for combining its system with ours, and we have our own ideas on what co-operation should take place. Those sets of ideas are still some way apart, but the positive thing is that discussions are under way on how we can work together.

[Mike Gapes (Ilford South) (Lab/Co-op)]

The Prime Minister told us that the Afghans are not yet capable of securing their own country from terrorists. Does he seriously believe that the Afghans taking a lead role in provinces within four years will mean that Afghanistan will be secure from terrorism?

[The Prime Minister]

I am a little bit more optimistic than the hon. Gentleman. The case today is that Afghanistan ground is forbidden to al-Qaeda and al-Qaeda training camps. Post-2001, there were training camps in Afghanistan, but there is none now because of the action that the allies and the Afghan security forces have taken. The question is this: if the allies withdrew now, would the Afghans be able to sustain that? The answer today is no, but the answer by 2014 should, we believe, be yes. Of course there is a lot more help to be given and a lot more capacity to build, and a lot more troops and police need to be trained up, but we can see some success already, because the number of plots that we face from that part of the world has declined, partly because of the action we have taken.

[Richard Ottaway (Croydon South) (Con)]

I congratulate the Prime Minister on the positive outcome of the summit and, in particular, on the fact that the United States has moved away from 2011 as the date for withdrawal, and towards 2014. However, is not Iran the elephant in the room? It does not appear in the declaration—at least not in substance. Will my right hon. Friend say what the attitude of his partners is towards Iran and, in particular, towards sanctions, which, at the end of the day, is the only weapon that we have?

[The Prime Minister]

There has been good progress on that. The UN Security Council resolution on Iranian sanctions was helpful. The European Union went beyond that and introduced further sanctions. When you look around that room, with all those NATO partners and ISAF partners, you see that there is a pretty good consensus on the need for sanctions and the need to apply them properly. There is a conversation that we go on having with allies such as Turkey about the importance of not seeing any slippage in the sanctions. There are some early signs that they are having some effect on the Iranian regime, but we have to keep that up. As my hon. Friend says, we do not have many other weapons to force a change of mind on the Iranians. The sanctions are a weapon that we have, and we should use them to the best of our ability.

[Jeremy Corbyn (Islington North) (Lab)]

Does the Prime Minister not agree that the greatest causes of problems in this world are poverty, instability and the competition for resources? The NATO summit has set itself on a path of nuclearisation, a missile defence system and an alliance that includes virtually all the major industrial countries of the world. Should we not be looking in the other direction, towards peace, disarmament and a stable world based on those objectives, rather than towards vast expenditure on new nuclear weapons and missile defence?

[The Prime Minister]

Let me be clear about where I think the hon. Gentleman is right and where he is wrong. He is right that we should be doing more to tackle poverty the world over. That is one of the reasons why we have committed to spend 0.7% of our gross national income on aid. Britain has very effective aid programmes, and we should be encouraging other NATO allies to do the same. However, where he is wrong is to believe that all conflict and problems come from poverty. Some of the problem of Islamic extremism is related not to poverty but to ideology. We have to recognise that we have to confront and defeat that ideology.

[Bob Russell (Colchester) (LD)]

The Prime Minister said that every one of the 48 nations in the coalition had reaffirmed its enduring commitment to the mission in Afghanistan. On sharing the burden and removing the overstretch of our forces in Helmand province, which of the other 46 countries, apart from the United States, have service personnel serving alongside our personnel in Helmand?

[The Prime Minister]

In Helmand, there have been very courageous efforts by the Estonians and the Danes, who have fought very effectively alongside our troops. The Canadians, as someone mentioned, were stationed in Kandahar, and they will be moving from a combat role to a training role. It was not that long ago that France had an uplift in its troop numbers, so I do not think that it is right to cast too many aspersions about other NATO allies. We are certainly the second largest contributor by quite some way. It is important that we encourage others to do what they can, even where countries are pulling back from a combat role. It was quite notable that the Canadians invested more in a training role than people were previously expecting. There is a good spirit among the ISAF nations, as we want to see this through successfully and everyone has to play their part.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Is the Prime Minister aware that there will be widespread support in the country for the deadline—the end time—that he has fixed for the conflict? However, even if we can successfully withdraw after four years, for British troops that means another four years of bloody fighting in what he himself calls the most dangerous part of Afghanistan—Helmand. I appreciate that we cannot push him on the details now, but over those four years will there be a continued effort to see, rather than a military outcome, an overall political accommodation with the Taliban?

[The Prime Minister]

There are two elements to the reconciliation process. There is what is called reintegration, at the lowest level, where tribes that have perhaps taken up arms against the Afghan national army and the allies are being encouraged to put down those arms and join a political process. Sometimes tribes took up arms not because they were Taliban supporters, but because of local conflicts. The higher level—reconciliation, as it were—is much more like a political process. That has to be Afghan-led, and, as I said, it has to be based on de-linking from al-Qaeda, giving up violence and accepting the basic tenets of the Afghan constitution. In the end, those people want the same as everyone else, which is an Afghanistan that is not stationed full of foreign troops, so I hope that we can make progress on the political front, as the hon. Gentleman says.

[Mark Lancaster (Milton Keynes North) (Con)]

Like any serviceman or woman who has spent time in Afghanistan, nothing would make me happier than seeing a speedy resolution to this conflict. Does the Prime Minister agree, however, that if we are to meet this ambitious timetable, we must focus on capacity building in the provinces, which is key if we are to have a sustainable future in that country?

[The Prime Minister]

My hon. Friend has served in Afghanistan and knows the country well, and he is completely right. As I have said, there are two elements involved. The first is the security forces training the police and the army, but on its own that does not provide enough capacity. We also need good governance, and one feature that we should look at closely is the progress of better governance in Helmand province itself. Governor Mangal has done an extremely good job there and is well supported by the British, and it is important to have good governors in place to ensure the stability that will enable us to leave.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

The Prime Minister mentioned the EU-NATO partnership and the fact that there had been discussions. The French press reports said that it was still completely unclear what we were doing. Can he shed any more light on what this now amounts to, post-summit?

[The Prime Minister]

There was a very lively exchange at the NATO leaders’ dinner on this issue. I am a pragmatist, and it just seems to me that, given that there is an EU mission to train the police in Afghanistan and a massive NATO mission to train the army and the police there, the fact that NATO and the EU cannot talk to each other on these issues because they do not have permission to do so, apart from in Bosnia, is simply crazy. One of the reasons for this problem is the fact that the issue of Cyprus is used by both sides in the debate, and the EU-NATO relationship is used as a proxy for that. I am sure that everyone in this House wants to see a settlement of the Cyprus dispute, but we should not allow that to bung up relations between the EU and NATO. An outbreak of pragmatism is required and, because this was discussed at the dinner, we all instructed our NATO ambassadors to go back and try to do better, so that we can try to unfreeze that conflict.

[Rory Stewart (Penrith and The Border) (Con)]

I congratulate the Prime Minister on setting such a firm deadline for the ceasing of combat operations but, given the problems that we had in Basra in 2006, how will we use the next three years to ensure that we pin down the United States and British military to facilitate the transition?

[The Prime Minister]

I pay tribute to my hon. Friend, who knows a huge amount about that country—I do not want to give an advert for his book, because I am sure that it has sold well enough already. The point is that by setting the deadline early, we are giving a clear signal to our friends and allies in NATO about the role that Britain has played—we should remember that we have played a very big role and taken a very large number of casualties—and about our intentions. The key to a successful transition is focusing on training the Afghan army and police, as well as the governance that I have spoken about, and being clear about our intentions. We cannot make it up with only six months to go; we need to say now what Britain’s commitment is and what it will be in the future.

[Mr Dennis Skinner (Bolsover) (Lab)]

So, to sum up, does the Prime Minister agree that he has done a dodgy deal with Karzai and the Taliban, got into bed with that ex-KGB man, Putin, and already done a deal with the French to share our defence? Was that rainbow coalition in the Tory manifesto?

[The Prime Minister]

The hon. Gentleman makes me sound terribly busy, anyway. I think I will just leave it at that.

[Dr Julian Lewis (New Forest East) (Con)]

The new NATO strategic concept approved at Lisbon rightly states that, as long as other countries have nuclear weapons, so will the NATO alliance. Some of us would like to see the same apply to the United Kingdom. What reassurance was my right hon. Friend able to give to our NATO allies that Britain’s Trident replacement programme will go ahead after the next election, given that, if the Liberal Democrats were again to hold the balance of power, that would almost certainly not happen?

[The Prime Minister]

My hon. Friend and I go back years on this issue, to the time when we almost shared an office. At that time, we were fighting a very unilateralist Labour party that wanted us to give up our nuclear weapons and get nothing in return. The assurance that I can give my hon. Friend is that I believe that while others have nuclear weapons, we should retain ours. That is why I said what I said in the statement. He is being a little unfair, however, because in this Parliament, we will be spending many tens or even hundreds of millions of pounds on the preparation for our Trident replacement—which is on schedule to go ahead—to ensure that there is continuous at-sea deterrence and no capability gap between the deterrent that we have now and the deterrent of the future. The Government, including the Liberal Democrats, are fully committed to that.

[Chris Bryant (Rhondda) (Lab)]

I warmly congratulate the Prime Minister on raising the matter of Georgia with President Medvedev. When the right hon. Gentleman visited Tbilisi in 2008, he said that this was an illegal invasion. It certainly was, and it still is today. May I urge the Prime Minister to be a bit more robust in some other respects with the Russians? Corruption is so endemic at the very highest level in Russia that British businesses find it very difficult to do business there. Will he expressly raise the human rights issues, particularly in respect of the trial of Mikhail Khodorkovsky and Platon Lebedev?

[The Prime Minister]

I take what the hon. Gentleman says very seriously. We are trying to have better relations with Russia—that is, I think, in our interest—but without trying to gloss over the bilateral impediments to those relations. When I have met President Medvedev, I have raised the Litvinenko case and other concerns, which is also right. At the same time, we must try to overcome some of these problems and raise the cases that the hon. Gentleman mentions. The impediments to relations between Britain and Russia are well known, but that does not mean that we should fail to speak about those and other things and try to have a slightly better relationship than we have had up to now.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

The Prime Minister rightly touched on the importance of guaranteeing Afghanistan’s northern distribution network. Does he agree that security in Tajikistan is particularly important if we are to have any prospects of withdrawing within a reasonable time frame, and that it is also important in developing NATO’s relationships with Russia?

[The Prime Minister]

My hon. Friend makes an extremely good point. If we want to leave behind a secure and stable Afghanistan, relations with its neighbours are crucial. Many people make the point that NATO and ISAF are making a tremendous effort in Afghanistan and that many of the country’s neighbours will benefit from a stable Afghanistan, but are not making a contribution. I think it is up to them to contribute, but also up to us to try to bring the neighbours together to make sure they demonstrate the equity they have in a stable Afghanistan for the future.

[Mr Frank Roy (Motherwell and Wishaw) (Lab)]

Is it not apparent that the number of trainers for the Afghan police and army is woefully inadequate? Will the Prime Minister tell us what the timeline will be and what priority will be given to increasing the number of trainers by all the countries concerned?

[The Prime Minister]

We are making very good progress in training up the Afghan police and army. We are a little ahead of schedule. The key thing about this NATO summit was to get other countries to commit to adding to the training mission. There were some very welcome developments, such as the Canadians who, in pulling back on the combat forces front, committed to the training mission. As I said, Britain added another 320 trainers. I think we are on target to deliver the sort of Afghan national security forces we need to complete our drawdown by 2014.

[Mr Edward Leigh (Gainsborough) (Con)]

To be honest, I have always questioned whether foreign combat troops can ever win a war in Afghanistan. What does the Prime Minister say to those who argue that setting a deadline just incentivises the Taliban never to negotiate?

[The Prime Minister]

I think it incentivises the Afghan Government to recognise that we are serious about handing over a country for them to run. It also shows the Afghan security forces that they are going to have to learn to stand on their own two feet. Let me make two additional points. First, there is a serious amount of time to elapse between now and the end of 2014 when all this has to be completed. This is not some rapid deadline; there are a lot of years between now and then to make it work. Secondly, Robert Gates, the US Defence Secretary has said about the US forces:

“I think anything that remains after 2014 would be very modest and very much focused on the kind of train and advise and assist role”.

So I do not think we are putting ourselves apart from the consensus on this matter.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Further to the answers given to both my hon. Friend the Member for Motherwell and Wishaw (Mr Roy) and to the hon. Member for Colchester (Bob Russell), will the Prime Minister provide some specific figures—either to the House today or later through the Library—on how many additional trainers and instructors each of the NATO countries has committed to Afghanistan?

[The Prime Minister]

I should be happy to place that information in the House of Commons Library or write to the hon. Gentleman. In the run-up to the summit everyone was asked to make extra contributions, and my understanding is that we made ours and that a number of other countries did the same. However, I should be happy to provide the information so that the hon. Gentleman can see exactly how we will secure the size of Afghan security forces that we need.

[Rehman Chishti (Gillingham and Rainham) (Con)]

How will the ethnic and regional composition of the Afghan national army and police force be maintained in the long term?

[The Prime Minister]

My hon. Friend is right to raise that issue, which is a difficult one. Not only has there been an insufficiency of Pashtuns in the security forces, but there has been an insufficiency of Pashtuns from Helmand and elsewhere in that part of the country. That means that we must make a greater effort to recruit and retain them, but I think that as they see progress on the ground they will be more likely to want to serve.

Let me make clear that we are on track to achieve the 2011 goal of 171,600 in the Afghan national army—the current force is 138,000—and to reach the October 2011 target of 134,000 in the Afghan national police, who currently number 120,000. Plainly, those are not unrealistic objectives, but the point about the ethnic make-up is important.

[Toby Perkins (Chesterfield) (Lab)]

The Prime Minister is right to say that the country has paid a tremendous debt to Afghanistan in terms of the cost to our country. He said earlier that he would send a message to our friends and allies by setting a deadline, but he also sends a message to our enemies by setting that deadline. What impact does he think the deadline will have on al-Qaeda and the Taliban? Does he think that it will make them more likely to want to negotiate?

[The Prime Minister]

The point is that the Taliban have suffered huge reverses in Helmand and southern Afghanistan, particularly over the past year, and a serious attrition in their numbers. As for what I have said, I have not been talking about 2010, as my predecessor did, or about 2011; I have been talking about 2015.

I think the Taliban know that they are losing militarily and suffering huge attrition in their numbers. They should also know that, as well as the military hammer that is hitting them, there is the option of a political process allowing them to reintegrate at a low level, and that, with the Afghan Government, there are opportunities for reconciliation at a higher level. If we look across the world at the way in which counter-insurgencies have ended, we see that they have normally ended through a combination of military might and a political process, and I believe that the same applies in this instance.

[Tony Baldry (Banbury) (Con)]

Turkey has always been important to the defence of NATO’s southern flank, and, given the ongoing concerns about Iran’s intentions, it will continue to be so. Does that not confirm that it is in all our interests for the United Kingdom to be the best possible friend to Turkey in Europe?

[The Prime Minister]

My hon. Friend is entirely right. I think it important for us to send a message to the Turks that, as far as we are concerned, they should be sitting in the tent as well as guarding the camp, and I therefore believe that, as well as being good NATO members, they should be encouraged into the European Union. They are a key ally—a key NATO ally. Given our relations with Iran, it is important for them to be staunch in terms of sanctions and trade with Iran, because that will send the clearest possible message to their neighbour.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Any Member who was not present at the start of the statement should not expect to be called to ask a question. That is the position in the House, and it is important that we adhere to that standard.

[Mr Peter Bone (Wellingborough) (Con)]

Sometimes the Prime Minister just cannot win. If he sets a deadline, they say that he is encouraging the Taliban; if he does not set a deadline, he is accused of drift. Does he agree that our brave men and women in Afghanistan will warmly welcome his statement?

[The Prime Minister]

I am grateful to my hon. Friend for his support. There is another point to be made. The Taliban trade on the idea that foreign forces will never leave Afghanistan. By setting a deadline such as this and being clear about transition, we are saying to Afghans throughout the country, “We want good relations with your country—we think that it is an important country for Britain to have strong relations with—but we do not want our forces to be there for ever, and neither do you.” That is a very important message.

[Laura Sandys (South Thanet) (Con)]

In the context of NATO reform and NATO into the future, does the Prime Minister see a growing role for NATO in relation to such matters as securing trade routes and counter-piracy, which are essential to our domestic economic prosperity?

[The Prime Minister]

My hon. Friend is entirely right. NATO was for years focused very much on territorial defence of Europe against the Soviet Union and, sadly, when we look at the defence postures of different countries in NATO, including our own to some extent, we see that there is still too much legacy-asset thinking—about tank battles in Europe, for instance, rather than securing sea lanes, fighting cyber-attack, combating terrorism and securing failed states on the other side of the world. So a big shift needs to take place in NATO, and I think this weekend’s summit was important in helping bring that shift about.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

Did the Prime Minister have a chance to discuss with President Obama and others in NATO the very worrying news coming out of North Korea of the discovery of a state-of-the-art uranium enrichment plant?

[The Prime Minister]

I discussed that issue with President Obama and others at the G20 summit in the Republic of Korea, because obviously that country is so close to the line of control that what happens in North Korea is very much on everybody’s minds. What we want is a return to the six-party talks and to put pressure especially on North Korea’s neighbours to try to get that country to go down a more sensible path.

[Mr Julian Brazier (Canterbury) (Con)]

Does my right hon. Friend agree that no amount of skill and courage by our troops at the sharp end can substitute for muddled command and control structures, especially at the military-political interface, and that to avoid the kind of mistakes that disfigured the early years in Afghanistan we need the kind of reforms that he introduced nationally with the National Security Council and which he is now pressing for, and got a first stage for, at the NATO conference?

[The Prime Minister]

My hon. Friend has huge expertise in this area. I think that NATO in Afghanistan did initially suffer from having a slightly divided command between an ISAF mission to secure Afghanistan and Operation Enduring Freedom to combat al-Qaeda, particularly in the Tora Bora. It has taken some time to have a more unified command and a greater focus on what was necessary not only militarily, but politically and diplomatically. I think that the whole process is now much better run and managed, but we must make sure we make the most of the remaining few years that we have in order to ensure we can hand over a stable and secure Afghanistan.

[Mr Speaker]

I am grateful to the Prime Minister and all colleagues for their co-operation.

Financial Assistance (Ireland)

Monday 22nd November 2010 Commons Chamber

16:16

[The Chancellor of the Exchequer (Mr George Osborne)]

With permission, Mr Speaker, I should like to make a statement regarding financial assistance for Ireland.

I hope Members will understand that an announcement had to be made at the weekend, ahead of markets opening this morning. Last night, I spoke to the Chair of the Treasury Committee and the shadow Chancellor to keep them informed of the latest developments.

The United Kingdom, alongside the International Monetary Fund, the European Union, the eurozone and other member states, is participating in the international financial assistance package for Ireland announced last night. We are doing this because it is overwhelmingly in Britain’s national interest that we have a stable Irish economy and banking system.

The current Irish situation has become unsustainable. Its sovereign debt markets had effectively closed and had little prospect of reopening. While Britain’s market interest rates had fallen over the past six months, Ireland’s had risen to record levels, and Ireland’s banks had become completely reliant on central bank funding to maintain their operations. In the judgment of the Irish Government, as well as of the IMF and others, this situation could not go on.

Members will understand that it would not have been appropriate for us in recent weeks to have engaged in public speculation about whether Ireland should request assistance from the international community, but I can now report that we have been engaged in intensive private discussions with the G7, the IMF, the EU and the Irish Government on plans for the eventuality that Ireland would request support. At the G20 meeting in South Korea two weeks ago, I was one of the European Finance Ministers who issued a joint statement that provided a brief respite. At the ECOFIN meeting last Wednesday, my colleagues and I discussed the Irish situation with Finance Minister Brian Lenihan, with whom I have also kept in touch directly. Following meetings in Brussels, the Irish Government committed to engage in a short and focused consultation with the IMF and the EU. On Thursday a joint mission arrived in Dublin, and in the last few days I engaged with my counterparts in the G7, the euro area and the EU about the way forward.

Following intense work over the weekend between the Irish and international authorities, last night Ireland’s Prime Minister, Brian Cowen, made a formal request for assistance. This was followed by statements from the G7, the IMF, the Eurogroup and European Finance Ministers that they would

“provide the necessary financial resources for Ireland to implement its fiscal reform plans and stabilise its banking system.”

The statements made it clear that there were two components to the rescue package. The first puts beyond doubt Ireland’s ability to fund itself. The international assistance package will support an ambitious four-year fiscal strategy which the Irish government will set out later this week. This will see a fiscal consolidation of €15 billion by 2014, of which €6 billion will be implemented next year, as part of a strategy leading to a target budget deficit of 3% of GDP in four years’ time. The second part of the assistance package is a fund for potential future capital needs of the banking sector. This will support measures to promote deleveraging and ensure restructuring of Ireland’s banks, so that its banking system can perform its role in supporting the economy.

Let me turn to how the package will be financed. This is a joint programme, with funding from both the IMF and the EU. The amount of money involved will, in part, depend on the IMF’s analysis of what is needed, and Prime Minister Cowen has said that he expects it to be less than €100 billion. The international community is working on the rough assumption that the IMF will contribute about one third of the total. The total European package will provide the other two thirds. Based on the significant reform of the IMF agreed by G20 Finance Ministers last month, the IMF is well placed to play a leading role in this international effort. The UK, of course, is an important shareholder of the IMF and we will meet these multilateral obligations. I would like to reassure the House that the IMF is currently well resourced and able to meet the cost of the package for Ireland.

The European element of this package will primarily come from two sources of funding agreed in May before this Government came into office: the €60 billion European financial stabilisation mechanism; and the €440 billion European financial stability facility. The balance between the European mechanism and the eurozone facility will be determined in the coming days. The United Kingdom is not a member of the euro, and will not be a member of the euro while we are in government, and so we will not participate in the eurozone stability fund. To be fair to my predecessor, he kept us out of that fund, but he did agree to the UK’s involvement in the European mechanism two days before we took office. I made it clear at the time that I did not believe he should make that commitment. However, it operates according to qualified majority voting and so we cannot stop it being used, and to exercise that vote at this time would, I judge, be very disruptive. So the EU will lend money to Ireland on behalf of all 27 member states, and the UK must accept its share of this contingent liability, which would arise in the unlikely scenario that Ireland should default on its obligations to the EU.

On top of this, I have agreed that the UK should consider offering a bilateral loan to Ireland, as part of the IMF and European package. I judge this to be in Britain’s national interest. Let me explain why. We have strong economic relations with Ireland. Ireland accounts for 5% of Britain’s total exports—indeed, we export more to Ireland than to Brazil, Russia, India and China put together. Ireland is the only country with which we share a land border, and in Northern Ireland our economies are particularly linked, with two fifths of its exports going to the Republic.

Just as our two economies are connected, our two banking sectors are also interconnected. I should stress that the resilience of our own banks, which are now well capitalised, means that they are well placed to manage any impact from the situation in Ireland. But two of the four largest high street banks operating in Northern Ireland are Irish-owned, accounting for almost a quarter of personal accounts. The Irish banks have an important presence in the UK. What is more, two Irish banks are actual issuers of sterling notes in Northern Ireland. It is clearly in Britain’s interest that we have a growing Irish economy and a stable Irish banking system. By considering a bilateral loan, we are recognising these deep connections between our two countries and, crucially, it has helped us to be at the centre of the discussions that have shaped the conditions of an international assistance package that is of huge importance to our economy. Of course, this is a loan and we can expect to be repaid. In fact, Sweden has already deemed it to be in its national interest to consider a bilateral loan to Ireland.

Now that the Irish Government have requested assistance, a lot of the detailed work of putting together the package can take place. I understand that Members are keen to hear the specifics, such as the rate of interest on the loans, the repayment periods and the contribution from each of the various elements of the package. I shall keep the House informed.

Later this week, the Secretary of State for Northern Ireland and my hon. Friend the Financial Secretary to the Treasury will be in Northern Ireland to discuss the situation there. I will ensure there is a specific discussion in the House if there is a bilateral loan, and we will need to take primary powers.

Finally, let me say something about the future of the various European support funds, which are being discussed later this year. Both the Prime Minister and I are very clear that when it comes to putting in place a permanent eurozone bail-out mechanism, the UK will not be part of that.

This is a situation of great difficulty for Ireland and it is a tragedy when it did so much to improve its competitiveness with low taxes and flexible labour markets, but the truth is that it had a hugely leveraged banking sector that was badly regulated—a pattern that we have had to deal with in our own country. In addition, because Ireland is a member of the euro, exchange rate flexibility and independent monetary policy were not tools available to it when the crisis took hold. The arguments against Britain joining the euro are well rehearsed, not least by me, but although “I told you so” might be correct, it does not amount to an economic policy.

When the coalition Government came into office, Britain was in the financial danger zone. We have taken action to put our house in order. We were once seen as part of the problem, but we are now part of the solution. Ireland is a friend in need and it is in our national interests that we should be prepared to help at this difficult time. I commend the statement to the House.

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

I thank the Chancellor for advance notice of his statement and for keeping me informed about developments over the weekend.

The Opposition agree with the Chancellor’s basic argument that Ireland is a friend in need and that Britain should not simply ignore the plight of one of our biggest trading partners because it is in the eurozone and we are not. So we are in principle content to support a role for the UK in assisting Ireland to secure economic stability.

The Chancellor talked about the resilience of our banks, and the question that many people will be asking today is why he thought it was wrong for the previous Government to support British banks but right for his Government to support Ireland’s banks. On the crucial question of ensuring that Britain’s contribution is fair and balanced, will he first explain how our relative share of the burden will be calculated and what his definition of “fair” will be?

Secondly, will the Chancellor give his expectation of the proportion of UK support that will go through each European route—the European financial stability facility, the stabilisation mechanism and the bilateral arrangements—and the rationale for that distribution? He said that he disagreed with the agreement that my right hon. Friend the Member for Edinburgh South West (Mr Darling) made in May to enter the European stabilisation mechanism, yet the Chancellor is seeking to provide bilateral support. Why does he need to provide bilateral support when the other routes are available? Will he also tell the House how, when and where each element will appear in Government accounts?

Thirdly, what interest rate is to be charged on our loans, what form will it take and when does the Chancellor expect to receive full repayment? I understand the issues he mentioned about not being able to tell us now, but if he cannot give us any indication, when and how will that information be reported to the House?

Fourthly, what conditions will the Chancellor seek to apply, and is he preparing this proposal unilaterally or in conjunction with our European partners? Will there be any attempt to interfere with Ireland’s right to set its own tax rates? Will the Chancellor tell us to what degree he believes the difficulties are a consequence of Ireland’s adoption of the euro? What does he think this will mean for the future of the single currency? When his right hon. Friend the Foreign Secretary was asked if he thought the euro would survive, he shrugged his shoulders and said, “Who knows?” That strikes me as being at the least undiplomatic and at most unworthy of the great office he holds. It could even be said to be making “I told you so” into an economic policy. How would the Chancellor answer the question about whether the euro will survive?

Finally, it is clear that Ireland’s efforts to cut its deficit so deeply and quickly have failed to lead to growth in the economy. The private sector has not taken up the slack caused by the huge cuts to public services, so will the Chancellor agree that growth is crucial to Ireland, Europe and, indeed, to the UK’s full recovery and tell us what steps he is taking to encourage growth as part of this package? In 2006, he said that we should “Look and learn from across the Irish Sea”. In a eulogy of the deregulation of the financial services sector, he asked:

“What has caused this Irish miracle, and how can we in Britain emulate it?”

Now he needs to assure us that he has learned other lessons from across the Irish sea. The last time he made a statement from that Dispatch Box, he said that Britain was on “the brink of bankruptcy”, but that was clearly not the case. Now he is proposing to make a substantial contribution to a country that really is on the brink. One lesson from Ireland should be salutary: exaggerated rhetoric affects confidence and loss of confidence can lead to economic disaster.

[Mr Osborne]

I certainly agree with that last statement. First, I welcome the support in principle that the Opposition have given to this decision and I well understand that the shadow Chancellor, like everyone else in the House, will want to see the specific terms and conditions. The IMF-EU team hope to conclude those in the next couple of weeks and then, of course, I will bring those details to the House.

On burden sharing between the different European channels, we will make no contribution through the stability facility—the eurozone facility. In relation to the mechanism—money lent off the back of the EU—if Ireland were, in an extraordinary situation, to default on that then we, as one of the 27 members of the European Union, would have a contingent liability. That is how the mechanism operates. On the terms of the bilateral loan, we have not yet set a figure on that, but it will be in the billions, not the tens of billions. On that, too, I will come to the House when I have a specific figure. As I have said, we will be required to take primary powers to make that bilateral loan and I would hope to have Members’ support in doing that.

The shadow Chancellor mentioned the mechanism. In the period between the general election and the creation of this Government, to be fair, as I said in the statement, the former Chancellor of the Exchequer made it clear that he did not want the UK to be part of the eurozone facility, but he did agree to the use of the mechanism. It is based on article 122, the original intention of which was to provide support to eurozone members in dealing with natural disasters. At that time, I said that I did not think that we should be committing to that, but that debate was had in May. The mechanism exists and, frankly, for the UK to say now that we will vote against its use would, as I have said, be very disruptive.

The question of the accounts is for the Office for National Statistics and the Office for Budget Responsibility. My understanding is that the loan will of course add to borrowing but that we will get an asset in return—an Irish commitment to pay back the loan—and that it will not add to the deficit.

On the conditions attached to the loan, I would expect them to be part of the international package agreed with the IMF and European Union contributions, so I would not expect radically different conditions for the UK.

I think it is well known that corporation tax has been the subject of discussion in some European Union capitals, but not here—we believe that countries should be free to set their own tax rates. The Irish Government have to make some very difficult decisions about their fiscal package over the next four years, and how that package is composed should be a decision for them—provided, of course, that the international community is satisfied that it is credible, and I am absolutely sure that we will be satisfied.

Finally, the right hon. Gentleman asked two questions, one about the future of the euro and so on. As I have said, we made lots of arguments about not joining the euro 10 years ago and I do not—[Interruption.] I cannot remember what the Opposition’s official policy is, but it probably does not bear consideration. I would just make the point that I am dealing with the situation as I find it today. We can debate the merits of the euro at another time; I have to deal with the Irish situation.

On the deficit and Ireland’s decisions, I have to say that in all the discussions I have been involved in during recent weeks, not a single person around the international tables has suggested that Ireland should be doing less to address its fiscal situation. I would have thought that the current economic environment in the world would surely remind everyone of the risks run by countries with very high budget deficits and no credible plan to deal with them. Unfortunately, we inherited a higher budget deficit than Ireland’s, so I hope that the right hon. Gentleman and the Leader of the Opposition, in this big rethink they are having, will re-evaluate their opposition to a fiscal plan that has taken Britain out of the financial danger zone, which means that we are not one of the countries speculated about at the moment. I hear today that the Leader of the Opposition says that their economic policy is a blank sheet of paper. Quite frankly, I do not think that it would be much use taking that into an international negotiation.

[Several hon. Members]

rose—

[Mr Speaker]

Order. There is enormous interest but some pressure on time, so brevity from Back Benchers and Front Benchers alike is vital.

[Mr Andrew Tyrie (Chichester) (Con)]

I think that the public were shocked to discover that the UK was going to be bailing out a eurozone member, not just through the IMF or bilateral loans, but through the European stabilisation mechanism—that is, through the EU budget. Will the Chancellor reassure the House that he will seek to block British participation in any replenishment of the €60 billion mechanism?

[Mr Osborne]

Let me first say that it is our intention not to be part of the permanent eurozone bail-out mechanism, which of course is the subject of discussion, not least at the December Council. It would be our intention that that mechanism should return to what it was designed for in article 122, which is dealing with natural disasters. There has been a balance of payments support mechanism in the European Union for many years to deal with the accession of the central and eastern European countries. Both that mechanism and that balance of payments support drew from the same €60 billion, and we would certainly not be in favour of somehow replenishing it to make good the amount of money that, potentially, will be committed to Ireland.

[Several hon. Members]

rose—

[Mr Speaker]

Order. I should also mention that Members who were not here at the start of the Chancellor’s statement should not expect to be called. That is what I said in respect of the previous statement and that is our usual practice, to which I think we should adhere.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

I agree with the Chancellor that it is in our country’s interests to do everything we can to help Ireland through its present difficulties. Although he and I agree that I was right to keep us out of the eurozone support fund, some money coming from Europe is partly subscribed by us and also the IMF—but does that not demonstrate that it is in our interests? The fact that he is also willing to make bilateral loans available to Ireland demonstrates that it is our interests to sort out the problems in Ireland. Although he does not have the details, can he tell us how much of that money from us and from other sources will be used to restructure and recapitalise the Irish banks, which is absolutely necessary in Ireland and also, I suspect, in a number of other countries in Europe?

[Mr Osborne]

I very much welcome what the right hon. Gentleman has said, and of course I agree that it is in our national interests, and indeed the interests of other European Union member states, that we bring some stability to Ireland. He is right, as his question implies, to focus on the banking system. The situation in Ireland is different from the situation that Greece found itself in earlier this year, with which he had to deal when he was Chancellor.

On the question of the breakdown between the amount of money going to the banking system and the amount going to fund the sovereign, I am afraid that I cannot give the right hon. Gentleman the exact figures, because they are still being negotiated, but I would say that most of the money will be used to take the sovereign out of the market for a period, and a substantial minority of the amount will be required for a fund to help the Irish banking system.

[Mr John Redwood (Wokingham) (Con)]

Given that the very large loan to Greece on 2 May did not stop the rolling euro crisis despite the promises from many of the participants at the time, will the Chancellor assure the House that Britain does not stand ready to lend more money to other eurozone members in the event that the Irish loan package does not mark the end of the crisis either?

[Mr Osborne]

I was very clear that the bilateral loan was given because of the very specific economic relationship between the UK and Ireland, the interconnectedness of our banking systems, the fact that we share a land border, and the importance of the Irish banks in Northern Ireland. Those specific reasons led me to believe that it was right to provide a bilateral loan in these circumstances.

[Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)]

I wonder whether the Chancellor would help me with a conundrum that the people of Sheffield will no doubt be mulling over tonight. Why, in raising the money for the bilateral loan for the Irish Republic, would it not be possible to help another friend in need by adding a simple £100 million to the loan and helping Sheffield Forgemasters, which after all will repay the loan, just as the Irish will?

[Mr Osborne]

What I am proposing is a bilateral loan to another sovereign nation as part of an international package. Of course, I am doing it to provide stability for the entire UK economy, including the economy of Sheffield. I believe the steps that we have taken in the past six months to move this country, with the highest budget deficit in the G20, out of the financial danger zone provides the platform for economic growth, as it does for the rest of the UK.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

Does the Chancellor realise that our constituents were very angry indeed at having to bail out mismanaged British banks, and will be even angrier at having to bail out even more irresponsibly managed Irish banks? Will he not have to give a clearer picture of some of the consequences for the British economy if such action is not taken?

[Mr Osborne]

I make two observations. The first is that this is a loan to a sovereign nation state and, barring a really extraordinary turn of events, we would expect Ireland to pay us back. So we are making a loan to another sovereign nation that we fully expect to be paid back. The long history of international packages shows that the IMF and others get their money back in almost all circumstances. This is a loan that we can afford to make and which we will get back. Secondly, there is a broader observation about banking systems in Ireland, the UK and elsewhere. They became vastly over-leveraged and vastly over-borrowed and they were very badly regulated. The assurance that I can give my constituents and those of the right hon. Gentleman is that we are sorting out the regulation of the UK banks. We hope that the Irish Government are now dealing with the situation of the Irish banks. They were interconnected with the UK and made a lot of loans in the UK, and it is in the interests of us all that we sort out the Irish banks as well.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

I recognise the reasons why the Chancellor has had to provide the loan to the Irish Republic, and he has recognised the potential impact of that on the Northern Ireland economy and on business in Northern Ireland. Will he support the Northern Ireland Executive in reducing the level of corporation tax there to the same level as exists at present in the Irish Republic?

[Mr Osborne]

I thank the right hon. Gentleman for the support that he has given to the action that we have decided to take today. He will know that my right hon. Friend the Northern Ireland Secretary is pursuing with vigour the subject of Northern Ireland’s economic environment and business environment, the corporation tax rate and so on, and we are coming forward with plans to stimulate the Northern Ireland economy. Specifically, the Northern Ireland Secretary and my hon. Friend the Financial Secretary to the Treasury will be in Northern Ireland later this week to talk principally about what is going on this week, but I am sure they can have discussions about broader issues as well.

[Chris Heaton-Harris (Daventry) (Con)]

As much as I am uncomfortable with the fact that we are bailing out a eurozone country, I have to concur that it is overwhelmingly in our national interest to do so. After 13 years on the sidelines, it is nice to see us playing a central part in negotiations that affect eurozone countries and the IMF. Can my right hon. Friend reassure the House that the UK will commit resources to Ireland only if we are confident that Ireland is able to grow its way out of trouble and pay our money back?

[Mr Osborne]

I thank my hon. Friend for his support, and the answer to his question is yes.

[Mr Ian Davidson (Glasgow South West) (Lab/Co-op)]

Will the Chancellor be a little more clear about whether he is ruling out providing financial support in future to Greece, Portugal, Spain, Italy or any other country in the eurozone? Yes or no?

[Mr Osborne]

It would not be particularly responsible of me to speculate on any other country at this time. Let me put it as clearly as I can: there are very specific connections between the UK and Ireland, which we do not have with other countries, and I think that is why it is completely appropriate that we make a bilateral loan in this case.

[Michael Fallon (Sevenoaks) (Con)]

Does the Chancellor agree that, when we end up having to lend very large sums of money to other countries, the Government should always be able to do so at their discretion, in a way that is accountable to this House and not at the mercy of being outvoted by other European countries?

[Mr Osborne]

My hon. Friend makes a very good point. As I say, a bilateral loan will be debated in this House and require the Government to take primary powers, so it is within the control of all Members, and we are accountable to the taxpayers of Britain for that. I have explained the situation, so I will not go over it again, but we are part of the European mechanism, which involves a qualified majority vote, and even if we had exercised a no vote we would have been completely outvoted. That is why I want to see that the UK is not part of the permanent bail-out mechanism, which will be discussed at the December Council.

[Mr George Mudie (Leeds East) (Lab)]

We are contributing to the IMF deal and to the stability mechanism deal. Is the £7 billion additional to that, or is it broken up between those two with a topping-up sum?

[Mr Osborne]

I am not going to give a specific figure today, because it simply has not been agreed as part of the overall package with the Irish. In these situations, it is perfectly normal for the sovereign Government, in this case the Irish, to invite the IMF and the EU in and to ask for their help, and for that to be negotiated over the following week or two. Of course, we will be part of that, but as I say, I expect the UK’s support to be in the billions, not the tens of billions.

[Mr David Ruffley (Bury St Edmunds) (Con)]

If it requires a treaty change to create a new permanent bail-out mechanism, will the UK Government be prepared to use their veto?

[Mr Osborne]

We have made it clear that we would accept a treaty change—of the kind that, for example, Germany is talking about—only if it created a eurozone bail-out mechanism that we were not part of, and of course a treaty change requires unanimity.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

Will the Chancellor confirm that the UK is Ireland’s largest creditor, being owed about £100 billion or 7% of our GDP? It is understandable that we would want to be in there and protecting our investment. During his speech, he mentioned that we were at the centre of discussions to shape the conditions of the agreement, but does he intend those conditions to include a further retrenchment of the Irish economy, or, like Opposition Members, will he go for growth in order to help the Irish economy get back on its feet?

[Mr Osborne]

The plans to deal with Ireland’s budget deficit are a very important part of the Irish Government’s approach, but they are also part of the international package. The further fiscal tightening was specifically referred to in the statement issued by Finance Ministers yesterday. That will mean that Ireland has a budget deficit of less than 3% by 2014. If we had not taken the action that this Government have taken to accelerate the proposals we inherited, we would have been the only European country in that year with a budget deficit of more than 3%.

[Mr Douglas Carswell (Clacton) (Con)]

We might be outside the euro as a currency union, but does the small print of the Lisbon treaty not in effect make us, as we are discovering, members of the euro as a debt union? Notwithstanding protocol 15, article 122 of the Lisbon treaty means that we pay. Will not that mean enormous non-discretionary liabilities as and when other eurozone countries seek similar bail-outs?

[Mr Osborne]

As I said in reply to earlier questions, we entered into certain commitments about the mechanism that I did not support at the time; I have made that clear. I was an opponent of the Lisbon treaty, as were many hon. Members. However, I have to deal with the world as I find it today, and that is a world in which Ireland’s economic situation is unsustainable. One of the reasons for choosing to offer a bilateral loan is precisely so that this Parliament, including my hon. Friend, can have a view and a vote on it, and we can account for that to our constituents.

[Ms Margaret Ritchie (South Down) (SDLP)]

I thank the Chancellor for his statement and the proposed assistance. Will the Treasury carry out an in-depth study of the economic impact of Ireland’s assistance settlement on the regions of the UK, particularly the devolved regions? Will the Treasury be prepared to intervene where any region may be affected negatively, such as Northern Ireland, where there is a connection in the banking sector and where two of the banks are Irish-owned?

[Mr Osborne]

We are taking this action precisely because, in part, we recognise the specific economic connections between Northern Ireland and southern Ireland. I would be very happy for the Treasury to work with the Northern Ireland Executive on looking at the potential economic impact of what is happening in Ireland. Obviously, the intention is to bring some stability to the Irish economy, and then some growth, which would be in the interests of not only the people of the Republic but the citizens of the United Kingdom.

[Claire Perry (Devizes) (Con)]

I understand that the Chancellor cannot yet set out the amounts that will be delivered under various mechanisms, but can he at least reassure the House that any bilateral financing will rank at least pari passu with money delivered through the IMF and through the EU mechanisms?

[Mr Osborne]

We would certainly expect it to be treated with the same seniority as any other European assistance.

[Kate Hoey (Vauxhall) (Lab)]

What kind of conditions is the Chancellor likely to impose on the bilateral loan to Ireland? Will he take into account the feelings of people in Northern Ireland who, if they live on the border, see corporation tax at 12% just down the street, but at 28% in Northern Ireland, and will be asking why they are paying more to help a country when there is such a disparity in corporation tax?

[Mr Osborne]

As I said earlier, the conditions attached to our loan will be similar to those attached to the overall international assistance package; of course, we are part of the discussions when it comes to shaping that package. I would make two specific points. First, we have set very high store by sorting out the banking problem. In other words, using this financial assistance to sort out the banking problem has been the primary thing that I have been calling for in the private discussions we have had leading up to this point.

Secondly, on the rate of corporation tax, I would make this observation to the hon. Lady, and I hope that she has some sympathy with me. Ireland should be in charge of its own tax rates. How the terms of the financial assistance are met has to be a decision ultimately for the Irish Government and the Irish Parliament. It is the thin end of the wedge if we allow other countries and other international organisations to start determining what corporate tax rates should or should not be. It is in everyone’s interests that Ireland grows, and it would not be particularly in our interests if the Irish undertook measures that might, for example, lead to an immediate flight of international business.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

I recognise that my right hon. Friend is dealing with some very serious and potentially disastrous economic circumstances, but when I say, “I told you so,” it is not just about staying out of the euro; I am saying, “I told you we shouldn’t have ratified the Maastricht treaty.” [Laughter.] They are guilty over on the Opposition Benches, too. Will my right hon. Friend be a little clearer? Is he saying that unless we are fully extricated from any potential liability for other eurozone members through the European Union, there will be no treaty change?

[Mr Osborne]

I am not proposing to take Britain out of the Maastricht treaty, despite my hon. Friend’s request. I know that will come as a bit of a disappointment. I would like the balance of payments mechanism to remain—it has existed for many years—but of course the situation in the eurozone is not a balance of payments issue. That mechanism is for countries, particularly accession countries, to draw upon. I would like the mechanism set up under article 122 to be used for what it was designed to be used for, which was natural disasters and the like, and I would like the permanent bail-out mechanism for the eurozone not to include the United Kingdom.

[Rachel Reeves (Leeds West) (Lab)]

Although it is imperative that we support Ireland through the crisis, does the Chancellor accept that events in Ireland demonstrate that the global economic recovery is extremely fragile, and that to premise our own recovery on £80 billion of cuts and export-led growth looks increasingly optimistic at best and dangerously naive at worst?

[Mr Osborne]

If the hon. Lady looks around the western economies, she will see that countries with large budget deficits—we have the largest—are moving to take further steps to show how they are reducing them. I cannot see around the international scene a single group of people other than the Opposition who actually believe that the UK should be loosening the fiscal position from what we have set out. That really is completely incredible and carries absolutely no conviction in any other part of the world. As part of the Labour party’s re-evaluation of its entire economic policy, I suggest that it start with that.

[Glyn Davies (Montgomeryshire) (Con)]

I would like to ask a question from a Welsh perspective. We all understand the impact of a strong economy in Ireland on Northern Ireland, but does the Chancellor recognise that a strong Irish economy is also particularly important to Wales?

[Mr Osborne]

Yes, I do. Ireland’s links are not just with Northern Ireland, they are also with Wales, Scotland and England. The Irish banks were of course engaged in lending into the UK economy, UK banks have engaged in lending into the Irish economy, and many companies export to each other’s countries. We are deeply interconnected, which is why I have proposed this set of measures.

[Mr Ben Bradshaw (Exeter) (Lab)]

Does the right hon. Gentleman not have the tiniest smidgen of regret about what he used to say about the Irish economic model?

[Mr Osborne]

I seem to remember plenty of Labour Ministers standing at the Dispatch Box praising what Ireland was doing to make itself competitive, to reduce its corporate tax rates and to create a flexible labour market. That is the tragedy—it did so much in that direction to make itself competitive, but it did not properly regulate its banking system. We in the UK know the price of that.

[Mr Edward Leigh (Gainsborough) (Con)]

On reflection, does the Chancellor believe that our Irish friends might have been better off remaining faithful to sterling rather than eloping with the more flighty euro, and does a warm welcome await our friends if and when they return?

[Mr Osborne]

I am a believer in national sovereignty, so I do not propose to tell other countries what they should do with their currencies. I would just make this observation, since this has been a debate I have heard in recent years: Ireland has all its sovereign debt denominated in euros.

[Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)]

Ultimately, the bail-out will work only if Ireland can retain its competitiveness. Traditional International Monetary Fund packages always include reducing public spending, increasing tax rates and devaluing the currency. The third element, which is essential for Ireland’s recovery, is missing. What makes the Chancellor believe the bail-out will work under those conditions?

[Mr Osborne]

If it is not possible to devalue the currency, there is a more difficult route, which is to try to enforce competitiveness through, for example, wage cuts, and that, of course, is part of the Irish package. It does make things more difficult, but, as I say, those of us who argued against Britain joining the euro made all these arguments at the time. That makes for a very good discussion, but at a very theoretical level given the very practical immediate challenges we face in Ireland.

[Mr Peter Bone (Wellingborough) (Con)]

The euro could collapse—nobody can doubt that point. During the Chancellor’s wide-ranging private talks with the Irish Government, was there any discussion of a contingency plan under which Ireland would come out of the euro and become part of the sterling area?

[Mr Osborne]

No, there was not.

[Mr Ronnie Campbell (Blyth Valley) (Lab)]

Are there not lessons for us in the United Kingdom to learn, given that the Irish cut very deeply not so long ago? Does the Chancellor not think that we should have a credible growth programme along with what the Government have already done? How will the Chancellor solve the problem when he does not know the causes?

[Mr Osborne]

An absolute precondition of growth, as we can see in Ireland, is stability, and there is no stability if people put a question mark over a country’s ability to fund itself. One reason why the international assistance package is being put in place is to take the sovereign out of the debt markets for the next couple of years. Quite frankly, the decisions we took in May, in June and last month were absolutely necessary to restore international confidence in Britain’s ability to deal with its deficit and to restore some sanity to its public finances. I find it slightly bizarre, having now had this argument for about a year with Labour Members, that they continue to pursue the belief that we could stick with a set of fiscal plans that no one regarded as credible.

[Joseph Johnson (Orpington) (Con)]

Could the Chancellor say whether he thinks Ireland’s move to tap international financial assistance will reduce or increase the risk of contagion for other euro area sovereigns and their banking systems? What assessment has he made of the risk posed by countries such as Portugal, Italy and Spain to the UK?

[Mr Osborne]

I hope my hon. Friend will allow me not to engage in speculation about any other country at the moment. The package today shows the willingness of the international community, the IMF and so on to help countries that get themselves into trouble, whether they are in Europe or anywhere else in the world.

[Alex Cunningham (Stockton North) (Lab)]

Earlier today, I met politics students from Bede sixth form college in my constituency, who asked how it can be right to bail out the Irish economy, but wrong for our previous Government to have done likewise when our banks posed the same threat to our economy. Has the Chancellor an answer to the students and the House?

[Mr Osborne]

I would say to those students, and, indeed, to the hon. Gentleman, who represents them, that their prospects of getting a job later in their lives depend on a stable UK economy that is growing and a stable Irish economy that is not having contagion effects on the UK or anywhere else. That is why we are taking action domestically to put our own house in order. Even his students, I am sure, would recognise that, in the end, we cannot live beyond our means and we cannot sustain an economy on debt alone. I am also sure that if his students asked themselves what connections they had to Ireland, they would find quite a lot of connections in their family, in the businesses that they know about and the like. Our two economies are interconnected.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

People at home will be listening to this statement, or they will read it tomorrow, and wonder whether we can borrow a few more billion and spend a few more billion. Does the Chancellor agree that market concerns over sovereign debt remain, and that the priority for the coalition Government must be to keep the UK out of the financial danger zone?

[Mr Osborne]

The sovereign debt concerns are very heightened at the moment—that is a statement of the obvious—and a Chancellor of the Exchequer who represents the country with the largest budget deficit in the G20, and the largest budget deficit in the EU until Ireland started to overtake us, must make moving Britain out of the financial danger zone their immediate priority, which is what this Government have done.

[Toby Perkins (Chesterfield) (Lab)]

Does the Chancellor agree that the real lesson that comes out of Ireland—he rightly identified similarities with our economy—is that the impact of the global banking crisis added to a drastic programme of public sector cuts does not mean growth? That is dangerous to the economy.

[Mr Osborne]

Quite frankly, that assessment is not shared by the International Monetary Fund or other EU member states. It is not the assessment of anyone who looks at the Irish situation except for the hon. Gentleman.

[Mr David Nuttall (Bury North) (Con)]

Bearing in mind that the Treasury will itself have to borrow the billions of pounds that it proposes to lend to the Irish Government, will the Chancellor reassure the House that the interest rate it charges the Irish Government will be substantially higher than the rate we must pay?

[Mr Osborne]

The terms and conditions of the loan are still to be decided, and as I said, they will be brought to the House of Commons. However, to make a general observation, we are seeking not to make a buck, but to help our friend.

[Albert Owen (Ynys Môn) (Lab)]

The Chancellor is right to say that it is in the British national interest to help Ireland. Irish economists say that one problem on top of the instability of the banks is that the economy is suffering because too much money has been taken out of it. Will the Chancellor act in the British interest and reconsider the speed at which austerity measures are introduced in the UK, because that could hamper our economy?

[Mr Osborne]

At the moment, there is heightened concern around the world about European countries with high budget deficits. One such country is the UK, but there is no heightened concern about us because of the measures that we have taken. If we followed what the hon. Gentleman and Labour Front Benchers propose, and if I were to say at the Dispatch Box tomorrow, “You know what. We are abandoning our fiscal plans set out in the Budget and the spending review, and instead engaging in a loosening of those plans,” I can only imagine what the international reaction would be.

[Charlie Elphicke (Dover) (Con)]

Being there for a friend in need overseas and unbankrupting ourselves at home are right and proper. However, how could it ever be right or proper for a Government voted out of office to engage in major financial commitments for the UK while squatting in Downing street?

[Mr Osborne]

I think my hon. Friend is referring to the period between the general election and the creation of this Government. I have given the House my account of that. I thanked the former Chancellor for keeping us out of the eurozone facility, but I did not agree with his decision to commit us to the mechanism, and I communicated that to him. However, I also made it clear at the time there can only be one Chancellor of the Exchequer operating for the UK, even in the unusual situation between the general election and the formation of this Government. He will account for his decisions and I will account for mine.

[Chris Williamson (Derby North) (Lab)]

I know that a week is a long time in politics, but can I take the Chancellor back to when he was the shadow Chancellor? He wrote an article for The Times in which he said:

“Ireland stands as a shining example of the art of the possible in long-term economic policymaking…They have much to teach us, if only we are willing to learn.”

Does the Chancellor stand by or repudiate that article?

[Mr Osborne]

Yes. The shadow Chancellor read out the same quotation.

[Mark Reckless (Rochester and Strood) (Con)]

Is not the fundamental problem that Ireland has the wrong interest rate and the wrong exchange rate, and that Irish politicians made a fundamental mistake by joining the euro? Does the Chancellor agree that we must stand and support Ireland, and that should Ireland seek a return to sterling, it must have a seat on the Monetary Policy Committee?

[Mr Osborne]

The first time I met my hon. Friend was when we were both at university together, and he gave a speech about exchange rates and the European exchange rate mechanism. He was absolutely right in his prediction of what would happen shortly thereafter, so it is good to hear him talk about exchange rates here in the House of Commons. I would make this observation: decisions on people’s currencies must, as I am sure he would agree, be decisions for the nation state involved. I have made the observation—just because there has been some interesting speculation about this—that much of Ireland’s sovereign debt is denominated in euros, which would remain whatever its currency was.

[Mr William Bain (Glasgow North East) (Lab)]

What assessment have the Chancellor and his counterparts in the eurozone made of the capacity of the European financial stability fund to withstand further calls on finance from Italy, Spain or Portugal? If the assessment is that the fund is not big enough, would he be prepared to see it increased?

[Mr Osborne]

As I say, I do not think that it is sensible for me to speculate about any other country in Europe or anywhere else in the world in the current environment. I would make two observations. One is that the IMF is well resourced and is now on the road to reform, so that it properly reflects the balance of economic power in the world. It is therefore well placed to deal with whatever situation emerges, in whatever part of the world. As for the eurozone stability facility, that has to be a decision for members of the eurozone. They contribute to the facility, and they have set aside a considerable sum of money—€440 billion.

[Matthew Hancock (West Suffolk) (Con)]

Is not the lesson from what is happening in Ireland clear: that countries need to get their own houses in order? Would it not be utter folly for us to take as the lesson that we should divert from the path of getting our house in order here in the UK?

[Mr Osborne]

I agree with my hon. Friend. I make the point again that if we followed the prescription advanced by the Opposition—they suggest that tomorrow I should get up and announce a brand-new Budget, and engage in fiscal loosening at a time when we have the largest budget deficit in the G20 and at a time of heightened concern about sovereign debt—that would be a completely irresponsible path to take.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

For the last six months the Government have wasted no opportunity to tell us that Britain’s situation is very similar to Ireland’s. Now they cannot tell us fast enough that we are in a very different situation from Ireland, because we have our own currency and control of our monetary policy. Has the Chancellor not spent the last six months talking down the British economy for naked political advantage?

[Mr Osborne]

The reason we are in a different situation is not just because we have a different currency; it is because we have a Government who have put our public finances in order.

[Christopher Pincher (Tamworth) (Con)]

We are in a very different situation from Ireland. In the past several months, our long-term interest rates have fallen materially, whereas those of Ireland and other parts of the eurozone have not. Will my right hon. Friend remind those on the Opposition Benches—and particularly on the Opposition Front Bench—why that is so?

[Mr Osborne]

That is absolutely the case. Back in May, the largest bond investor in the world said that sterling was sitting on a “bed of nitroglycerine”. That was the kind of sentiment out there in the markets. We have taken—[Interruption.] The speculators? The Labour party literally believes that it can defy the bond market. That is what Labour Members are reduced to—that is where their policy review is leading them. I have to say that it is not a credible economic policy for this country.

[Chris Evans (Islwyn) (Lab/Co-op)]

The Chancellor seems confident that the bail-out package will work. What will happen if it does not? Will there be more loans, and can we expect public sector cuts to pay for them?

[Mr Osborne]

Of course, an absolute precondition of the package being negotiated is that not just the UK but the IMF and others believe that it will work. An enormous amount of effort is going into putting together a package that will deal not just with the sovereign debt situation, but—the former Chancellor alluded to this—with the Irish banking situation. That is a key part of the package.

[Richard Harrington (Watford) (Con)]

Does my right hon. Friend agree that a main cause of the problems in Ireland is the pursuit of those very policies that Labour Members would have us carry out here—borrow, borrow, borrow and spend, spend, spend?

[Mr Osborne]

Ireland had over-leveraged banks, and they were poorly regulated. We are all picking up the pieces of something similar in the UK.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

Given the stark consequences of Ireland’s failure to grow, will the Chancellor assure the House that he has not downgraded his commitment to a White Paper on growth in Britain?

[Mr Osborne]

I am absolutely committed to setting out our growth policies—[Interruption.] Perhaps I could make the observation that I did not think that today, given the other things that are going on, would be a particularly good day for the House to discuss an economic paper from the Government. I thought it better to take the time to explain what is happening in Ireland and what we are doing to assist it.

[Mr Dominic Raab (Esher and Walton) (Con)]

The Chancellor has set out the national interest in supporting a close trading partner and avoiding the systemic risks posed by an Irish default. How can we mitigate a third risk—the moral hazard of the taxpayer picking up the tab for yet another banking bail-out?

[Mr Osborne]

Of course, the support that we are providing with the bilateral loan is to the Irish Government—to the sovereign—and we have every expectation that that will be repaid.

[John Cryer (Leyton and Wanstead) (Lab)]

Will the Chancellor now answer the question that the hon. Member for Harwich and North Essex (Mr Jenkin) asked? Does he believe, as I do, that when British Ministers signed up to Maastricht and the growth and stability pact, they made a mistake?

[Mr Osborne]

To be honest, the real mistake was that countries did not pursue the policies recommended in the growth and stability pact, which was to keep control of their public finances. Year after year during the past decade, the UK was regularly warned that its deficit was growing and that it was not doing enough to deal with it. If we had listened—not necessarily to the European Commission, but to all the other people in the world who were pointing that out—we would have been in a bit better shape than we were when this Government came to office.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

Does my right hon. Friend agree that one of the few redeeming features of the Labour party when in government was that it failed to take us into the eurozone? Does he understand, as I do, that the Labour party’s policy remains that we should work towards the eurozone? As the Leader of the Opposition is changing his policies, what advice can he offer?

[Mr Osborne]

Let me speak for Government policy. We will not join the euro. I believe that the Opposition’s official policy is to join the euro, but perhaps that will be discussed by their policy groups over the next two years.

[David Rutley (Macclesfield) (Con)]

The Chancellor is right to support Ireland, one of our important trading partners, at this critical time. Will he tell the House what steps he is taking to widen and deepen our trading relationships with fast-growing major markets such as China, India and Brazil? The Labour party missed a huge opportunity when it was in government.

[Mr Osborne]

The fact that we export more to Ireland than to Brazil, Russia, India or China is a statement of the interconnectedness of the Irish and UK economies, but also an indictment of our exports to the fast-emerging BRIC countries, which is precisely why, since taking office, the Prime Minister has led major trade delegations to India and China, and why we want to ensure that companies in Macclesfield and throughout the country can export more to those fast-emerging new markets.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

The Chancellor has been asked whether he has a smidgen of regret about his comments on the Irish economy, but does he not find it more incredible that the Opposition still believe that we should join the euro after the devastation that it brought to a thriving Irish economy?

[Mr Osborne]

As I have said, it is for the Opposition to speak to their own policy. As I understand it, they are still committed in principle to joining the euro—

[Mr Ronnie Campbell]

No!

[Mr Osborne]

Maybe not on the Benches where the hon. Gentleman sits, but it is those on the Opposition Front Bench that I am talking about.

[Ben Gummer (Ipswich) (Con)]

The Chancellor will be aware of the significant property assets owned by Ireland’s National Asset Management Agency and the Irish Allied Bank across the United Kingdom. Uncertainty in Ireland has prevented development on those sites and is stopping development in some of the most deprived areas in our country, which need regeneration. In providing funds to the Irish Government, what pressure can my right hon. Friend bring to bear on the Irish to divest themselves of those assets so that others can provide investment where they cannot?

[Mr Osborne]

My hon. Friend makes a very good observation about a particular aspect of the Irish banking situation and its impact on those property investments in the UK. We have discussed this with the Irish, and I will get back to him on whether there have been specific developments in the last few days, but I have not raised the matter as part of the discussion on the international assistance that we are providing. We are trying to put the whole Irish banking system and the Irish state, which stands behind those banks and, indeed, behind NAMA, on to a much more stable footing.

[Jeremy Lefroy (Stafford) (Con)]

I thank the Chancellor for his welcome statement. Given that we have sovereignty over these matters, in what currency is the bilateral loan likely to be denominated?

[Mr Osborne]

We will set out the terms and conditions and the exchange rate of the bilateral loan when we agree them over the next couple of weeks, and I will bring that information to the House of Commons.

[David Morris (Morecambe and Lunesdale) (Con)]

I congratulate the Chancellor on doing the right thing in this instance—[Interruption.] He did the right thing. Also, as a result of the fact that we have managed the economy better over the past six months, we are in a position to lend to Ireland. The Conservatives’ insistence on not joining the euro in the first place has saved us from an even bigger bail-out package than we are having to contemplate now.

[Mr Osborne]

As my hon. Friend says, we are now part of the solution rather than being part of the problem.

[Mr Rob Wilson (Reading East) (Con)]

May I offer the Chancellor my support in the difficult task that he has ahead? Will he spell out for the House what he believes the consequences of leaving the euro would be for Ireland?

[Mr Osborne]

As I have said, that has to be a matter for Ireland. It has not been raised by them in any discussion, publicly or privately, and I do not think that I should speculate about it.

Points of Order

Monday 22nd November 2010 Commons Chamber

17:22

[Caroline Flint (Don Valley) (Lab)]

On a point of order, Mr Deputy Speaker. The Minister for Housing and Local Government, the right hon. Member for Welwyn Hatfield (Grant Shapps), has been out and about in the TV and radio studios describing the biggest change to social housing for a generation, and one of those reforms could mean that people who get a pay rise could be evicted from their social homes. On the “Today” programme he said:

“I don’t want to overstep the mark and announce something to you which is actually properly being announced to Parliament later”.

A consultation document has been published, and the period of time in question is only eight weeks, not 12. We are told that this consultation will inform the localism Bill which we have heard on the grapevine will be published this week. This is not the right way to treat the House. Mr Deputy Speaker, will you ask the Housing Minister to come here and apologise and to allow us to question those proposals?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

First, may I thank the right hon. Lady for giving me notice of her point of order? As the House knows, Mr Speaker attaches great importance to key policy announcements being made to the House before they are given to the media. There has been a written ministerial statement today, and the Department for Communities and Local Government will be answering questions on Thursday. This seems to be a classic example that should be drawn to the attention of the Procedure Committee as part of its inquiry into ministerial statements.

[Andy Burnham (Leigh) (Lab)]

On a point of order, Mr Deputy Speaker. At the last two Education Question Times, hon. Members raised concerns about the award of a contract to an organisation called the New Schools Network by the Department for Education, and about the lack of process that was followed. I wrote to the permanent secretary more than three weeks ago, asking him to investigate those concerns. I was promised a reply a week ago today, in advance of Education questions last week and of the Opposition day debate, but no such reply was forthcoming. Mr Deputy Speaker, through your good offices, may I ask that Members be given prompt answers when they are promised them, so that important questions can be raised and the Department in question can be held to account on these important matters?

[Mr Deputy Speaker]

That is not a point of order, but the message has been put before us and I am sure that the Chief Whip will have taken note of it. I am sure that this will be taken into account and that we can look forward to earlier replies in future.

Savings Accounts and Health in Pregnancy Grant Bill

Monday 22nd November 2010 Commons Chamber

Consideration of Bill, not amended in the Public Bill Committee

Clause 1

Removal of eligibility for child trust fund

17:25

[Mr David Hanson (Delyn) (Lab)]

I beg to move amendment 1, page 1, line 1, leave out Clause 1.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Amendment 17, page 1, line 6 , leave out ‘3rd January 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 4, page 1, line 6, leave out ‘2011’ and insert ‘2016’.

Amendment 18, page 1, line 8, leave out ‘3rd January 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 5, page 1, line 8, leave out ‘2011’ and insert ‘2016’.

Amendment 19, page 1, line 14, leave out ‘3rd January 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 6, page 1, line 15, leave out ‘2011’ and insert ‘2016’.

Amendment 20, page 1, line 17, leave out ‘3rd January 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 7, page 1, line 17, leave out ‘2011’ and insert ‘2016’.

Amendment 21, page 1, line 18, leave out ‘3rd April 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 8, page 1, line 18, leave out ‘2011’ and insert ‘2016’.

Amendment 22, page 1, line 21, leave out ‘3rd January 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 9, page 1, line 22, leave out ‘2011’ and insert ‘2016’.

Amendment 23, page 2, line 2, leave out ‘3rd April 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 10, page 2, line 2, leave out ‘2011’ and insert ‘2016’.

Amendment 24, page 2, line 4, leave out ‘3rd January 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 11, page 2, line 4, leave out ‘2011’ and insert ‘2016’.

Amendment 25, page 2, line 5, leave out ‘3rd April 2011’ and insert

‘a date to be set by regulations made by the Secretary of State by statutory instrument’.

Amendment 12, page 2, line 5, leave out ‘2011’ and insert ‘2016’.

Amendment 26, page 2, line 8, at end insert—

‘(5) Regulations made under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.’.

Amendment 51, page 2, line 8, at end insert—

‘( ) The Chancellor of the Exchequer must lay a report before Parliament no later than 31 December 2011 on the impact of section 1 on looked-after children in England, Wales, Scotland and Northern Ireland.’.

Amendment 52, page 2, line 8, at end insert—

‘( ) The Chancellor of the Exchequer must lay a report before Parliament no later than 31 December 2011 on the uptake of tax free savings accounts by looked-after children in England, Wales, Scotland and Northern Ireland following the implementation of section 1.’.

Amendment 36, in title,  line 1, leave out

‘To make provision about eligibility for a child trust fund;’.

[Mr Hanson]

The Bill was considered in Committee but it was not amended, despite the fact that we had some 19 Divisions, which showed the strength of feeling among Labour Members. I am pleased to see so many of my hon. Friends who served in Committee in their places today.

The Labour Opposition’s objection to clause 1 was well rehearsed on Second Reading and in Committee, but I regret to tell the House that it will be rehearsed again as we continue to explain our objection to the clause. As ever, I wish to help the Minister and be pragmatic by giving him the opportunity to reflect on the mistake he is making in proposing clause 1 and on the issues we raised in Committee, which my right hon. and hon. Friends want to debate again.

My main concern is to delete clause 1, which amendment 1 is designed to achieve, unless we can get the Minister to reconsider some of the amendments we tabled in Committee, which are before us today. I refer particularly to amendment 17, which would delay the abolition of the child trust fund until such time as the proposed child ISA—individual savings account—came into play. We had that debate in Committee and I will refer to it again later.

Amendment 4 would allow the abolition of the child trust fund to be delayed until 2016. Again, I want to help the Minister and give him an opportunity to fulfil his manifesto commitment to help the poorest third of children in society. At the general election in May, he said that he would not wish to see them disadvantaged by the abolition of the child trust fund.

I also support amendments 51 and 52, tabled by my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins), which raise issues that my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) aired in Westminster Hall relating to looked-after children. It is important to return to those issues again today.

Amendment 1 would delete clause 1. I want the Minister and the House to know that, however pragmatic our approach to the abolition of the child trust fund, our fundamental objective is to ensure that the fund remains for all children, as proposed by the previous Labour Government.

I say that for three reasons. First, we believe that the child trust fund promotes saving, encourages financial education and ensures that all young people have a financial asset at the age of 18, which is particularly important for those who come from poorer families. The child trust fund scheme, introduced by the Labour Government, was having a positive effect between April 2008 and April 2009: a massive 823,504 vouchers were issued—about 70,000 a month; more than 74% of the accounts were opened by parents; and about £2 billion is held in funds. By the end of this year, it is likely that more than 6 million child trust funds would have been opened. That is a success by any stretch of the imagination—a success now being torn up by the coalition Government. Those child trust funds would have helped to support our children when they reached the age of 18. That would have been a progressive measure, which is why Labour Members oppose clause 1.

17:30

The principal aim of child trust funds was to ensure that families who had never saved for their children undertook such saving as a matter of course. Previously, regular long-term savings had been made for only 18% of children. The child trust fund industry average is now 31%. Money is being saved every month in 30% of the child trust funds of families whose incomes are just above welfare dependency level. Families in the lowest income bracket are saving a higher proportion of their household incomes than those in more affluent groups.

In Committee, we heard evidence from Katherine Rake of the Family and Parenting Institution, and from the Children’s Mutual. They recognised—I quote from a letter written to The Sunday Times in July—that

“the decision to abolish the Child Trust Fund along with the Savings Gateway”

—to which we shall return later—

“ is short-term and misguided.”

According to the figures we have, there have been regular contributions to child trust funds, made in a highly tax-efficient way, of more than £22 million a month up to July this year. The Government are abolishing a successful scheme, which is why we will oppose clause 1 unless it is amended.

Let me again help the Minister. As he can see, amendment 4 alters the date of 3 January 2011 to 3 January 2016, which is later than the date of the next general election. That date was chosen so that the Minister could secure a proper mandate for the abolition of child trust funds. I accept that in Committee the amendment was rejected by 10 votes to seven, but it has been tabled again so that Conservative Members can stick to their manifesto commitment to the electorate. The Minister will know—but it is worth reminding the House—that this was in the manifesto on which he, indeed, all 306 Conservative Members—stood:

“We will… cut government contributions to Child Trust Funds for all but the poorest third of families and families with disabled children”.

I am being pragmatic about amendment 4, which is not perfect, but, if the Minister accepts it, I will ask my hon. Friends to support clause 1. The amendment gives the Minister an opportunity to fulfil his manifesto commitments to help the poorest third of families, to help children who are disabled, and to help children who are looked after and in care, who, indeed, form most of the poorest third of children. In February this year, the Government supported an increase in the amount payable to disabled and severely disabled children. Given that, and their commitment to retain child trust funds for the poorest children, I hope that the Minister will support our amendment, but I ask him to defend his decision to renege on that commitment.

As ever. I exempt the Liberal Democrat hon. Member for Birmingham, Yardley (John Hemming) from the charge, for he and his party stood on a proposal to abolish child trust funds across the board. As I recall, 57 Liberal Democrats and 307 Conservatives were elected in the general election, as well as a substantial number of Labour Members, Scottish National party Members, Plaid Cymru Members, Ulster Unionists, Independents, Democratic Unionists and Sinn Féin Members, none of whom supported the abolition of child trust funds. The policy of abolishing them across the board was officially supported at the general election by only 57 Members of the House of Commons, yet the Minister has come here today prepared—as part of a wider coalition agreement—to give up his principle of supporting the poorest third of families in the community so that the Liberal Democrats can put their seats on the line and their backsides in ministerial cars.

Clause 1 will hit the poorest children in our society, and it should be resisted. We should do what the Conservatives felt they should do in May this year, and support poorer families as a whole. Amendment 4 would allow child trust funds to be retained. It would also allow the Minister to go into the next election with his promise to the electorate maintained, although he would be able to argue to the electorate that, if returned in 2015, he will abolish child trust funds completely. The amendment does nothing but allow the Minister to keep to his manifesto pledges.

Amendments 51 and 52 stand in the name of my right hon. Friend the Member for Wythenshawe and Sale East but have broad cross-party support. As I said, my hon. Friend the Member for Kilmarnock and Loudoun raised the issue they address in Westminster Hall. Sadly, the new clause that I wished to be selected was not selected today, but these amendments give the Minister an opportunity to reflect on the impact of the abolition of the child trust fund on children in care.

I seek to assist the Minister. I want to give him a chance to reflect on his actions. I will put aside the fact that in Committee he voted down amendments we had tabled to maintain the child trust fund for looked-after children, because I hope he has reflected on what the Prime Minister said to my right hon. Friend the Member for Wythenshawe and Sale East at a recent Prime Minister’s questions, and because I believe he has had some very constructive meetings with my right hon. Friend.

I want the Minister to look at the impact of the abolition of the child trust fund on looked-after children. Some 6,000 children go into care each year, and there are 86,000 children in care across the UK—as of March this year, there were 64,000 in England, 5,000 in my home area of Wales, 15,000 in Scotland and just over 1,600 in Northern Ireland. Over previous years, the state has opened 33,158 child trust funds for children who are looked after by the state or by individuals who have been given that power by the state—children in residential care or foster care. When in Committee the Minister refused to allow the child trust fund to continue for those children, he was saying to them that the state no longer has a role to play in helping to support them financially at the age of 18. I believe he will want to reflect on that. Amendments 51 and 52 provide him with an opportunity to realise that we can, after all, offer help and support to such individuals at that time in their lives.

The amendments give the Minister an opportunity to look again at the impact of the abolition of the child trust fund and of the implementation of clause 1. They give him an opportunity to look at how we might provide some help and support. We must not allow individuals who do not have parents to contribute to their future to fall through the net. Indeed, for them, parental contributions to the child individual savings accounts that will be introduced in October next year will not be possible, because they do not have parents who play an active role—or their parents might not even be alive. The amendments would avoid a postcode lottery in respect of local authorities. As the Minister said in Committee, they can contribute to the fund, but they might do so individually with no recognition of the specific needs of each individual in their communities.

My right hon. Friend the Member for Wythenshawe and Sale East will outline his amendments in more detail, so I will not dwell on them much longer, but I want the Minister to say what we will do for looked-after children if clause 1 is agreed in the House this evening and enacted.

Amendment 17 also addresses the child trust fund issue. It is a pragmatic amendment that I hope the Minister will consider. Again, it would give him some flexibility. It would amend the Bill so that eligibility for a child trust fund was not cut off in January 2011, and Ministers could, by regulation at some point in the future, introduce a date to end eligibility. We discussed this matter in great depth in Committee, but I am still interested in the Minister’s thinking on it.

Amendment 17 does not say that the Minister will not be able to abolish the child trust fund, much as we wish he would change his mind on the issue. We have no final details on the new child ISA and no implementation date for it, although October next year has been suggested. The amendment simply says that in the time between the possible abolition on 3 January, as set out in the Bill, and the introduction of the new child ISA in October or November next year, the Minister is allowed to keep the flexibility of the child trust fund for all children, and in particular for the benefit of looked-after children and those in the poorest third. The amendment seeks to ensure that between 3 January and a date provided by regulation the Minister could continue to have lower payments in place, to which the House has already agreed, for children born after 3 January 2011. Alternatively, he could end Government contributions but keep eligibility in place for parental contributions until such time as he introduces the child ISA.

There are many good reasons for taking such an approach. Carl Emmerson, of the Institute for Fiscal Studies, has said:

“I do not think that it is possible to make decisions on how the policy should look and also ensure that the financial sector is geared up to operate a market of that size.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 16, Q37.]

He was making the point that we do not yet know what the child ISA is, how it will operate and when it will come into play, and we need to know those details before we abolish the child trust fund. Graeme McAusland, chief executive of the Children’s Mutual, told us:

“If what happens next is that you launch this new junior ISA, it would seem sensible to leave the child trust fund mechanism in place until it is clear what that new product is and until the industry is ready to participate in it.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 46, Q133.]

Amendment 17 gives the Minister a final opportunity to maintain the child trust fund, not for ever, for three years or for five years, but for a further eight months, until we are clear on the implementation of the ISA he is introducing.

These amendments are clear, and let me make it clear to the Minister that the Labour party opposes the abolition of the child trust fund and will continue to do so, not just here tonight and as we have done in Committee, but in another place. I hope that he will look favourably on the amendments tabled by my right hon. Friend the Member for Wythenshawe and Sale East relating to looked-after children, so that we can find a detailed solution before this Bill abolishes things. I hope that the Minister will consider maintaining his manifesto commitment, because I want him to go back to the electorate with some integrity in 2015.

Finally, I hope that he will look pragmatically at ensuring that an alternative product is in place and at maintaining the child trust fund until such time as the child ISA is introduced next October. Serious issues are at stake. I know that my right hon. and hon. Friends feel very strongly about these matters—we all do—and it is important for the Minister to respond on them. I hope that having reflected on the 19 Divisions in Committee and the seriousness with which we take these matters, he will at least come back to the House and reflect strongly on the views that we have put to him today.

[John Hemming (Birmingham, Yardley) (LD)]

We are back where we were in the Public Bill Committee: the Opposition are going to fight on the barricades to protect the child trust fund because it is so important. We are in a world where we are borrowing large sums—we have seen in Ireland what happens if we do not bring the finances under control—and the Labour party wants to borrow money to put it into child trust funds. That sounds interesting, and in 18 years, children will be able to access that child trust fund. We then have to ask, however, what happens to the money in that child trust fund, and it is relatively difficult to find out. Today, I looked at the annual reports of the Children’s Mutual. In 2008, the funds were generally worth less than the money put in. In 2009, some were worth more than the money put in and some were worth less.

17:44

The idea is that the Government borrow a large sum of money—it was running at a very high rate of about £500 million a year—and invest it to benefit other people. That means that we get a lower return than it costs to borrow it in the first instance. In 18 years’ time, those children will get a benefit. By working at an earlier stage, some will already have started paying tax, and that tax will be paying for the cost of the whole process. Given that we have a deficit that we need to bring under control, would it not be better at least to say that we will not borrow money to invest it and lock it away for 18 years, because, frankly, we have not got the money to do that? The Opposition argue that there is evidence that justifies the process because it encourages people to save, but the evidence is not there. The Government are proposing a junior ISA scheme that will be available to everybody from the point at which the child trust funds scheme ends. There is no question that anyone will fail to have a savings vehicle.

It is also important to remember the evidence we heard in Committee from the Royal College of Midwives, which said very simply that if a family is on a very low income and has a young baby the best thing they can do is spend the money on good quality food and health. We will soon hear Opposition Members argue that that is important.

There are those who say that people do not have to chose whether to spend £10 on better-quality food or to invest it in a savings vehicle that is not making them any money and that they can do both, but, I am sorry, that does not add up either. People do not have such options. If they are on a low income, they must decide what to do with the money. They do not have the resources to put money in a child trust fund and lock it away until the child is 18. Although the scheme has the advantage that the money can be locked away until then—it is quite useful for grandparents to know that the money will not be used until then—a family that faces difficulties when a child hits 10 or 13 finds that it is an inflexible vehicle that is not very good for their purposes.

On the amendments on children in care, I have a lot of concerns about the care system. There is confusion about the difference between a looked-after child and a child in care and the wrong figures are often quoted. In 2010, 9,500 children in England were taken compulsorily into care and more children were put voluntarily into care by their parents under section 20 of the Children Act 1989.

We identified in Committee that the administrative costs to the Government of running the machinery for the child trust funds were about £5 million a year—I think that the Financial Secretary can confirm that figure—[Interruption.] I thought that it was £50 million to start out with, but I had it confirmed that it was £5 million a year and I accept that it is. I have heard various figures from the Opposition for how much it costs to put in the additional cash to maintain the system for children in care, and those figures ranged from £1 million to £2 million a year. If we add the £5 million a year to the larger figure of £2 million a year, we will be putting in £7 million a year, which we are borrowing, to cover putting £2 million a year into an investment vehicle that probably does not produce a return over time to match the long-term benefit that we would have gained by not borrowing the money. We would be far better off simply saying that we will provide some funds when those children reach the age of 18. To spend £7 million in such a way is not a rational means of managing public finances.

[Fiona Bruce (Congleton) (Con)]

Would we not be far better off doing what we are doing now and supporting growth in the economy so that we can provide the jobs that those young people will need when they finish education and start work?

[John Hemming]

The hon. Lady is entirely right. If we do not deal with the deficit, we face many other problems. We will end up paying a higher interest rate on sovereign debt. At the moment we are doing quite well, with an interest rate of about 3.5%. Before the bail-out, the Irish were being charged about 8% and the Greeks are being charged about 11%. When a country has a large deficit, if that country does not take action, not only does the amount of debt go up but so does the rate of interest.

[Sheila Gilmore (Edinburgh East) (Lab)]

In April, the leader of the Liberal Democrats said that big cuts would be extremely dangerous. Did the hon. Gentleman agree with him then? If he does not agree with that now, when did he change his mind?

[John Hemming]

That might be slightly out of order, but I should probably answer the question. There has been a debate about the £6 billion of cuts in this financial year. At about 4% of the overall deficit, £6 billion is not a large sum, but given what happened with the initial sovereign debt crises during the general election—things that we have to be aware of, such as what was going on in Greece—we need to give the message that we are serious about dealing with the deficit. That is a socially progressive policy.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Does the hon. Gentleman accept that the state has a special responsibility for children in care, irrespective of how they end up in care? Even in times of financial difficulty, any responsible parent would look first to the most vulnerable children, and that is what the state should do.

[John Hemming]

I agree entirely, but it is also the state’s responsibility to make sure that we do not spend £7 million to give people £2 million. Putting aside whether child trust funds bring a return over time, it is absolutely absurd to propose, as the Opposition do, spending £7 million to give children in care £2 million. There has to be a better way of doing things. Also, those children would not get the money until they were 18.

[Nic Dakin (Scunthorpe) (Lab)]

I think that the hon. Gentleman agrees that we should support looked-after children in some way, so can he suggest a better way? [Interruption.]

[John Hemming]

From a sedentary position, an hon. Member suggests that we ensure they have a job. That is true, but what we are talking about is a child trust fund that is made available at the age of 18.

[Pete Wishart (Perth and North Perthshire) (SNP)]

Would not the people whom we are talking about need that money at 18 to pay for the Liberal Democrats’ tuition fees?

[John Hemming]

The good news is that we are scrapping up-front tuition fees not just for full-time students but for part-time students, but I think we are straying—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We are going off the Bill.

[John Hemming]

The point is that spending £7 million to give £2 million is an appalling waste of money. Anyone who votes for anything like that will have a real stain on their financial track record, because people will observe the Opposition saying, “This is so important that we have do things in this inefficient way.” It is a ludicrous proposal.

[Bill Esterson (Sefton Central) (Lab)]

The hon. Gentleman has talked about ISAs replacing the child trust fund as a way of saving for children. Does he appreciate that ISAs are often related to stocks and shares and that their value can go down as well as up? I do not see the difference in what he proposes.

[John Hemming]

At this point, I should declare my interest, which is on the Register of Members’ Financial Interests, as the chair of a company, John Hemming and Co., which provides software to ISA providers. I understand how ISAs operate and that the value of ISAs that are exposed to the stock market can go up as well as down. The difficulty with the child trust fund is that it is relatively small and that there is a great challenge in managing small funds. As a proportion of the fund, the 1.5% charges rate is higher than that for many other funds.

[Kate Green (Stretford and Urmston) (Lab)]

Is the hon. Gentleman confident that the junior ISA will be more cost-effective for the local authorities that are the corporate parents of children in care than the child trust fund?

[John Hemming]

There is no reason why a junior ISA should be any less effective for the corporate parents. The issue is that running the computer systems for the child trust fund costs £5 million a year. That cost would not affect local authorities but would mean central Government incurring an extra £5 million in administrative costs now to give children in care £2 million in 18 years’ time.

[Kate Green]

Rather than this being about whether there will be more or less cost, is it not simply about whether the cost will be borne by central or local government? In the scheme of things, that makes very little difference when we are talking about overall cost to the public purse.

[John Hemming]

The Opposition’s proposal to maintain the child trust fund and give £2 million to children would cost £7 million, so they would waste £5 million on the process. In the sphere of the massive deficit, £5 million might not seem like much, but it is the responsibility of Government to be effective and efficient in their use of public funds.

[Cathy Jamieson]

Will the hon. Gentleman confirm that £5 million will still be used for children in care under the Government’s proposals? Will he also tell us how it will be used?

[John Hemming]

I cannot confirm precisely what is being done in the care system. I am not a Minister; I have never been in a ministerial car and I have no interest in putting my derrière inside one. I happen to be a Back-Bench Member of my party who is very supportive of the Government’s strategy of being cost-effective and of using public funds in the most effective way, particularly to look after the most vulnerable members of society. The simple point, on which I shall end if there are no more interventions, is that it is insane to spend £7 million to give people £2 million.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

Let me begin by complimenting my right hon. Friend the Member for Delyn (Mr Hanson) and, indeed, all my hon. Friends for their sterling work on the Bill and exposing clearly its impact on looked-after children and children from all backgrounds. My right hon. Friend said that he wanted to be helpful and conciliatory. I have worked with him for many years and I thought he was very helpful and conciliatory this afternoon. I want to adopt the same approach regarding amendments 51 and 52, which stand in my name. They would place a duty on the Chancellor to report, by the end of 2011, on two things: the impact of clause 1 on looked-after children, and the take-up rate of tax-free savings accounts for looked-after children. Admittedly, this is in its early stages because we do not have the details on the child ISA that have been promised.

Whatever divisions there are in the House, we should always try to reach consensus on our obligations and duties in relation to looked-after children. We should not be divided on that and should constantly seek answers that we can all agree on and that clearly show we are prepared to meet our obligations. Whatever other motives might be attributed to the Minister in bringing the Bill to the House, I do not believe that he came here intending to cause children in care any harm. I believe that the impact the Bill will have on looked-after children is a genuinely unintended consequence. Equally, however, if it is enacted without steps having been taken to ensure that looked-after children are not disadvantaged by its measures, the Government—indeed, all of us—will have failed to meet our obligations.

The Minister has said on several occasions that he wants the new junior, or child, ISA to be the replacement for the child trust fund, which might have merit—I shall not discuss this in too much detail. That policy might well make sense for the child who has a parent who can afford to set up and contribute to an ISA, but for the child who does not have a parent or who does not have a parent who is in a position to invest on his or her behalf, it is meaningless. It is therefore essential to establish in the Bill the principle that the Government should open and make suitable contributions to a child ISA when a child is in care for a reasonable length of time. For me, that is a fundamental principle. I will be listening carefully to the Minister’s response, because its nature and content will be important when I decide whether to press the amendment to a Division.

18:00

It was many years ago, but I worked with looked-after children for about 10 years, most of which were spent in a local authority assessment centre in Wigan. The centre was the point of entry for many of the children in the area who came into care. Generally, we worked with those children for about three months. After that, about half of them, thankfully, were able to go back home, often with support from others in the community, because we had been able to iron out the problems, whatever they were. The other half went on in their care journey to other situations, such as foster care. It is the children in that group for whom we should have the greatest concern, because they face the greatest disadvantage. It is those children who end up over-represented in our custodial institutions, and in so many other aspects of our society that cause us difficulty.

My hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) is right to say that we take on the responsibility as parents when those children come into the care of the state, and with that responsibility comes a range of actions that we need to take. We have an obligation to support looked-after children in different ways. Government Members are quite right to say that a good way to help children when they leave care is to ensure that they have a job to go to and that they have been properly educated and trained. Any actions that the Government take to make that more likely will have my full support, because it is important. If setting up a child ISA is good enough for children in reasonably well-off families, it is good enough for the children whom we are obliged to support and look after.

I believe that a savings account, a nest egg or some such asset could make a real difference for a young person who has been looked after as they move into adult life. The reports that I am calling for in amendments 51 and 52 would offer the Government an opportunity to demonstrate their support for looked-after children. If, in the context of the Bill, they were prepared to put together a package that would deliver both the opening of accounts and contributions to them, they would have something very positive to say in those reports.

I first raised the issue with the Prime Minister on 27 October and was heartened by his response. I asked him whether he would ask his Ministers to work with me and others to produce an affordable alternative to the child trust fund, and he said yes. In a way, that did not surprise me; whatever other differences I have with him, he has made it clear that we need to do more for looked-after children and get better outcomes for them. In that sense, it did not surprise me that he was so positive. I had a discussion with the Minister last week, which, again, was a cordial exchange. I left him several things to think about, and I look forward to hearing his observations this evening and any further thoughts he has had.

The scheme that I propose is outlined in some detail in new clause 3—it was not selected for debate, and I understand why. I have been working with a number of Members and senior representatives of Barnardo’s and Action for Children, the two largest children’s charities in the country. We propose a very simple scheme that would apply to children throughout the UK: for any child who enters care and remains in care for a minimum of three months, the Government should open a junior ISA and make an opening deposit of some £250, which is consistent with the previous scheme, and there should be a top-up of £100 for every year that the child remains in care thereafter. Of course, it would be open for others to make contributions to that ISA, such as members of the extended family who were not in a position to look after the child but who could contribute. Nothing in our proposals would prevent local authorities, trusts and other benefactors from making contributions.

[Cathy Jamieson]

Does my right hon. Friend agree that that would also give young people themselves the opportunity to understand the value of saving and perhaps make some contributions themselves, which hitherto they may have been unable to do?

[Paul Goggins]

My hon. Friend makes an important point. If a looked-after child aged 16 or 17, perhaps studying and working part time, was in a position to make a modest contribution to their own fund, that would be a good thing. Looked-after children have to be more resilient than any other people in our society, so it would be good for them to learn about the importance of managing money and planning ahead through the medium of that child ISA or a savings account to which they and others may contribute. That could make them even more resilient, and looking back to the time when I worked with such young people, the opportunity to sit down with them and work out their money management would have been a great way to do it. I think that that suggestion has great merit, and if the young person could also contribute, that would be a very good thing too.

My proposal would require the Government to open accounts for about 20,000 looked-after children each year. With additional top-ups of £100 for those who remain in care for a year or more, as I have described, we are talking about a total annual sum of some £6.6 million. We can argue about whether child trust funds are a sensible way to spend half a billion pounds, and the Government have taken a view that is different from that taken by my right hon. Friend the Member for Delyn and those of us on the Labour Benches, but I put it to the House that a scheme that would deliver a savings account for every looked-after child in the UK who had been in care for more than three months, at a cost of less than £7 million, would be a good way to spend public money. The young person would get the money when they were 18. It could be an important part of care planning, as I said in response to my hon. Friend the Member for Kilmarnock and Loudoun, and would promote resilience. It would send a clear and strong message to the young people concerned that we owe them an obligation and are prepared to support them in a practical way.

I hope that the Minister will provide a positive response not only to the precise content of my amendments, but to the proposal in general and the need to do something, either here or in another place, that will put in the Bill something tangible for looked-after children. What I propose is modest, but it could make a real difference. If the Minister is prepared to act and make that clear, that would be good news for looked-after children. It would demonstrate that, whatever differences there are in this place over the Bill, when it comes to looked-after children we are prepared to sink those differences and do something together.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

I am grateful for the opportunity to pass comment on the Opposition’s continued attempts to retain child trust funds. I am struck, in particular, by the nature of their opposition: rather than concentrating on the effectiveness or otherwise of child trust funds as savings vehicles, they appear to have reduced their argument to one about generic usefulness. There seems to be a growing objection to abolishing child trust funds, because somehow the Opposition have inadequate confidence in the junior ISAs or child ISAs that are due to replace them. That is particularly concerning.

I remind those Members who sat on the Public Bill Committee with me, and inform those who did not, of a quote from the director general of the Building Societies Association, Mr Adrian Coles, who said:

“let us not pretend that we need to rely on the Government or the public sector to do all of this. The 49 building societies and other mutuals offer about 100 children’s savings accounts in the free market, which have been pretty successful over the years”.––[Official Report, Savings Accounts and Health in Pregnancy Grant Bill Public Bill Committee, 2 November 2010; c. 26, Q67.]

I know that in Committee concerns were expressed that the customers who take out ISAs might be the more affluent or the more elderly. It was made clear at the time that 12 million people on incomes under £20,000 have ISAs, and that 40% of them are under the age of 44, compared with just 20% who are over the age of 64, so any concerns that younger families are not sharing in ISAs are unfounded.

I was particularly concerned when I heard continued doubts about the ability of families on lower incomes to cope with the financial complexity of an ISA. We need to trust people. A great deal of work is going into financial education—an increasing amount. It is a trend initiated by the previous Government, and I congratulate them on that. We are building on it, so we can have confidence in ISAs as a potential future savings vehicle.

Another reason for opposing the abolition of the child trust fund was the impact that that could have on the needs of families with disabled children. I was shocked by one of the statements by the shadow Minister, the right hon. Member for Delyn (Mr Hanson), when he said that

“the proposal for providing 8,000 week-long respite breaks each year for disabled children in England . . . trivialises the nature of the child trust fund”.––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 9 November 2010; c. 228.]

I found that a disquieting comment. I do not regard respite breaks for children as trivial in any way, shape or form.

[Mr Hanson]

There are two points about those discussions in Committee about which the hon. Gentleman is aware. First, the abolition of the child trust fund takes away a resource that is applicable in Scotland, Northern Ireland, England and Wales, and replaces it with a provision that is available only in England. Secondly, provision for respite care is entirely different from building a capital asset for individuals at the age of 18. That was the objective of the revised proposals from the Minister.

[Paul Maynard]

I thank the right hon. Gentleman for that effort to bring clarity. None the less, I regret the use of the word “trivialise”, if only because I have spoken to many families in my constituency with disabled children. When speaking just a fortnight ago to one family who had benefited from the family fund and had their first holiday in five years, the mother broke down in tears.

I raise the matter not to have a go at the shadow Minister, but to highlight one of the wider issues that was illuminated in Committee: the difference between the accessibility of an asset that is locked away until the young person is aged 18, and the changing needs of families with disabled children—and of looked-after children, for that matter. If we are seeking to target the child trust fund at those in the community who are the most vulnerable, who have the most chaotic lives, who are subject to the most pressures, to whom unexpected things occur, is it truly sensible to tie them into something that can be delivered only when the individual reaches the age of 18?

[Cathy Jamieson]

Does the hon. Gentleman agree that the situation should not be an either/or? We should be able to give day-to-day help and support to the most vulnerable, at the same time as allowing people—for example, looked-after children and people who have disabled children—to build a capital asset that will be available to them when they enter adulthood.

[Paul Maynard]

I agree entirely, and I wish that during the evidence taking in Committee and in the debate, we had had an either/or discussion, rather than an “and, and, and, and yet another idea” discussion. We had far too many shopping lists and not enough recognition that hard choices had to be made. It is important to recognise, as Marc Bush from Scope did when he gave evidence to us, that delivering an asset at age 18 is not the solution to the problems faced by families engaging in the transition of their child from childhood to adulthood, when faced with a complex disability. That starts at age 14 and can continue to age 30. The hon. Member for Stretford and Urmston (Kate Green) recognised that when I intervened on her, and that was a useful move forward.

When we are discussing the future of child ISAs, I hope it is taken into account that families who are particularly vulnerable may need access before the age of 18. Locking the ISA away until age 18 is not always the best solution.

[Kate Green]

rose—

[Paul Maynard]

I will give way, for the last time.

[Kate Green]

I am grateful to the hon. Gentleman. He is right to say that if the junior ISA can offer that flexibility to disabled children, it would be a useful enhancement—I look forward to hearing the Minister’s response on that—but does he accept that another advantage of the child trust fund, which he and I would welcome in the junior ISA, was that it delivered extra money to more vulnerable children in the double payments that were available to children from low-income households or with disabilities, for example?

18:15

[Paul Maynard]

I thank the hon. Lady for that intervention. One of the joys of the Bill is that I have learned so much from her about progressive universalism. She is right that the progressive element is being removed. However, it has struck me that it is as though I have been locked away on Moonbase Alpha for the past fortnight, because there seems to have been no recognition on the part of the Opposition that we are operating in a much more stringent financial climate. The hon. Member for Wirral South (Alison McGovern), who is no longer in her place, dismissively said at one point in Committee, “I recognise that there has been a debate about the deficit and all that sort of thing.” I found that regrettable.

We are operating in a situation in which we have to make financial savings. Rather than having a discussion about whether the child trust fund is the most appropriate use of public money, we have continually debated why we should do this, and this, and this, and then something else, and something else again. At no point did we discuss the crux of the issue: whether the child trust fund was the best use of public money to help those most in need in our society.

I welcome the fact that the Minister is having discussions with the right hon. Member for Wythenshawe and Sale East (Paul Goggins). I hope something comes of that, but I remain concerned that the Opposition’s determination to try to save child trust funds is based on an outdated notion that only those savings vehicles provided by the state can provide a solution. That is not the case.

[Yvonne Fovargue (Makerfield) (Lab)]

The child trust fund has a dual purpose—not only to give the young person a lump sum, but to nurture in them a savings habit for life. Some 74% of those eligible have taken up the responsibility of the child trust fund account. It is the most successful savings product on the market; ISAs and pensions fall well behind that figure. It is simple—much simpler than opening a deposit account—and it gives people a nudge to save.

Nearly a third of parents and grandparents have added to the fund, and the poorest 20% have added a higher proportion of their income to it. However, even for young people whose families do not contribute, the practical demonstration of saving in the account is invaluable. Organisations such as the Personal Finance Education Group, which works in schools, structure their lessons around it, certain in the knowledge that all pupils will have received a statement annually on their birthday, and that all pupils have such an account.

The very universality of the scheme provides a useful and practical foundation for learning and for influencing behaviour. In addition, it is especially useful for looked-after children and children with disabilities, who receive extra premiums. For looked-after children, it is a practical example of the state acting as parent and attempting to improve their prospects at 18—an ambition that all parents have for their children—by providing a lump sum at one of the most difficult periods of their lives, a time of transition that is difficult for any teenager, but especially for those leaving care.

For children with disabilities, the scheme provides an asset that allows them to take advantage of life opportunities or to invest in whatever they see as their priority. It is unfair to remove the scheme without a full impact assessment of groups who may be disproportionately affected, such as families with disabled children and people with disabilities, especially as the Demos report showed that the emergency Budget had a substantial financial impact on families with disabled children.

It has been suggested that a junior ISA may replace the child trust fund, but I cannot believe that it will provide an adequate replacement, even if a seamless transition in January 2011were possible, which has been disputed by a number of experts in the savings field. An ISA primarily benefits taxpayers and higher-rate taxpayers in particular, so what advantage does an ISA offer to a non-taxpaying family? Equally, the simplicity of the child trust fund product has been praised.

I have worked with people to whom ISAs and other financial products have little relevance, with people who need support to open a basic bank account and with people who have no notion of opening a deposit account. I urge Members, therefore, to retain the scheme in some form—even if only for looked-after children, children with disabilities and the poorest third of families—and not to scrap it completely. I urge Members to support the amendments.

[Kate Green]

I shall speak strongly in support of amendments 51 and 52, which my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) has tabled. As he says, Members from all parties share a deep concern about the continuing very poor outcomes that we, as corporate parents, deliver for children in the care of the state. Those children suffer difficult childhoods, often arriving in care in traumatic and traumatising circumstances. They are therefore significantly unsettled and disadvantaged in their childhoods, and that disadvantage continues, to our shame, into their adult lives.

Such children all too often achieve poorer outcomes in education and health: in adult life they are less likely to move into sustainable employment or further or higher education, and they are more at risk of poverty. I know all hon. Members feel deeply that that is wrong, so I shall speak strongly in support of my right hon. Friend’s amendments, because they open-mindedly ask us to address that endemic disadvantage. If Opposition Members are offered assurances that other financial instruments can meet those concerns, we will of course consider them, but we are clear about what those alternative instruments must deliver if they are to receive our approval tonight. They must deliver some of the advantages that the child trust fund was able to deliver for looked-after children—advantages that sought to some degree to adjust and compensate for the disadvantages that such children face as they embark on adult life.

The first important thing about a payment mechanism specifically designated to meet the needs of looked-after children is that it represents a signal from us as a community that we care about such children—that they are valued, and as precious as any child living with his or her family is to his or her parents. Too often, looked-after children feel that our society does not value or recognise them and that nobody has an interest in them, so a financial contribution to a savings fund for them is one of a number of steps that we can take to show that those children and their futures are important and matter to us all.

The child trust fund, in its design, also delivered much more hard-edged benefits to looked-after children. As Members have said, it put extra money aside for children through double payments, and in responding to my right hon. Friend’s questions it is important that the Minister should address how we ensure that those children do not suffer further financial disadvantage and inequality in adulthood by embarking on adult life with a significantly smaller asset than many other children. Adjusting wealth and asset inequality was one of the intended bonuses of the child trust fund—one that was particularly important for looked-after children, and one that I hope the Minister will address.

My hon. Friend the Member for Makerfield (Yvonne Fovargue) pointed out that the fund sought to meet costs at a time of transition, and reaching 18 is a particularly difficult time for children leaving care, because we leave them at the mercy of adult life as no familial parent would with her or his child. No mum or dad would throw their child out of the family home without so much as a kettle or an offer to underwrite the gas bill if they struggle as they set up home, but that is what we do to too many children who leave the state’s care. By providing those children with a financial asset, the child trust fund helped to smooth some of the extra costs that they faced at transition points, with which no other family member might have been available to help them. The fund therefore enabled those young people to embark on their adult life with the confidence, certainty and stability that other young people often draw from family support.

I hope the Minister will reassure me that any alternative financial model will replicate two other in-built advantages of the fund, one of which is the product’s relative simplicity. It was fairly clear what sums were going in, and it was fairly clear when they could be drawn out. Junior ISAs might offer more flexibility and allow more contributions and different points of withdrawal, and that might bring some advantages, but we must not set up a product that is too complex for corporate parents and others who might wish to donate to the funds of looked-after children to access readily and save within. I look forward, therefore, to the Minister’s assurances about how the product will prove accessible to anyone who wishes to save for a looked-after child or young person, and in particular how a corporate parent will be able, without unnecessary bureaucracy and expense, to make contributions for children in their care.

Right hon. and hon. Friends have mentioned how the child trust fund offered consistency throughout the country, between local authorities and in all four parts of the United Kingdom, ensuring that every looked-after child left care with the same opportunity of an asset with which to start adult life. Can the Minister assure us that the alternative mechanisms and products that he might bring forward will deliver such consistency? We do not need to perpetrate inequalities among children leaving care as we do between children leaving care and other young people as they start out on adult life.

My hon. Friend the Member for Makerfield rightly pointed out that the junior ISA offers little that is intrinsically attractive to savers who do not benefit from a tax break. By definition, that includes corporate savers who invest for the future of children leaving care. I very much want to hear how the Minister will at least incentivise, more than that exhort, and—preferably—insist that corporate parents save adequately and equally for every child who falls within their care. If those assurances are forthcoming this evening, like my right hon. Friend the Member for Wythenshawe and Sale East, I will be able to look again at his amendments. If we do not receive satisfactory assurances, however, every young person and every child who has been in care will expect the House to support the amendments, and I for one certainly will.

[Sheila Gilmore]

Let me offer these words to the House:

“Simply put the Child Trust fund started people saving for children again. Since its introduction, child saving across all schemes and products has risen. We should acknowledge that asset building for children became a widespread reality in the UK through the introduction of the Child Trust Fund in 2005, and it quickly became an internationally renowned example of a long term tax free savings and investment account for children, one which encouraged saving and promoted an understanding of personal finance.”

Those are not my words but the words of Phillip Blond, in a new pamphlet called, “Asset Building for Children—Creating a new civic savings platform for young people”. I did not expect to be speaking his words, let alone encouraging the Minister to listen to them.

[Fiona Bruce]

It is correct that families have engaged in, and benefited from, the improved financial awareness that was one of the stated aims of the child trust fund. However, the evidence given by Dr Samantha Callan, a witness to the Committee, said that of parents who opened child trust funds,

“99%...have not received the maximum funding available. Therefore, it is not those on the lowest income that are actually taking the initiative to open the accounts.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 102, Q253.]

That means that they are not benefiting from the financial education and engagement that the funds were aimed at providing.

18:30

[Sheila Gilmore]

The hon. Lady overstresses that issue. She fails to see that the child trust fund was different from other savings funds because it was intended to provide not only financial education but a real asset to children who would not otherwise retain one. It is also important to realise that there is a real difference in kind between what the previous Government put in place and the junior ISA, which was thrown in fairly late on in the course of the thinking that occurred in response to the concerns expressed and is still fairly vague in its implications.

This is about a transfer of assets and tackling asset inequality. We are faced with not only income inequality but asset inequality. It is perfectly legitimate, and indeed desirable, that we look at asset inequality just as much as at income inequality. As my hon. Friend the Member for Stretford and Urmston (Kate Green) said, the way in which child trust funds were structured enabled additional money to be put in for looked-after children and children with disabilities. That is extremely important for them at the age of 18. Junior ISAs do not deliver that; rather, they will be of greatest benefit to those who get the tax relief that goes with an ISA.

In the past, there have been many schemes allowing parents, grandparents and other people to save on behalf of children. My children had baby bonds, which were provided under the National Savings scheme, and some of the money that went in came from their grandmother. That was wonderful, and a great idea, but it would not—I am sure that it did not—assist many children from low-income households, to whom the child trust fund was specifically designed to give additional help.

I want to return to the pamphlet produced by Phillip Blond, which has been given a lot of support from several organisations interested in this field. He strongly advocates that the infrastructure of child trust funds should be retained, even if the rest of the system is to go:

“Our first and foremost recommendation is to maintain, extend and improve the infrastructure of the…Child Trust Fund under the auspices of the new ABC account. Maintaining the old CTF platform comes at a minimal cost (£2m pa) and it preserves a unique and valuable savings infrastructure for the further augmentation and development of children’s savings.”

That would then enable the new proposal that comes from a raft of organisations working with children—the ABC account—to be developed using the same infrastructure. It would also enable this Government, or a future Government, to return to it and decide that they want to put in additional contributions at a later date. I am surprised at the lack of faith shown by Government Members, including members of the Committee, about the economy recovering. They do not seem to think that it is worth preserving the infrastructure for a future time when it would be possible to put in extra contributions.

I urge the Minister to listen to the words of Phillip Blond and those who have supported his proposals and even at this stage, if the Minister cannot support amendment 1, to consider keeping the infrastructure.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

As the right hon. Member for Delyn (Mr Hanson) set out in his opening remarks, the amendments in this group, except for the two tabled by the right hon. Member for Wythenshawe and Sale East (Paul Goggins), seek to delay the ending of child trust fund eligibility, or indeed not to end eligibility at all. Amendments 4 to 12 and 17 to 26 would delay the end of child trust fund eligibility from January 2011, either to 2016 or a date set by regulations. Amendments 1 and 36 would mean that child trust fund eligibility did not end at all.

I set out clearly on Second Reading the rationale for ending child trust fund eligibility, particularly for ending it from January 2011. This Government inherited a fiscal position that the Governor of the Bank of England described as “clearly unsustainable”, and dealing with it immediately was unavoidable. As hon. Members will recall, my right hon. Friend the Chancellor set out a package of £6 billion-worth of savings in 2010-11 just a couple of weeks after the coalition Government were established. Part of that package was £320 million of savings from the child trust fund this year. A large part of those savings have already been made through the regulations made in July, which reduced contributions at birth and stopped them at the age of seven. Delaying the end of eligibility would reduce the savings that we plan to make by £20 million this year and by around £50 million in each future year that the delay continued.

Those figures assume that the current value of the child trust fund would continue at £50 at birth for most children and £100 for those in lower-income families. Some providers have told us that those values would not be viable for them in the long term, and so some could withdraw from the market. However, if the value of the vouchers were increased, which could be done through regulation, the costs of the delay in ending eligibility would increase too. Either way, the money would have to be found from somewhere, through other spending cuts, tax rises, or even more borrowing. The Labour proposals would also be confusing for families who understand that CTF eligibility is due to end in January this year, particularly if we were to take the power to set a date through regulations.

I understand the point that the right hon. Member for Delyn made about delaying the end of eligibility until the junior ISA, which I announced on Second Reading, is in place. I am not expecting that to take too long; I hope that the new account will be up and running as early as autumn next year. It will be available for children who are born after the ending of the child trust fund—that is, those born after 3 January 2011.

The hon. Member for Edinburgh East (Sheila Gilmore) said that the trouble with the junior ISA was that it is tax free, but so was the child trust fund, so I cannot see that its essential nature is very different. I do not quite understand her point.

[Sheila Gilmore]

rose—

[Mr Hoban]

I am happy for the hon. Lady to clarify it.

[Sheila Gilmore]

The point that I was trying to make is that the only incentive given in the junior ISA is that the payer—the parent or grandparent, or whoever is putting in the money—can get tax relief. The child trust fund gave money to the children of families who do not usually benefit from putting money into a savings account that brings tax relief because they may not be paying tax, or paying very little tax, so it is not of such great advantage.

[Mr Hoban]

The fundamental difference is that under the junior ISA there will be no contributions from the state, whereas in the case of the child trust fund there were contributions from the state. Our intention is to save money in order to cut the deficit—that is why we are ending eligibility for those sums. The junior ISA will be a simple product. The hon. Member for Stretford and Urmston (Kate Green) queried that, but she should remember—to reiterate a point that I made in Committee—that 20 million people have ISAs, 12 million of whom earn incomes of less than £20,000 a year. The ISA is a mainstream financial product that people of all income streams and all ages understand; they find it very easy to contribute to a cash ISA or to an equity ISA.

[John Hemming]

Perhaps the hon. Member for Edinburgh East (Sheila Gilmore) was slightly confused about whether people get tax relief on contributions to an ISA. My understanding is that they do not. They get it only on contributions to a pension.

[Mr Hoban]

Indeed, the tax models for ISAs and pensions are different. With an ISA, the income and gains are tax-exempt, which is one of their incentives.

I believe that child trust fund eligibility should end for children born from January 2011, as the Bill provides, and not from any other date. I continue to believe that ending eligibility is the right thing to do. I know that some find that disappointing, but in the middle of the exceptional fiscal challenge that we are facing, it simply does not make sense to continue to spend half a billion pounds a year on giving people money that is locked up until the age of 18. There are more urgent priorities, and the child trust fund is a luxury that we cannot afford.

I wish now to refer to the amendments tabled by the right hon. Member for Wythenshawe and Sale East and the wider points raised in his new clause and amendment that were not selected. I understand his point about looked-after children, who are among the most disadvantaged young people in our society and face a number of particular challenges that mean they need additional support. As he said, we met last week to discuss the matter, and he outlined to me the proposal that he has referred to today. As I said then, I have a lot of sympathy with what he is trying to achieve, and I want to consider the matter more closely. Indeed, I have already written to the Under-Secretary of State for Education, my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton), to ask his views on the proposal. We will have to consider it carefully, but as I have said a number of times during debates on the Bill, we have limited resources at the moment and there is currently no unallocated funding in the Department for Education budget that could be used for the suggested payments. We would also have to be sure that they were the best use of our resources and gave us the best possible value for money.

As I have said, there is also the question of whether locking up money for up to 18 years provides better value than spending it to support people now, and we need to ensure that we focus resources on our priorities. We will also have to consider what the proposal would leave children with. As the right hon. Member for Wythenshawe and Sale East explained, the provision would not be triggered until a child had been in care for at least 13 weeks, to avoid junior ISA accounts being opened for children who were in care for only a week or so. We know that, thankfully, most children are not in care for long periods. Of the children who left care in 2009-10, about 37% were in care for less than six months. I will therefore wish to consider how many children would receive accounts containing just the £250 Government payment that he suggests, and whether those accounts would necessarily provide good value.

However, as I have said, I am more than happy to continue to consider the proposal with my hon. Friend at the Department for Education, and I certainly commit to maintaining contact with the right hon. Member for Wythenshawe and Sale East. I reassure him that if we do want to move forward with his proposal or something similar, the Bill will not be the right vehicle for doing so. It may be possible to legislate on the matter alongside the provisions on junior ISAs, or even to introduce them without legislation. Not including them in the Bill does not close down our options.

I understood the right hon. Gentleman’s points on amendments 51 and 52, which were selected, but there are practical reasons not to accept them. First, as I have said, we are still looking closely at our options, and that may end up making the reports called for in those amendments unnecessary. Secondly, if we wanted such reports to be produced, requiring their completion by the end of 2011 would be too early. By then, child trust funds would only just have stopped being opened, as the last vouchers are not expected to expire until well into 2012, and junior ISAs would have been in place for only a few months.

Thirdly, I suggest that even if we did want to carry out the reports that the right hon. Gentleman suggests, we could do so without having them specified in the Bill. In fact, leaving them out of the Bill would provide us with more flexibility on both content and timing.

[Paul Goggins]

I am very grateful to the Minister for clearly giving very serious consideration to the points that I put to him at our meeting last week. He has clearly weighed them up carefully. I am grateful that he has already written to his colleague in the Department for Education.

The Minister will understand my slight concern that, notwithstanding the fact that he is going to consider my proposals seriously, the Bill will now go to the other place and—in fairly short order, he hopes—become an Act. With the Government’s majority, I am sure that will happen. I do not want the focus on the important issues that we have discussed to be lost, so will he make a commitment that as far as possible, they will be addressed as the Bill is considered in the other place?

18:45

[Mr Hoban]

The right hon. Gentleman will be aware that we are consulting on the design of the junior ISA, and we need to ensure that his points are considered in tandem with that, rather than in the accelerated time scale that it will take for the Bill to go through the other place. I reassure him that I am considering the matter seriously with my hon. Friend at the Department for Education.

The right hon. Gentleman makes important points about looked-after children, and we need to consider them carefully. As he knows, there are other provisions in place to meet the needs of such children, such as a bursary scheme for those who go into higher education, although I regret that not as many do so as we would all like. However, he has made important points both today and in our meeting last week, and I will pursue them with him and with my hon. Friend the Under-Secretary of State for Education. I hope that the right hon. Gentleman will not press the amendments tonight, but that is a decision for him to take. I hope that he will take into account my comments this evening about the approach that I want to take.

On the other amendments in the group, as I have explained, I believe that we should go ahead as planned with ending child trust fund eligibility from January 2011. I believe that the right structure is in place to ensure that children who do not qualify for a child trust fund will be eligible for the junior ISA, even if it is not introduced until late next year. I have made the commitment that any child born after 3 January 2011 will be eligible, and I believe that the for combination of reasons that I have set out—the need to tackle the deficit, the need to save money and the need to put the public finances on to a better, firmer footing—we need to press ahead. I urge hon. Members to oppose the Opposition’s attempt to squander yet more money.

[Mr Hanson]

I am grateful to the Minister for his response to the debate. It is self-evident that I am disappointed with the fact that he wishes to continue to seek the abolition of the child trust fund. I did not expect him to accept amendments 1 and 4, both of which gave him an opportunity to stick to his manifesto commitments and save some remnant of the child trust fund.

I have some concerns about the Minister’s responses. I hope to encourage my noble Friends to return to the matter raised in amendment 17, because it is about ensuring that we do not have a hiatus between the abolition of the child trust fund and the establishment of the new child ISA. It simply gives the Minister an opportunity to reflect on the fact that he can delay the abolition for what may be only six or seven months to ensure that he does not have to backdate the child ISA and confuse parents. He can put a product in place and ensure that we know about it by the time of the abolition. I suspect that there will be further debates on the matter in another place, and I hope that amendments will be tabled there to support the aims behind amendment 17.

On the amendments tabled by my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins), I am grateful that the Minister is continuing to discuss what we should do about looked-after children, who are a vulnerable group of individuals. I wish to ensure that he—[Interruption.] I hope that the Minister will listen to this point. He has just said to the House that he is in discussion with his colleagues in the Department for Education about how we deal with looked-after children. I am pleased about that, but I remind him that the current child trust fund is a UK-wide facility funded by the Treasury, which applies in the constituencies of my hon. Friends in Scotland and Northern Ireland as well as in mine in north Wales. If he just brings forward an England-only solution with the Department for Education, that will not satisfy my hon. Friends. I hope that he will reflect on the fact that the current child trust fund is a UK-wide provision for looked-after children. My right hon. Friend is trying to ensure that that is what it remains at a relatively low cost to looked-after children and the state. I do not expect my right hon. Friend to press his amendments, but I do expect the Minister, in the context of the discussions that we will have in another place, to look at a UK-wide solution, not a solution that simply involves him having discussions about England with his hon. Friend in the Department for Education.

[Paul Goggins]

In addition to the points made by the Minister, my right hon. Friend has raised a very serious issue. Any replacement provision for looked-after children would have to be UK-wide to be fair, so his point is clear. I share his thinking on whether I should press amendments 51 and 52 to a vote. When somebody with whom one has a disagreement reaches across and begins to come halfway, one probably does not poke them in the eye just at that moment. I am not tempted to press amendments 51 and 52 to a vote, but my right hon. Friend knows me well enough to know that, the Minister having made the commitment, I will be closely on his tail every inch of the way to make sure that he delivers something for looked-after children right across the United Kingdom.

[Mr Hanson]

I know my right hon. Friend very well and I know that he will do that. In coming to a solution, will the Minister make sure that it is UK-wide? Will he make sure that it is not based on a postcode lottery, under which one local authority might contribute for looked-after children, while another local authority might not? We want to ensure, at the very least, that we salvage something from this train crash, and that is help and support for looked-after children in our society as a whole.

Based on what the Minister has said, I have no alternative but to press amendment 1, because the abolition of the child trust fund is wrong. Opposition Members believed that it was wrong on Second Reading, we believed that it was wrong in Committee and we believe that it is wrong on Report, so we will press amendment 1 to a Division.

Question put, That the amendment be made.

18:52

Division 122

Ayes: 218

---

Labour: 208
Scottish National Party: 4
Plaid Cymru: 3
Democratic Unionist Party: 1
Green Party: 1
Social Democratic & Labour Party: 1

Noes: 297

---

Conservative: 250
Liberal Democrat: 46

Clause 2

Repeal of Saving Gateway Accounts Act 2009

[Mr Hanson]

I beg to move amendment 2, page 2, line 9, leave out Clause 2.

[Madam Deputy Speaker (Dawn Primarolo)]

With this it will be convenient to discuss the following:

Amendment 13, page 2, line 10, at end insert ‘with effect from 1st January 2014’.

Amendment 14, page 2, line 10, at end insert—

‘(1A) The provisions in subsections (2) to (5) come into force with effect from 1st January 2014.’.

Amendment 15, page 2, line 36, in clause 4, leave out subsection (2).

Amendment 16, page 2, line 39, leave out ‘The rest of this Act ‘ and insert ‘This Act, apart from section 2’.

Amendment 27, page 2, line 39, leave out ‘The rest of’.

Amendment 40, page 3, line 1, leave out subsection (4).

Amendment 28, page 3, line 1, leave out from beginning to ‘3(1)’ and insert ‘Section’.

Amendment 29, page 3, line 2, leave out ‘extend’ and insert ‘extends’.

Amendment 41, page 3, line 4, leave out subsection (5).

Amendment 31, page 3, line 4, leave out from beginning to ‘3(2)’ in line 5 and insert ‘Section’.

Amendment 32, page 3, line 6, leave out ‘extend’ and insert ‘extends’.

Amendment 39, page 3, line 7, leave out ‘The rest of’.

Amendment 37, in title, line 1, leave out ‘to repeal the Saving Gateway Accounts Act 2009;’.

[Mr Hanson]

We are in danger of repeating discussions that we had in Committee, but the Prime Minister has said that opposition is an important constitutional duty, and I intend to fulfil it in the next hour on the question of saving gateway accounts.

Amendment 2 seeks to remove the abolition of those accounts by removing clause 2. As ever, and as I said in relation to the first group of amendments, I am trying to be pragmatic. The Minister will note that amendment 13 seeks merely to delay the abolition of the saving gateway until 1 January 2014 to allow him and his officials a period of reflection in which they can examine whether abolition is required.

The saving gateway, which was originally introduced in the Saving Gateway Accounts Act 2009, is important—[Interruption.]

[Madam Deputy Speaker]

Order. One conversation in the Chamber is quite enough at any one time, and the conversation we are supposed to be hearing is the shadow Minister addressing the House.

[Mr Hanson]

I am grateful, Madam Deputy Speaker. This debate is about how we help poorer people in society and save resources. Of course, that might not interest all hon. Members in the Chamber today, but that is another discussion—[Interruption.]

The Saving Gateway Accounts Act was introduced to pave the way for a national scheme. Members will be aware that the saving gateway was to be a cash savings account for those on lower incomes. It was to provide a financial incentive to save, with the Government making a matching contribution for each pound that people saved in the scheme. The saving gateway was first proposed in 2001, after which it was consulted upon and piloted twice. In total, more than 22,000 people took part in the pilots, achieving an additional £15 million of savings. As Members will know, accounts would have run for two years and would have been offered by financial institutions such as banks, building societies and credit unions. The Government would have contributed 50p for each pound saved, which would have been paid at the end of the accounts.

The criteria for opening a saving gateway account were fairly straightforward. If an individual in the community was on income support, jobseeker’s allowance, incapacity benefit, employment support allowance, severe disablement allowance or carer’s allowance, or if they were on tax credits and their income was less than £16,040 a year, they would qualify for the saving gateway scheme. The objectives of the saving gateway scheme were quite simple: to kick-start a savings habit among people on lower incomes, by providing a strong incentive to save through a matching fund contribution from the Government; and to promote financial inclusion by encouraging people to engage with mainstream financial services.

The pilots, which were successful, were delivered in partnership with the then Department for Education and Skills, with the Halifax bank—now HBOS plc—providing banking facilities. The first pilot ran from August 2002 to November 2004, with individual accounts open for an 18-month period. In the first pilots, about 1,500 people took part, and the scheme covered five areas: Cambridge, east London, Hull, Cumbria and Manchester. People living in those areas were eligible to open an account if they were of working age—between 16 and 65—and had household earnings of less than £15,000 or individual earnings of less than £11,000, or if they were out of work and receiving benefits, as I have described. Individuals in the first pilot were allowed to save up to a limit of £25 a month in the account, up to a maximum of £375 overall, for which they received a pound-for-pound match when the account matured. A final evaluation of the first pilot was produced in March 2005. Based on that pilot, the largest saving gateway pilot was run in the same five locations, as well as in another area, south Yorkshire. That pilot started in March 2005, and the accounts were open for 18 months, as in the first pilot. In total, around 22,000 accounts were opened and the second pilot was opened to a wider income group, including households with incomes of less than £50,000, individuals with incomes of less than £25,000 a year and, similarly, those receiving benefits.

The point of the pilots was to establish whether the scheme would be successful and whether it would meet the objectives that we had set, which were to encourage lower-income savers and to ensure that individuals saved resources that they would not have saved previously. The key findings from the pilots were that the saving gateway scheme generated new savers, that new saving was generated among existing savers and that the scheme brought individuals into contact with mainstream financial institutions for the first time. Research from the pilots showed that 60% of participants were still saving regularly two years after they had ended, and that three in 10 participants who were not saving regularly before the pilot were now doing so. Participants were extremely positive about the saving gateway. I quoted in Committee the fact that 98% of people involved in the pilots said that they would open another saving gateway account if offered the chance, while an astonishing 99% would recommend it to a friend.

19:15

In the Budget on 24 March, my right hon. Friend the Member for Edinburgh South West (Mr Darling) announced that the first saving gateway accounts would be available from July, and that Lloyds Banking Group, the Post Office and the Royal Bank of Scotland Group would provide the accounts on a regular basis. Before we touch on the fact that the accounts did not open in July, it is important to refer to the all-party support for the saving gateway account before the election. One of the reasons I wanted to give the Minister a chance to reflect, having had discussions in Committee, was that when the then Saving Gateway Accounts Bill came before the House in February 2009, he said:

“This Bill serves a valuable purpose in encouraging people, particularly those on low incomes, to save. People on higher incomes have an opportunity to smooth out fluctuations in income and expenses to which those on low incomes do not have access. If the Bill is successful in encouraging people to save, it will enable them to create a modest buffer against variations in income, such as the unexpected expense of being laid-off for a short period. It will give people a degree of financial security that they have not had hitherto.”—[Official Report, 25 February 2009; Vol. 488, c. 323.]

That was the Minister, before the pilots had been completed, saying that he believed that that Bill had merit, that he supported it and that he believed that it would help with some of the difficulties that people on low incomes would face if they lost their jobs. However, it was not just the Minister saying that, but the hon. Member for Taunton Deane (Mr Browne)—now the Minister of State, Foreign and Commonwealth Office—who was then the Treasury spokesman for the Liberal Democrats. On Third Reading, he said that

“it is the equivalent of the share-owning democracy being extended to people in the bottom 10 to 20 per cent. of society. That will bring widespread social benefits if the Bill works out as successfully as we all hope.”—[Official Report, 25 February 2009; Vol. 488, c. 325.]

The evidence that we took in Committee from those responsible for administering the scheme and for looking at its effectiveness indicated that they had no reason whatever to believe that in the event of a change of Government, which I accept and acknowledge has happened—

[Bill Wiggin (North Herefordshire) (Con)]

That is big of you.

[Mr Hanson]

I am a realist—the Government have changed—but any realist would say that before the election the Conservative party and the Liberal Democrats supported the then Bill, along with my right hon. Friend the Member for Edinburgh South West, the then Chancellor, and his team, and every other Labour Member. Nothing has changed since except for the change of Government, which has meant that the Minister and the Liberal Democrats have stood on their heads and jettisoned the scheme, which would have been in place in July and would have helped to support the poorest in our society.

[Sarah Newton (Truro and Falmouth) (Con)]

There is another significant change since that time, which is the financial mess that we found we had inherited. This Bill, along with other measures, has to sort out our finances. When the Public Bill Committee took evidence, Carl Emmerson of the Institute for Fiscal Studies said:

“I think that £1,000 at age 18 will improve their life outcomes and will help. I think that the money spent on education or on increasing their family’s incomes over those first 18 years is probably going to help more.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 12, Q23.]

Does the right hon. Gentleman agree?

[Mr Hanson]

There are two points about that. I do not wish to cause the hon. Lady any difficulty, but I think that her intervention relates to the previous group of amendments, on the child trust fund. We are now talking about the saving gateway account, which is for poorer people. It does not relate to people under the age of 18, and if she looks at Hansard, I think that she will realise that she is talking to the previous group of amendments.

However, I should also say that if the hon. Lady thinks that the current financial situation is difficult, I look forward to her supporting amendment 13 in the Lobby, because it would give the Minister time to reflect. Amendment 13 says that we should delay scrapping the saving gateway until 2014. We have had the saving gateway account—which the Minister and the Liberal Democrats supported in opposition and which Labour supported in government—which has had its pilots. The pilots have proved successful, and by any assessment more people have saved, resources have been generated and people on low incomes have learned the saving habit. The Bill abolishes the saving gateway account that was to be implemented in July this year, until the Minister put that on hold.

Two amendments are the focus of the debate. Amendment 2 would delete clause 2, so that the saving gateway account would not be abolished. However, I am being pragmatic, and I tabled an amendment to abolish the saving gateway account on 1 January 2014. That would provide a three-year gap in which the Minister could, as the hon. Member for Truro and Falmouth (Sarah Newton) said, look at the economic situation and assess whether the financial contributions are practical and desirable. I happen to believe that they are, and that the scheme is affordable now, but I will park that debate for the moment, and simply tell the Minister and the hon. Lady that if they accepted amendment 13, they would accept minimal cost, if not almost no cost, to the Treasury. All that would be abolished, effectively, is the pilots, and their assessment. The saving gateway scheme has not started, and there would be no financial contribution to it because it did not commence in July 2010.

The Minister could accept amendment 13 and not commence the scheme next year. He could accept it and not commence it in 2012, or 2013. He could make an assessment in 2014 of the principles that he espoused in Opposition with his hon. Friend the Member for Taunton Deane—that the scheme is a positive one that brings benefits. If the economic situation improves during those three years—the Minister presumably believes it will as a result of his other economic policies—he could consider returning to the saving gateway scheme without repealing the Saving Gateway Accounts Act, which is what the clause will do, and end any possibility of the scheme being introduced.

I am offering the Minister an opportunity. He need not abolish the scheme, but could reflect on it. He could delay its commencement until 2014, and not rip up a scheme that he supported in opposition, and on which valuable work was done in five areas in the first pilot, and in those areas plus south Yorkshire in the second pilot.

The Minister has a duty to explain why he believes the scheme should not progress now. If the reason is finance, amendment 13 provides the opportunity to reflect on that. The Opposition would swallow our pride and support him in not having the saving gateway scheme starting this year, next year or the year after. That would be a big step for us, but we might consider it if he would accept amendment 13.

[Bill Esterson]

Is not the truth about the Government’s position on the saving gateway that if they were serious about using it as part of tackling the deficit, as the hon. Member for Truro and Falmouth (Sarah Newton) said, they would support amendment 13 and delay repeal of the 2009 Act, because improving the financial habits of people from the poorest backgrounds is part of what the coalition Government say is their solution to the country’s financial problems?

[Mr Hanson]

I thank my hon. Friend for his intervention. He emphasises that amendment 13 would not cost the Government anything. If it cost anything, it would be a minuscule amount to maintain the scheme because it has not yet started. The Minister froze it, and said that he would not start it in July 2010, as planned by the previous Labour Government. All the expense to date has been on the pilots in phase 1 and phase 2. I remind him that the legislation had his support and that of his hon. Friends the Liberal Democrats without a vote on Third Reading, and with warm words being spoken by them in Opposition. The situation now—it is self-evident to my hon. Friends—is that we have a scheme that is on the statute book and that has been successfully piloted but has not commenced. Amendment 13 gives the Minister the opportunity to delay its commencement until at least 1 January 2014.

If the situation improves and the Minister’s economic policies ensure that we tackle the deficit, build a strong economy, recoup our money from Ireland and consider all the issues that we have talked about during debates on the economy over the past few months, he will be able, if he wants, to go back to his electorate in Fareham, Truro, Falmouth and everywhere else and say, “Not only have we helped to tackle the deficit, we have not hit poor people in doing so.” He will have secured a scheme that he can continue to implement because he will be able to repeal the 1 January 2014 date later. Presumably, both the Liberal Democrats and the Conservatives thought that it was a good thing in February last year, or they would have voted against it on Third Reading, and would not have used such warm words to describe it from the Opposition Dispatch Box.

[Sarah Newton]

I agree that the coalition definitely wants to enable people to make better financial decisions, and I am sure that the Minister will detail all the ways in which we plan to do that, but I want to bring the right hon. Gentleman back to the evidence that we heard about the saving gateway from the Institute for Fiscal Studies:

“There was not any really strong evidence from the saving gateway that it led to more overall saving from lower-income households.”

I could go on. There is not the strong evidence base that the right hon. Gentleman refers to.

[Mr Hanson]

That is not what the pilots showed. They showed that there were new savings, engagements and increased resources. Does the hon. Lady believe that, at no cost, we could maintain the saving gateway on the statute book, allow it to develop for the next two to three years, and not abolish the scheme until 1 January 2014? If she voted for amendment 13 tonight, she would vote not to spend any money or to start the scheme but simply to say, “Let’s note the pilots that have taken place and that the legislation is on the statute book, but let’s not repeal it until a future date.”

That option would allow the Minister to accept the amendment and reflect on the matter. I remind him that not only did he and the hon. Member for Taunton Deane support the measure in February, but nowhere in the coalition agreement or at the general election was there a manifesto commitment to abolish the saving gateway account—[Interruption.] The hon. Member for Birmingham, Yardley (John Hemming) asks whether it was in our manifesto. No, it was not. The Minister knows that it was not in his manifesto, but it was certainly in ours to maintain it once it had started.

We heard warm words about the scheme before the general election, no words about its abolition during the election and no manifesto commitment to do so. We have had successful pilots, and there is an opportunity tonight for me to put aside my wish for it to start in July and to ask the Minister not to abolish the scheme now, but to reflect on it and allow it to stay on the statute book. If it is a good scheme, as it presumably was in February and at the election, the Minister could return to it in the future and decide whether the Government can afford to contribute to it.

The pilots showed that the scheme increased poorer people’s savings. They were successful, and I hope that the Minister will not throw it out and stand on its head what he said in February 2009. He has had plenty of other opportunities to do that.

19:30

[Paul Maynard]

I welcome this opportunity to express my views on the concept of saving gateways. I listened with interest to the shadow Minister expressing his desire to save them for the future, but in his defence he missed some of the key pieces of evidence that we heard in the Bill Committee. I should like to remind him of some of that evidence. Adrian Coles, director general of the Building Societies Association, told us:

“No building society had committed to offering a saving gateway”.

Eric Leenders, executive director of the British Bankers Association, said that there were

“only a couple of providers who felt that it was suitably beneficial for them to provide the account”.––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 34, Q98.]

The Post Office would participate only if provided with taxpayers’ subsidy. It will cost £300 million to continue with the scheme.

There was a great deal of debate in Committee about the possibility of the fourth link in that chain being credit unions, and I pay tribute to the hon. Member for Makerfield (Yvonne Fovargue) for her assiduous advocacy of their cause. In a way, she was quite right. I was impressed to hear how many credit unions there were in Makerfield. I think she said that there is one at the end of almost every street, or certainly within walking distance for most of her constituents. We have a very successful one in Blackpool, too, but they would not be available for this purpose in the many parts of the country where the credit union movement has yet to implant itself fully, so we would be left with the kind of postcode lottery against which the shadow Minister was fulminating in the previous debate. We cannot have it both ways.

[Bill Esterson]

The hon. Gentleman describes a lack of credit unions in certain parts of the country, which is precisely why the opportunity to have the saving gateway is so important. Does he not appreciate that Government input into helping lower-income families to save is exactly what is needed to provide the necessary impetus?

[Paul Maynard]

Unfortunately, the hon. Gentleman’s point was not borne out by the evidence of Mark Lyonette of the Association of British Credit Unions Ltd. He was quite clear when he said of the saving gateway:

“None of the credit unions built their business plan around it, so I don’t think its withdrawal is a threat to the health of credit unions.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 52, Q149.]

It is important to ensure that we give credit unions what they want, and that is why we are seeing reforms to the Credit Unions Act 1979 enabling them to work with more than just individuals—they will now be able to work with interest groups, social enterprises and the like. We should not therefore allow the Opposition’s statement that credit unions have to be involved to obstruct the fact that this scheme will cost £300 million to continue. This might cause some Opposition Members to roll their eyes and shake their heads, as they did earlier in response to my hon. Friend the Member for Truro and Falmouth (Sarah Newton), but we are now living in a very different fiscal situation. The shadow Minister was quite right: the Government have changed, and we now have to take tougher financial decisions. We cannot justify spending £300 million on a saving gateway that will not be universally accessible across the country because there simply are not enough commercial providers willing to provide it. This is not a debate about a group hug, or about trying to encourage everyone to save more. We all know about those things.

I have been delighted to hear the hon. Member for Makerfield talk about Brighthouse, of which there is a branch in my constituency. I almost thought that she must have sneaked into my surgeries, because her tales about her voters’ problems with Brighthouse were the same as mine. However, I do not think that the saving gateway is the answer to the problems that many poor people face in getting access to cheap credit. It is not the answer to the problems we have been discussing. It fails the test that I raised on Second Reading—a test that I call my rhododendron test. The Opposition have a tendency to fixate on a single item of legislation that they believe will somehow solve all the problems in the world, but I am afraid that the saving gateway, however popular the pilots might have been, has not been popular enough with the providers that we need to ensure its success. That is why I support the Government’s decision to remove the scheme.

[Yvonne Fovargue]

I want to talk about the abolition of the saving gateway and the disappointment felt not only by the putative savers but by the credit unions, which thought that it would have a massive impact on the sector. The credit unions put a large amount of time and money into designing and introducing their product because they believed that the scheme had cross-party support. While matching the money is important in incentivising savings, it is not the only factor involved; in fact, it is not always the most important factor in influencing people to save. As we have heard, ease of access to a financial institution cannot be overstressed, and to use the existing credit unions at the heart of the community and to encourage the growth and development of the sector via this product was seen as vital. Indeed, Mark Lyonette said that encouraging people to save with credit unions was the issue. People are used to credit unions giving out loans, but the important thing is to provide them with products that encourage people to save.

The message that has been endorsed by the Government via the scheme is that even a small amount of savings matters, and that cannot be overstated. Most people do not deliberately set out to be in debt, but life events—such as the loss of a job, accidents, disability or even something as simple as the cooker breaking down—can cause debt. A small amount of money saved can act as a buffer, and people can then feel more in control and have more confidence. The value of that feeling cannot be overestimated.

It might be conventional wisdom that people should pay off all their debts before they start to save, but I take issue with that, as do people from the credit unions. As I said, events happen. The washing machine might break before someone has paid off the cooker, and if there is nothing to fall back on, the spiral of debt gets faster and deeper. That is when people turn to the legal loan sharks who charge more than 2,000%, or the actual loan sharks who prey on the vulnerable who have no resources. It is vital to provide a mechanism to remove people from the spiral of debt and make it easier to save. We know that people want to save for such events. Otherwise, why would so many people have saved with Farepak, a scheme that they believed was safe? If we could provide a trusted, easily accessible, local savings vehicle to encourage saving, we would prevent a considerable amount of human misery as well saving the health service a considerable sum for the treatment of depression and, in some cases, attempted suicide due to debt. A small amount of investment now could prevent a huge amount being spent later, and I urge the Government to reflect on that.

[John Hemming]

The Government have to look at what can be done when resources are limited. It is generally accepted that we need to enable people on lower incomes to save, and access to bank accounts and credit unions are important in that regard. We had an evidence session in Committee, which was quite useful. The Institute for Fiscal Studies has no axe to grind in this regard, but its acting director, Carl Emmerson, said that

“perhaps the £115 million should just be spent on boosting the incomes of these individuals.”

I then asked him:

“Or potentially on a system with more crisis loans?”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 19, Q47.]

His response to that question was yes.

There is no question but that people need to balance their costs when they have to replace a washing machine, for example, and need the resources to do that. There is an issue there, but the Government need to look at the best way of helping people in those situations.

[Fiona Bruce]

The Government are not leaving people entirely bereft of support, are they? Next spring, the new national financial advice service will be introduced, which will make available to everyone who needs financial advice—not just those in education—real support to ensure that they make the best financial plans for their families.

[John Hemming]

Indeed. The difference with this particular scheme was that it was to provide a way of matching funds that people put into their savings. If we go back to the evidence session, we find that the Institute for Fiscal Studies was asked whether it thought the child trust fund did no harm; in fact, it showed that this particular scheme had the potential to do harm by encouraging people to put money into the savings account rather than pay off the debt at the time. The Royal College of Midwives said that if people have just had a baby, it is better for them not to save money, but to spend it on healthy living and feeding the baby well. I believe that this is where the Opposition are fundamentally wrong. According to the IFS—again, I stress the IFS rather than the Government or the previous Government —there was no strong evidence that greater saving was encouraged.

[Mr Hanson]

I would be grateful if the hon. Gentleman could tell us why the Minister of State, Foreign and Commonwealth Office, his hon. Friend the Member for Taunton Deane (Mr Browne) supported the scheme prior to the election, did not oppose it during the election and did not vote against it on Third Reading?

[John Hemming]

We need to find some way of reducing this country’s borrowing. We do not want to end up like Ireland or Greece. If, on looking around, we find something that costs £115 million—

[Mr Hanson]

Why not support amendment 13 to delay the abolition for three years and see whether the economy picks up?

[John Hemming]

If there were an amendment to say that we should delay it until it is instituted by order, I would find that more reasonable, but I do not think we should set a date in the future. If there is not sufficient independent evidence that this scheme achieves a result and there are good arguments to show that there are better ways of helping people in these circumstances, I would press the Government to consider them and work with organisations such as the credit union movement to ensure that everyone has access to accounts, is encouraged to balance out their financial positions and gain wider access to crisis loans.

[Bill Esterson]

The hon. Gentleman did not answer the question about why there was such a change of heart. When the figures came out after the election, they showed that borrowing was £20 billion lower than had been assumed before the election. That could not have been the reason for the change of policy.

[John Hemming]

The hon. Gentleman ignores the fact that there was a sovereign debt crisis in Greece and that we need to learn from circumstances. If we do not do so, we will face great difficulties. We have a saving of some £100 million-plus on a scheme viewed by independent experts as not being the best way to use that money. There is no independent evidence that it even achieved its objective, save perhaps for reducing the amount of money people spent on restaurant bills when eating outside the home or on takeaways. That is what the IFS drew our attention to at the evidence session. If we are serious—and we are—about ensuring that the Government keep the interest rate on sovereign debt down so that we avoid ending up with the problems of Greece or Ireland, we must take that into account.

Yes, I accept there is a job to be done: we need to look after people on lower incomes and ensure that they have access to funding systems so they can balance their finances when they incur higher expenditure. We also need to encourage people to save where appropriate, but it is not always appropriate to do so. As I mentioned, the Royal College of Midwives said that a mother who has just given birth should not be concentrating on saving all her money; she needs to focus on eating well. On that basis, the proposals represent an entirely sensible and reasonable way of reducing the amount of money that the country has to borrow.

[Sheila Gilmore]

First, the selection of evidence we have heard from the Committee sittings is very limited, particularly from the hon. Member for Birmingham, Yardley (John Hemming). Other people giving evidence explained exactly how helpful the saving gateway scheme had been in its pilot phases and could be in the future. Mark Lyonette of the credit union movement said how important saving was, not only because of the money actually saved, but because of

“what it does to people’s confidence that they have… a few hundred pounds built up over a year or two. It gives them some sense that they are more in control. They will have credit commitments at the same time, but it is really important to feel that there is something of a buffer. Whether through the savings gateway or some other initiative, we think that the Government can encourage—and needs to encourage—more people to get that better balance between what savings they have, however small, and their credit.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 49, Q143.]

Yes, he also said that the saving gateway was not the only way to generate savings for the credit unions, but when asked whether it would make an important contribution he said “Yes, absolutely,” it would.

I did not quite understand the rhododendrons reference of the hon. Member for Blackpool North and Cleveleys (Paul Maynard), but he seemed to suggest that we believed that a scheme like this was “the answer” to deprivation and poverty. That is obviously nonsense. We are not suggesting that and we never have suggested it. It is one part of a whole jigsaw of provision that has to be put in place. It is that part of the jigsaw that needs to look forward to two things: first, questions of asset inequality; and, secondly, long-term solutions where people begin to change their behaviour and build up some assets for themselves.

19:45

It is important that we start looking to the long term. What worries me about the response from the coalition Government to this Bill is that it is very short term. The response is in effect, “Let’s get rid of this now. We’ll make some savings. We’ll destroy some schemes.” Both this group and the earlier group of amendments are about looking at issues in the longer term. If we do not start doing that, we are never going to get to the point where we properly tackle poverty and deprivation. It is not that saving gateways are suddenly the answer to everything; they are simply one mechanism that would assist in tackling the problem.

The important part of assisting is not just to give people advice. There is a great deal of advice out there, and there needs to be more of it—I certainly would not disagree with that—but this scheme, because of the matching in it, is about giving people practical help and incentives. It is qualitatively different from giving people advice at school or through an annual health check on their finances, when they can tell the financial adviser that there is no money. That would not be particularly fruitful for a lot of families. This is a practical scheme. It is about matching saving; it is about incentivising saving.

[Stephen Williams (Bristol West) (LD)]

The hon. Lady is dismissive of the importance of advice, good numeracy education in schools and an understanding of money. Proper budgeting and gaining an understanding of how to spread what I accept are limited means—I agree that this Government desperately need to deal with poverty in this country—are important; she should not be so dismissive of the importance of advice and good numeracy education in schools.

[Sheila Gilmore]

I was not being dismissive of advice; I said that it is not enough in itself. To suggest that it can be a substitute for something like the saving gateway is to miss the point—the real nudge, or the real incentive, that comes from the matching.

It has been suggested that there were not enough outlets for people to use the saving gateway, but the housing association movement was very interested in it and had a great deal of discussion about how it could become, in effect, a front end for people who wanted to save through the saving gateway scheme.

[Bill Esterson]

Does my hon. Friend agree that although advice and budgeting are important, one problem in society is the lack of good financial education? For people on very low incomes, it is difficult to find a means of saving. That is the whole point about the saving gateway and credit unions; otherwise, there are not the accounts or mechanisms for people on low incomes to save.

[Sheila Gilmore]

Indeed; I agree with my hon. Friend.

My point about the housing association movement is that the people who say that there are not enough outlets to make the saving gateway really work are not sufficiently prepared to look at some of the things that already exist. I firmly believe that we could have built the scheme up. If tenants could have agreed to small savings being taken at the same time as they paid their rent, for example, which would then be passed over to the provider—whether it be a credit union or another organisation involved in the saving gateway—that would have provided a relatively straightforward and easy-to-access method for those tenants. Housing associations, which see themselves as having a wider role than simply being a landlord, felt that this would have been helpful for their tenants.

We hear so much of “We have to do this because of the deficit.” We are told by the coalition Government, “We had to change our minds about all these things”—in fact, both Government parties did not support all these proposals, although they did support the saving gateway scheme—“because of the financial situation.” We have two different views about how to get out of a recession. The Government parties did not just want to pay down a deficit which they suddenly claim not to have known about before, although they did know about it and, as was pointed out by my hon. Friend the Member for Sefton Central (Bill Esterson), it had in fact been falling. They decided to reduce that deficit speedily, within five years, regardless of the consequences. There is another choice, although the Government may not agree with it.

The Government say to us, “You cannot support child trust funds or any of the other measures involved, because if you do, you will not reduce the deficit.” That is not the case. We take a different view on the economy. Our view is that the deficit should be reduced far more gradually. That was also the clear view of the Liberal Democrats as recently as late April: they said that fast cuts would be exceedingly dangerous. I do not see what has changed since then.

Ireland has been mentioned yet again. It cut public sector salaries and services, and it cut very hard. Indeed, only a few months ago it was being set up as a model in that regard. However, it has not got itself out of its financial difficulties.

We believe that if we reduced the deficit more slowly, two things would happen. First, we would be able to make choices about the things that are important, and I believe that the saving gateway would be one of them. Secondly, if we did not cut so drastically, unemployment would not be as high, which would mean more money for the Treasury, and we would not have a growing deficit problem. I firmly believe that if we proceed with the Government’s proposals the deficit will not be reduced as fast as they would like, despite the cuts, and it may actually increase.

We believe that those choices exist, and that the saving gateway is important because of the advantage that it brings to low-income families. It represents a long-term and real effort to change behaviour and improve the circumstances of such families, and that is why we want to retain it.

[Mr Hoban]

The speech of the hon. Member for Edinburgh East (Sheila Gilmore) was remarkable. It appears that only one group taking part in international debates is suggesting that we should be less aggressive in tackling the deficit and should put ourselves at the mercy of international markets, and that group is the Labour party. Surely the one lesson that should have been learned from our current circumstances is that a credible plan is needed to tackle the deficit, but Labour lacks that credible plan.

[Sheila Gilmore]

Many economists share our view, including Joseph Stiglitz and David Blanchflower. It is not true to suggest that it is only the view of the Labour party. There are different views, and it is entirely legitimate for people to hold different views, but it is simply not true that no one shares our view that reducing the deficit too rapidly is dangerous.

[Mr Hoban]

If the hon. Lady reads the comments of international organisations such as the OECD, the International Monetary Fund and the European Union, and those of rating agencies such as Standard & Poor’s, she will find that mainstream opinion agrees with the Government about the need to take action now to tackle the deficit in order to avoid the crises that we are seeing elsewhere in the world. All that we hear from the Labour party is “Let us delay the difficult decisions. Let us go into the election with the structural deficit, and try to deal with it in four or five years’ time rather than now.” That has been the theme of Labour Members’ contributions throughout our debates on the Bill. They have denied the need to tackle the deficit now, and have ignored the lessons that are being presented all around us.

[Bill Esterson]

Will the Minister give way?

[Mr Hoban]

Let me make some progress and explain why we are repealing the Saving Gateway Accounts Act 2009. The repeal is part of our deficit reduction policy. The right hon. Member for Delyn (Mr Hanson) quoted from my Second Reading speech. It was the third time that I had heard him use the same quotation. Let me now, for the third time, expand a little on what I said on that occasion. I said:

“The pilot scheme demonstrated some benefits, but it demonstrated some challenges too… What are the long-term benefits? What are we getting in return for the quite generous bonus that we are giving to savers?.. In the second pilot, questions were raised about whether the scheme was effective… First, there was no statistically significant evidence that, in delivering genuinely new savings, the saving gateway accounts delivered higher overall net worth.”

I referred to a

“number of anecdotes, rather than hard evidence, used to support the proposal”,

and added:

“It appears that money was moved from one set of savings to another, perhaps from a current account to a savings gateway account, simply to secure the Government match.”—[Official Report, 13 January 2009; Vol. 486, c. 145.]

While accepting the principle behind the saving gateway account, we nevertheless flagged significant concerns about its effectiveness.

The right hon. Gentleman mentioned the pilots. According to the conclusion from the second pilot,

“when we look at a broader measure of net worth (including investments as well as all cash deposit accounts), there is no statistically significant evidence that funds held in these forms have increased… we nevertheless do not find statistically significant evidence of an increase in overall net worth among this group.”

Carl Emmerson said in his evidence to the Committee:

“There was not any really strong evidence from the saving gateway that it led to more overall saving from lower-income households.”––[Official Report, Saving Accounts and Health in Pregnancy Grant Public Bill Committee, 2 November 2010; c. 18, Q42.]

Given the fiscal constraints that we face, we must question the value for money to be obtained from this project. It would be nice to be able to proceed with it, but the evidence suggests that it does not increase saving and does not possess the benefits ascribed to it by Labour Members. Not only is the evidence of its effectiveness in question, but it would cost more than £300 million over the next five years, which makes it unaffordable in the light of the need to reduce the deficit.

The other strand of the argument, touched on by the hon. Member for Makerfield (Yvonne Fovargue), is access. Who would be able to gain access to the saving gateway account? My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) echoed Adrian Coles, the director general of the Building Societies Association, who said that

“no building society had committed to offering a saving gateway account”.

Eric Leenders of the British Bankers’ Association said

“there were only a couple of providers who felt that it was suitably beneficial for them to provide the account.”

The banks that said they would provide accounts were Royal Bank of Scotland and Lloyds. The Post Office would take part in the scheme only if it received more taxpayers’ money.

I do not think we would have seen the easy access that the hon. Lady believed to be a key part of the scheme’s attraction. The only credit union outlet in my constituency is in a deprived area, and is open for only a short time each week. In my constituency, credit unions would not have been a vehicle for access to the saving gateway account.

Given that we do not intend to proceed with the scheme, we should leave no room for uncertainty among financial institutions or advice-giving bodies, and the best way in which to be clear about our intentions is to repeal the 2009 Act. I believe that if a future Government revisited the scheme, they would design it very differently. If the right hon. Gentleman wishes to press his amendment to the vote, I will ask my hon. Friends to oppose it.

[Mr Hanson]

I am disappointed by the Minister’s response, but that is the nature of the role that I currently fulfil. He did not oppose the saving gateway in opposition or in the general election; he did not vote against Third Reading of the Saving Gateway Accounts Bill; and he could have taken the opportunity today to accept the amendment enabling him to delay the repeal of the Act until a later date in order to judge how the economic situation developed. I have to assume that he says one thing in opposition and another in government, and that he is abolishing the scheme on the basis of dogma rather than the economic situation. I urge my hon. Friends to reject clause 2, and to support the amendment.

Question put, That the amendment be made.

19:59

Division 123

Ayes: 197

---

Labour: 187
Scottish National Party: 4
Plaid Cymru: 3
Green Party: 1
Social Democratic & Labour Party: 1
Democratic Unionist Party: 1

Noes: 300

---

Conservative: 251
Liberal Democrat: 48

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I call Mr David Hanson to move the next amendment.

[Kerry McCarthy (Bristol East) (Lab)]

rose—

[Mr Deputy Speaker]

Sorry. I call Kerry McCarthy.

Clause 3

Removal of entitlement to health in pregnancy grant

[Kerry McCarthy]

I beg to move amendment 3, page 2, line 22 leave out Clause 3.

[Mr Deputy Speaker]

With this it will be convenient to discuss the following:

Amendment 42, page 2, leave out lines 26 and 27 and insert—

‘(2) The Treasury will conduct a review of the health in pregnancy grant, to be concluded by 1 January 2012, which will consider, inter alia, the case for—

(a) the health in pregnancy grant to be retained in its current form;

(b) the health in pregnancy grant to be means-tested or in other ways targeted towards those most in need; and

(c) the health in pregnancy grant to be replaced by a system of vouchers.”’.

Amendment 44, page 2, line 27, leave out ‘2011’ and insert ‘2014’.

Amendment 43, page 2, leave out lines 31 and 32 and insert—

‘(2) The Treasury will conduct a review of the health in pregnancy grant, to be concluded by 1 January 2012, which will consider, inter alia, the case for—

(a) the health in pregnancy grant to be retained in its current form;

(b) the health in pregnancy grant to be means-tested or in other ways targeted towards those most in need; and

(c) the health in pregnancy grant to be replaced by a system of vouchers.”’.

Amendment 45, page 2, line 32, leave out ‘2011’ and insert ‘2014’.

Amendment 34, page 3, line 1, Clause 4, leave out ‘Sections’ and insert ‘Section’.

Amendment 30, page 3, line 1, leave out from ‘1992)’ to ‘extend’ in line 2.

Amendment 35, page 3, line 4, leave out ‘Sections’ and insert ‘Section’.

Amendment 33, page 3, line 5, leave out from ‘1992)’ to ‘extend’ in line 6.

Amendment 38, in title,  line 2, leave out from ‘2009;’ to ‘and’ in line 3.

[Kerry McCarthy]

I am sorry for not notifying you in advance, Mr Deputy Speaker, that my right hon. Friend the Member for Delyn (Mr Hanson) and I would be job sharing on Report.

We had a reasonably comprehensive debate in Committee on clause 3, which deals with the abolition of the health in pregnancy grant, although not as comprehensive as we would have liked. The Minister did not provide as much explanation as we would have liked on why he and his Government colleagues felt compelled to rush into axing the grant without sufficient evidence that it is not achieving the purposes for which it was intended. Amendment 3 would therefore delete clause 3, the grant would continue and we would have more time to assess whether it improves maternal health and nutrition, and the health of the unborn child and the child once it is born, and whether it achieves the important aim of getting expectant women to access professional advice during pregnancy.

I do not have time to rehearse in full the arguments in favour of such intervention during pregnancy. In Committee, we heard compelling evidence from witnesses of the health benefits for mother and child of tackling poor nutrition. We heard statistics about how many parents worry about not having enough money to feed their families and how many people on low incomes do not have enough money to provide healthy nutritious food. That can be seen in research carried out by organisations such as the Joseph Rowntree Foundation on what sort of household income would be sufficient to provide a healthy diet. Witnesses also told us of the importance of the grant as a nudge towards changing behaviour—the Prime Minister has been a keen advocate of such nudges in the past. By giving the grant and, in particular, by making the payment conditional on accessing advice on nutrition during pregnancy, we have encouraged expectant mothers who perhaps were not completely au fait with nutritional issues to start thinking about them, to access advice on health during pregnancy and to start on the road towards changing their patterns of behaviour. The scheme was in place for only a couple of years, so there was nowhere near enough time to assess its impact, but we heard evidence that it could help break generational cycles of poor nutrition, poor health, birth defects or even mortality during childbirth.

20:15

We heard other evidence about whether intervening earlier and paying the grant at 12 weeks rather than at 25 weeks would be a better approach, but we have not tabled amendments to that effect because we debated it extensively in Committee. I know that the Minister will probably say that there is little or no evidence that the scheme has done what it set out to do—the Government have also argued that in respect of the child trust fund and the saving gateway pilots. The simple answer to that is that the Government do not have any evidence that it does not work, because they simply have not given it time to roll out. The Conservative party element of the Government went into the general election seemingly happy that the health in pregnancy grant would continue. I concede that the Liberal Democrats are honouring their election commitment to scrap the grant and so are being consistent—they are wrong, but for once they are being consistent.

I shall now deal with the more detailed amendments tabled by the Labour Front-Bench team. Amendment 42 calls for a year’s moratorium on the abolition of the grant while a full review of its benefits is carried out. Such a review would consider the advantages and disadvantages of retaining it in its current form; of means-testing it or otherwise targeting it towards those who are deemed to be most in need and who would benefit the most; or of replacing it with a system of vouchers.

I stress that our preferred option is retaining the grant in its current form, but throughout the Bill’s progress through the House and in Committee two main criticisms have been made by the opponents of the grant. The first is that, as a universal benefit, it goes to those who do not need it and the money could be better spent on those who do. The second is that, because it is given as a direct payment with no restrictions on how it should be spent, it could be spent on frivolities. That is said despite the evidence we heard from child poverty groups, not only in this instance, but in general throughout the debate on child poverty. They suggest that the vast majority of women trying to get by on very limited incomes will spend any modest additional resources wisely and well, doing so for the benefit of their child or, as in this case, their unborn child. Some said on Second Reading that women could not be trusted, which is why we included as an option for the review consideration of whether a voucher scheme would be a better use of money.

Amendment 46 also calls for a moratorium, although it does not propose a time scale, while the Treasury—assisted, I would imagine, by the Department of Health or the Department for Education—conducts a review of current provisions for expectant and new mothers. That would include looking at other options on the table; it would consider not just the health in pregnancy grant, but the way in which it overlaps and interlinks with the Healthy Start scheme and the Sure Start maternity scheme, which is also being rolled back. That would give us the opportunity to examine whether those schemes are a more effective way of achieving what the health in pregnancy grant was designed to achieve.

Amendment 44 suggests postponing the abolition of the grant until 2014 and is, thus, self-explanatory. That would give more time for a proper assessment to be carried out on the experience of and health outcomes for people who have received the grant, and, more importantly, had access to the advice on maternal health which has accompanied the money.

That leads me to the last of the amendments tabled by those of us on the Opposition Front Bench. Amendment 49 calls again for a one-year moratorium during which the Government will consider how we can ensure that more women have access—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. May I suggest that we stick to the amendments that are selected for discussion now? Amendment 49 is not on the selection list and nor are some of the other amendments. If we could stick to the list, I would be very grateful.

[Kerry McCarthy]

Sorry, Mr Deputy Speaker. I assumed that they had all been grouped together.

Let me make a general point that links back to amendment 3 and the need to retain the grant. This is not just a matter of putting the £190 into people’s pockets so that they can spend it either on improving their diet during pregnancy or on items that they might need when the child is born. We need to bring people in so that they access professional health advice at the 25th week of pregnancy or, as we have debated, earlier in pregnancy. That is really important and there is nothing to replace it. The Government seem to have no suggestion on how to bring people in through the door and ensure that we increase the number of women who access such advice if the health in pregnancy grant is not used as a trigger mechanism. If the Government will not accept amendment 3 or any of the other amendments that call for more time and a review of how the grant works, will the Minister at least tell us how we can ensure that more women access professional advice on their health and the health of their unborn child during pregnancy? The grant was designed to tackle a serious issue and it is being abolished in its early stages. It is a shame to abandon the project at this stage.

[Paul Maynard]

Thank you, Mr Deputy Speaker, for giving me the opportunity to speak about the health in pregnancy grant, which of the three items covered by the Bill caused the most consternation in Committee and on the Opposition Benches. It certainly appeared to cause confusion in the Opposition’s arguments.

I have noted even today that there has been a slow, gradual erosion in the totalitarian position taken early on by the Opposition that the health in pregnancy grant was the most wonderful thing imaginable and could not possibly be trampled on. There has been a gradual slip back and quite a few Opposition Members have claimed that the grant was somehow misnamed and that, had they only called it something different, it would have all been all right. I must take them back to what the previous Prime Minister said when the grant was introduced. He said that he had received “powerful representations” about the

“importance of a healthy diet in the final weeks of pregnancy”.

He was very specific. He said the “final weeks of pregnancy”—not early in pregnancy, halfway through, in the 12th week, in the first week, or in the 25th week. The grant was well named, because it did precisely what the previous Prime Minister intended it to do.

The debate is not about the benefits of maternal nutrition, either. Everybody in the House agrees about the importance of proper maternal nutrition, but, clearly, we are divided on how that is best achieved. The Government do not believe that the health in pregnancy grant is the way to do it.

The debate is certainly not about timing. We have a range of alternatives: the Healthy Start vouchers, the maternity grant, and the Sure Start facilities. The shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) focused in particular on access to health care advice. I entirely agree with her about that, but she cannot avoid the fact that the Healthy Start vouchers are linked to attendance with a midwife.

Furthermore, the idea of the health in pregnancy grant was to provide access to health visitors, but one of the previous Government’s innovations that I wholeheartedly approve and wish to build on is the family nurse partnership schemes that operate in about 50 different councils. They specifically offer the access to advice for the most vulnerable that the hon. Lady was talking about. I simply do not understand her obsession with the health in pregnancy grant as the sole mechanism through which we can access advice. There are already multiple pathways to that advice—pathways that are more successful. I even think that there is a family nurse partnership in Bristol. Such schemes target the most vulnerable in society from the moment of conception until well past birth. This is far more expensive, I accept, but that is because it is a targeted intervention.

I do not accept the hon. Lady’s argument that we need to retain the health in pregnancy grant because it gives access to health advice. It is not the sole pathway for that.

[Kerry McCarthy]

The hon. Gentleman mentioned the family intervention project, and he is right that it does some valuable work—including some valuable work in Bristol. Does he have any idea how many families receive that advice and how many have been brought within the scheme compared with how many people would have received advice through the health in pregnancy grant?

[Paul Maynard]

It is actually called the family nurse partnership, but I assume that we are talking about the same thing. I know that in Blackpool it has worked with about 200 families in the past year. The numbers are clearly far fewer than those who could access the health in pregnancy grant, but once again the hon. Lady is returning to the debate that we have had over and over again about the universal versus the targeted.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

Does my hon. Friend agree that the difference with schemes such as the one in Bristol that he and the hon. Member for Bristol East (Kerry McCarthy) mentioned is that they can show tangible results, whereas the health in pregnancy grant can show no tangible evidence of how it has been beneficial?

[Paul Maynard]

I agree entirely. That is a very fair point. It was never clear whether the Opposition believed in universality or targeting. It seemed to depend on which amendment they happened to be pressing at any moment in time. It was part of the incoherent approach that they seemed to have to the debate.

The previous Government never tackled the issue of how it took up to eight weeks merely to process a health in pregnancy grant claim. The money often came through not in the 25th week but in the 33rd week—well beyond the time at which there was any hope of achieving real dietary change.

I specifically tackled the hon. Member for Bristol East on the issue of usefulness versus effectiveness. When she said in Committee that this was a useful grant, I asked her how she defined useful. She mentioned access, which I have dealt with, but never really dealt with the issue of effectiveness. That was my concern with the Opposition’s argument. At no point did they try to evaluate properly how effective the scheme was. I know that many amendments were tabled asking for such an evaluation, but all along the Opposition’s rhetoric was to use the word “useful” rather than “effective”. At no time did they argue that the scheme was effective, so we were left with not very much more than the shadow Minister trying to argue that it was nice to hand out other people’s money to other people. It might well be, but that is not a firm or solid foundation on which to build a health in pregnancy grant.

I support the abolition of the grant for the simple reason that we have a number of alternative mechanisms to support families who need assistance during pregnancy. The grant was not paid out at the right time in pregnancy, in my view, and I do not believe that it has achieved its goal. I do not believe that we would even be able to provide the evidence if that were the case. I wholly support the Government in what they are trying to do.

[Kate Green]

I am very sad that the Government have brought forward proposals to cancel the health in pregnancy grant. We have heard this evening and during the Bill’s earlier stages a number of criticisms of its structure. We have heard that it is paid at the wrong time—too late to have a significant impact on maternal nutrition and well-being—and that the money could have made more difference, even pre-conception, to low-income women of child-bearing age. We have heard that it misses the point and that women fritter it away on shoes and going to the spa. That might be true of a minority, but for many others the grant makes a crucial difference at a time when family finances become tight.

The Opposition have been asked whether we are not confused about wanting the grant to be universal or targeted at low-income and more vulnerable women. We are not confused. We are clear that we want a universal grant for all the reasons that we believe in universality: it is more effective at reaching the most disadvantaged, more cost-effective and simpler to administer, and it is easier to know when one is entitled to claim. We accept, however, that if we have to settle for a reduction in spending on pregnant women then, for a time at least, a targeted payment would have enabled us to keep the structure of the grant until it became affordable to offer it again on a universal basis.

20:30

We have also heard that the grant is not enough money and that £190 could not make much difference to a family budget. I assure hon. Members that £190 is a substantial sum to low-income households, particularly at a time when both parents might be facing the additional costs of a new arrival and when household income might dip as the woman takes time out of work to care for the newborn child. Whatever the grant’s imperfections, it is a matter of enormous regret that the Government propose to reduce our investment in women as they conceive, carry and give birth to children. I very much regret anything that could have a detrimental impact on maternal health and well-being.

We are very well aware of the effects of good maternal diet on the birth of healthy babies. Low-birthweight babies suffer particularly poor long-term outcomes in health and education and there is considerable evidence that poor maternal nutrition affects babies’ pre-birth development, including brain development. It is therefore very important to take every step we can as early as we can to improve maternal nutrition and therefore the chances of children being born healthy. My hon. Friend the Member for Bristol East (Kerry McCarthy) has already mentioned that the grant, which is linked to nutritional objectives, has enabled us to begin developing healthier eating habits in new mothers that would continue right through until after their child’s birth and on into family eating habits. We received evidence on that from a number of expert witnesses in Committee. We in Opposition are keen to sustain that long-term, albeit somewhat intangible, benefit.

Most importantly, the grant delivers more money to families and helps to relieve pressure on family budgets at a time when extra expenditure will be incurred. If it is not spent directly on food and nutrition, at least it frees up the family budget by meeting the cost of other, perhaps lumpy, items that parents have to buy when a new baby is expected, so there is less worry about the pressure on household budgets to meet day-to-day outgoings at that time. That is important in reducing the level of stress and mental distress that is felt by pregnant women if they are worried about money as they await the birth of their baby. It is particularly important that women prepare for birth in a calm and confident frame of mind. We know that women run out of money to pay for food if they are trying to manage in the late stages of pregnancy on a low income. We should seek to hold on to anything that can help to compensate for that fear and help them to be confident that they can make ends meet, so I very much regret this retrograde step.

Throwing the baby out with the bathwater is not desirable or necessary, and that is what the Opposition’s amendments seek to highlight. We want to take time to reflect on what in the grant has been successful and needs to be built on. If the grant is not the right mechanism, I challenge the Minister to tell us what he will offer instead to improve the well-being of pregnant women and the prospect of kids being born healthy. The health in pregnancy grant is, as the Zacchaeus 2000 Trust has said, not enough but a step in the right direction. I very much regret that we are seeing a step backwards—a step in the wrong direction—from the Government.

[Fiona Bruce]

I support the abolition of the health in pregnancy grant, not least because £150 million a year could simply be better spent on improving the life chances of our younger generation—for example, by reducing the deficit and the burden that they would otherwise bear as a result for years to come. The grant is poorly focused, poorly targeted and poorly timed. It is poorly focused because it does not have to be spent on nutritious food or on the health and well-being of the mother or child, as was originally intended. As Dr Callan of the Centre for Social Justice said in evidence:

“There was absolutely no guarantee that the grant would be spent on nutritious food.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 116, Q279.]

Indeed, the Committee heard evidence to the contrary, as has tonight been confirmed by a Labour Member.

The grant is poorly targeted because it is paid to the better-off and not just those who really need extra financial help in pregnancy. I find that quite offensive, as someone who—along with many of, if not all, my colleagues on this side of the House—shares a real desire to improve the life chances of the less well-off.

[Sheila Gilmore]

On that basis, if the hon. Lady feels so strongly about it, why has she not advocated that the grant should be retained but restricted to the groups that she feels need it most? I am not saying that that is my point of view, but I was not aware that she or her colleagues were proposing it.

[Fiona Bruce]

The hon. Lady makes a valid point: we are continuing the Sure Start maternity grant and the healthy start vouchers because their benefit is that they really hit their target, which is some half a million mothers in difficult circumstances who obtain vouchers from the 10th week of pregnancy to buy vegetables, vitamins, fruit and other healthy foods.

[Kate Green]

Does the hon. Lady not also accept that those women will at the same time suffer a loss of £190 that would also help them with those good outcomes? What steps would she take to ensure that those women were protected and did not find that they had less overall than they had before?

[Fiona Bruce]

I thank the hon. Lady for that intervention. I made the point at the start of my speech that unless we look at the bigger picture and reduce the deficit that the country is bearing, the generation that those mothers are now bringing up will have to bear the burden of interest on interest for years to come, and their life chances will be far lower than £190 could compensate for.

The healthy start vouchers were described in evidence by Belinda Phipps of the National Childbirth Trust as

“a really good scheme… It has been put together well and people can get a broad range of healthy foods for the vouchers.”

The health in pregnancy grant is poorly timed. Belinda Phipps said in evidence:

“If you are setting out primarily to improve the… health of the baby”

the payment of the health in pregnancy grant

“needs to be earlier. If you… really want to change the future of the baby, it needs to be as early as possible.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 79-89, Q205-224.]

The 25th week is simply too late.

Although there is no doubt that the grant does some good for a number of families, that certainly does not justify the expenditure of £150 million per annum. Indeed, it is a rich irony that, throughout the evening, Labour Members have been exhorting sound financial management, yet now, in the same debate, persist in pursuing what is an example of a seriously ineffective use of public funds—precious public funds of £150 million a year.

[Dr Poulter]

We have heard a lot this evening about universal benefits and the need for targeting. I think that we all agree that having a grant that would allow us to give every pregnant woman £190 sounds, in principle, like a good idea, but clinical practice—for me, as an obstetrician—and what we have heard from many colleagues tonight indicates that there is no firm basis or grounding to support a grant of that nature.

[Mike Weatherley (Hove) (Con)]

Given my hon. Friend’s experience, does he agree that some of that money would be better targeted on front-line services, especially midwives in areas such as my constituency where there is a shortage?

[Dr Poulter]

I thank my hon. Friend for his comments. He makes the point that I shall develop a little later. If we want to make a real difference to pregnant women, the resources must be given to the front line. I had the experience of working at Brighton hospital for a considerable number of months. There was a great shortage of midwives at my hon. Friend’s local hospital.

[Margaret Curran (Glasgow East) (Lab)]

Will the hon. Gentleman give way?

[Dr Poulter]

No, I will not.

The pregnancy grant would be much better directed if it was used to improve care at the time of delivery, when we know that maternity care matters most in reducing the number of foetal deaths and in reducing poor outcomes in pregnancy and delivery.

The hon. Member for Bristol East (Kerry McCarthy) made the point that we need to be able to measure the effectiveness of the grant, and that it should be a nudge in the direction of good behaviour. I accept that any intervention should encourage good behaviour. Unfortunately, what I saw in my clinical practice, and I speak also as the chair of the all-party parliamentary group on maternity, is that unfortunately many mothers from vulnerable backgrounds were spending the grant on, among other things, cigarettes, which we know have a detrimental effect in pregnancy. There is also a high though often unseen rate of drug and alcohol misuse in pregnancy. The grant is potentially spent on those harmful things as well. Giving an intervention, such as the grant, 25 weeks into pregnancy is far too late to help women deal effectively with those substance misuse problems.

[Kate Green]

I am sure the hon. Gentleman will agree that the majority of mothers are not substance misusers or alcoholics. Indeed, there is considerable evidence over many years, including from the Policy Studies Institute, that shows that if women are given more money, what they do, as my hon. Friend the Member for Bristol East (Kerry McCarthy) said, is spend it on their kids.

[Dr Poulter]

That is a fair point. Nevertheless, many women smoke during pregnancy and do not necessarily give up smoking. The hon. Lady made the point in her speech earlier about low birthweight babies, a factor which we know is linked to smoking. The grant can be used by mothers to support their smoking habit. To be used effectively, a grant must be tied in with results and effect. We all want mothers to have better nutrition, but unfortunately the grant was often spent on harmful substances. The main problem with the grant is that it was not targeted, it was not effective, and it was not making a difference at the time that we know matters to mothers, which is at birth and delivery.

[Kerry McCarthy]

I am slightly suspicious about the extent to which the hon. Gentleman speaks with authority on what the women who come to see him in his surgery spend their health in pregnancy grant on. I cannot imagine them saying, “I’m off now to spend my grant on rather a lot of packets of fags.” What is the difference between the point that the hon. Gentleman is arguing now—that during pregnancy women should not be given a lump sum that they can spend in any way they choose because some of them might spend it on the wrong things—and what happens with child benefit after a child is born? Surely mothers could spend their child benefit on cigarettes, drugs and alcohol. If that is pursued to its logical conclusion, is it not an argument against giving them child benefit?

[Dr Poulter]

We are not talking about child benefit this evening. We are debating the pregnancy grant. On the principle that the hon. Lady outlines, if we want to provide an intervention and if we want to make a gift of money effective, we need to target it effectively. We have no evidence to show that the grant is an effective intervention in pregnancy. No one on the Labour Benches has shown that the intervention is effective in improving nutrition in pregnancy.

Granted, in my clinics I obviously did not discuss in detail where the grant was spent. Nevertheless, I saw in my clinical practice far too high a rate of women smoking during their pregnancy. I would much rather see effective and targeted advice, independent of any grant, being focused on making sure that women do not smoke while they are pregnant. That would be a much better way of dealing with the issue.

[Sarah Newton]

I endorse what my hon. Friend is saying. I took the time to read in Hansard the entire debate that took place when the Bill was first introduced. The very points that my hon. Friend is making now were made then—that the grant is not the right way to encourage good nutrition in women of child-bearing age, which we all agree is vital.

20:45

[Dr Poulter]

I thank my hon. Friend for her point. On nutrition in pregnancy, we know from all the evidence that the biggest and single most effective intervention in nutritional terms is to give women folic acid pre-conception and in the early days of pregnancy. Most problems or birth defects occur in the first six to eight weeks of development, when the embryo is very small, so if we are to intervene effectively that is the time to do so. We already do, because all GPs, midwives and obstetricians encourage women in the first stage of pregnancy to take folic acid, which is the single most effective intervention to prevent neural tube defects and all others.

We have heard how we need to ensure that when we intervene, particularly with the most vulnerable and disadvantaged groups, we do so effectively. When the Act was introduced, the whole point of it was to reach those groups, yet people from Traveller communities, Gypsies and people from deprived backgrounds often still do not access maternity services until the time of delivery or when it is far too late. The hon. Member for Bristol East tried to argue that the grant improves access to maternity services among disadvantaged groups, but lots of clinical audits and data prove that it does not. The evidence shows that the grant is not at all effective in helping improve access to pregnancy services. The hon. Lady’s point fails, and I hope Members will bear that in mind later.

We are talking about targeted, results-driven and evidence-based care, but there is no evidence to support the grant as a nutritional intervention or in terms of improving childhood outcomes at birth, so for all those reasons we must target our resources where they belong, on putting those 3,000 extra midwives on to the front line, because they, not a £190 grant, will make the difference.

[Mr Hoban]

It has been a brief but thoughtful and thought-provoking debate. The amendments that the hon. Member for Bristol East (Kerry McCarthy) proposes seek to achieve one of three things: keep the health in pregnancy grant in place, delay its abolition or require the Government to conduct a review into the case for maintaining it in another form.

The grant was introduced in April 2009 by the previous Government. When announced in the 2006 pre-Budget report, the provision was to be paid as child benefit from the 29th week of pregnancy to recognise the important role of nutrition in the last months of pregnancy, when nutrition is most important, and in the first weeks after birth, with parents bearing the extra costs. Then, the payment was to be a £190 one-off grant, made from the 25th week of pregnancy with the intention of providing support for the general health and well-being of women in the later stages of pregnancy and helping them to meet costs in the run-up to birth.

Those were laudable objectives, but, as we have outlined on Second Reading, in Committee and again tonight, the grant has been essentially flawed from the outset. There is no requirement to use it for better health and well-being: women can spend the money on whatever they want; and it is paid to pregnant women regardless of their income or need. As Dr Samantha Callan of the Centre for Social Justice said in an evidence session on the Bill:

“There was absolutely no guarantee that the grant would be spent on nutritious food.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 116, Q279.]

In the context of the unprecedented budget deficit, therefore, we believe that this payment to all pregnant women is a poorly targeted use of limited public funds. Abolishing the payment will help to reduce the UK’s budget deficit, saving £40 million in 2010-11 and £150 million per annum from 2011-12 onwards.

Having decided that we need to abolish the grant, the Government believe it should be done quickly to maximise the Exchequer savings. By delaying the abolition until 2014, as amendments 44 and 45 seek to do, we would reduce those savings, and amendment 3 would keep the grant in place, so additional money would have to be found through other spending cuts, borrowing or tax rises this year. As my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) said, there are other priorities. The coalition Government are clearly committed to increasing spending on health in real terms over the lifetime of this Parliament. Are Labour Members saying that that commitment should be relaxed to enable us to keep the health in pregnancy grant?

Much was said by Opposition Members on Second Reading and in Committee about the importance of a healthy diet during pregnancy, the importance of vitamin supplementation, and, especially, the effect of these on women on low incomes. There is no doubt that maintaining a healthy diet throughout pregnancy is important. However, the evidence suggests that that should start at the earliest possible stage. Belinda Phipps of the National Childbirth Trust said in the evidence session on the Bill:

“If you are setting out primarily to improve the nutrition of the mother to improve the health of the baby,”

the payment of the health in pregnancy grant

“needs to be earlier. If you…really want to change the future of the baby, it needs to be as early as possible. It is not possible easily to do it pre-conception, but the earlier in pregnancy you can do it, the better.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 79, Q205.]

Amendments 43 and 44 would stop the abolition of the grant and require the Treasury to conduct a review to consider whether the grant should be retained in its current form, means-tested or replaced by a system of vouchers. As I said on Second Reading and again in Committee, the Government are committed to supporting the health of pregnant women in low-income households through the Healthy Start scheme, which provides support from the 10th week of pregnancy, when diet is particularly important in a baby’s development. The Healthy Start scheme provides vouchers worth £3.10 a week for fruit, vegetables and milk, as well as coupons to exchange for Healthy Start vitamin supplements containing the recommended daily amounts of vitamins C and D and folic acid for pregnant women and new mothers. The Department of Health is also co-ordinating a consultation exercise that seeks views on the extension of the scheme to allow vouchers to be used to buy plain frozen fruit and vegetables. This would increase the flexibility and choice for women supported by Healthy Start while encouraging them to include more fruit and vegetables in their daily diet at the time in their pregnancy when that is particularly important.

The amendments would delay the abolition of the grant or keep the grant in place. That would mean that additional money had to be found through other spending cuts, borrowing or tax rises this year. The Government have to face some difficult choices as to where to cut public expenditure, and we cannot afford to continue spending £150 million a year on the cash payment of a health in pregnancy grant regardless of what it is spent on and whatever the income or financial position of the recipient. As my hon. Friend the Member for Congleton (Fiona Bruce) explained, it is not well focused, well targeted or well timed. That is why I believe that it is right to scrap this grant, recognising that measures are in place to help to support maternal nutrition among families on low incomes. We also have the Sure Start maternity grant, which is a lump sum to help those on the lowest incomes.

[Mrs Mary Glindon (North Tyneside) (Lab)]

The Sure Start maternity grant is given only for the first child. If a family do not have that grant or the health in pregnancy grant, with the Government also reducing the amount that they would get in family tax credits for toddlers, they will be much worse off.

[Mr Hoban]

That is an unfortunate consequence of the difficult decisions that we have to take to tackle the deficit that the hon. Lady’s party has left behind. Tough decisions have had to be made to target help as closely as possible on those in the greatest need. The support that exists, whether through the Sure Start maternity grant—yes, we are restricting that to the first child from April 2011—or through the Healthy Start vouchers, provides targeted, focused help for those in the greatest need. That is the best way to give support to help mothers on low incomes through pregnancy. The health in pregnancy grant does not tackle nutrition, and it is not well timed because it should be delivered at an earlier stage to help families.

I have to say to the hon. Member for Bristol East that if the grant goes, there are still plenty of opportunities for expectant mothers to access health visitors, midwives and GPs to get the support that they need to help them with their diet or with smoking cessation, and to give them advice and support throughout the pregnancy. Support is not limited simply to receiving that grant; it is there throughout pregnancy, and we should not overlook that fact in discussing the Bill.

It is right to remove the health in pregnancy grant, even though we do not do it lightly and would not choose to do it unless it were a consequence of the situation that we have inherited. The previous Government lost sight of good fiscal discipline, and we are having to take measures today to tackle the problems that have resulted.

[Kerry McCarthy]

In all our debates on the health in pregnancy grant on Second Reading, in Committee and today, we have been going round and round in circles without ever quite nailing what the Government’s objections are to the grant continuing.

I shall try to pin down what the Minister has said. He says that the grant would be better if it were paid earlier, yet he has not brought forward any suggestion that it should be. He says that it is a problem that there is no guarantee about what it is spent on, yet he seems perfectly happy to go on paying child benefit to mothers or the winter fuel allowance to pensioners. There is no guarantee about how that money is spent, so I reject that argument. It has been suggested that there has been no evaluation of the scheme, but as he said, it was introduced in 2009. How on earth can we possibly have had the chance to carry out a full evaluation of the take-up of the grant, what it is spent on and people’s access to advice?

My final point, and the crux of the matter, is that the Minister praises the Healthy Start scheme because it is targeted at the people who need it most. He also mentioned the Sure Start maternity grant, which, as we know, is being reduced to cover just the first child. Does he not accept that if we abolish the health in pregnancy grant, the families he spoke of, who need the Healthy Start vouchers to cover expenses and to have a healthy diet during pregnancy, will be £190 a week worse off? That is why we argue for the retention of the grant, with a review of whether it should be means-tested and better targeted. In rejecting the idea of a review totally, he is basically saying that the poorest families, who are already suffering because the Sure Start maternity grant is being restricted to the first child, must lose £190 a week. That is something of a scandal. I therefore wish to press the amendment to a vote.

Question put, That the amendment be made.

20:57

Division 124

Ayes: 217

---

Labour: 205
Scottish National Party: 6
Plaid Cymru: 3
Green Party: 1
Social Democratic & Labour Party: 1
Democratic Unionist Party: 1

Noes: 304

---

Conservative: 255
Liberal Democrat: 48

Third Reading

21:11

[Mr Hoban]

I beg to move, That the Bill be now read the Third time.

As we have discussed today, the Bill deals with three policies: child trust funds, the saving gateway and the health in pregnancy grant. Both today and in Committee two weeks ago, we have debated the details of those policies. Opposition Members have pointed to their merits or, rather, their potential merits—as we have found, quite often the hard evidence to support their arguments is rather lacking. They have argued that we should either retain the policies or delay removing them, and sometimes both at the same time.

I shall come to some specific points about those policies in a moment, but I want to be clear on one point. The question for this Bill is not simply whether we think that child trust funds are a nice idea or whether we would like to give pregnant women some more money. The question for this Bill is a harder one to confront. It is whether we can afford such policies—at a cost of £3 billion over the spending review period—given the scale of the deficit that we inherited, and whether continuing with them would be the best use of taxpayers’ money.

As we decide to give the Bill its Third Reading, it is important to remind hon. Members of the context. When the Governor of the Bank of England says that our fiscal position is “clearly unsustainable”, when our borrowing last year was the highest in our peacetime history and when we are spending £120 million a day just to pay the interest on our debt, something has to give. If we do nothing and fail to tackle the deficit, we will see higher interest rates, business failures, rising unemployment and, potentially, even the end of the recovery. We therefore need a clear, credible plan to tackle the deficit. We have set one out, including more than £80 billion of spending reductions. However, to deliver it we have to make choices about where savings are going to come from.

We have made those choices, and this Bill implements three of them. They were not easy choices. As I said on Second Reading, the Conservative party supported the introduction of child trust funds and the saving gateway in opposition. Indeed, on at least three occasions so far, the right hon. Member for Delyn (Mr Hanson) has quoted what I said about the saving gateway, and I suspect that he may well remind the House again in his speech on Third Reading. We did not warn against the health in pregnancy grant, although we did raise some concerns about it. My Liberal Democrat colleagues were rather more sceptical. They opposed the child trust fund and prayed against the regulations that introduced the health in pregnancy grant. However, as I have said, the question is not whether it would be nice to keep those policies—in an ideal world it would be—but whether we can afford to keep them, given the fiscal challenge that I have outlined, and where else we would have to find savings if we did so.

I believe that the Bill makes the right savings. Continuing with the child trust fund, for example, would have cost us more than £500 million each year. That money would have been locked up for up to 18 years—a luxury we cannot afford.

Given our limited resources, we must spend money on our priorities: reducing the deficit, so that our children are not left to pay our debts; supporting the most vulnerable and poorest people in our society now—for example, through the pupil premium; and the extension of early years education and care to all disadvantaged two-year-olds. Those policies will provide real opportunities for disadvantaged children to move out of poverty for the long term.

While saving money from the child trust fund, we are still committed to encouraging people to save for their children in an affordable way. That is why I announced a new account—a junior ISA—on Second Reading. It will provide parents with a simple and clear way of saving for their children, albeit without Government contributions, and build on products that are already accessed by 20 million people of all ages and on all incomes. I also want to encourage people on lower incomes to save, but again that must be affordable. Unfortunately, it would not have been affordable to introduce a new scheme such as the saving gateway, which would have cost up to £150 million a year just when we are starting to tackle the deficit that we inherited in the summer this year.

I was worried that there would not have been enough providers to ensure that everyone had an accessible option for opening a saving gateway account. During the Bill’s evidence sessions, we heard from the British Bankers Association and the Building Societies Association that their members were far from enthusiastic about providing such accounts. The Post Office was going to offer the account only if taxpayers had funded it to do so. We cannot afford to introduce that account, and there were significant doubts not only about access and who would offer it, but about its effectiveness in increasing saving.

It is right to abolish the health in pregnancy grant. I remind hon. Members that it is a one-off cash payment of £190 to every pregnant woman around the 25th week of their pregnancy. In Committee, we debated at length the different ways in which women might spend that money, and how the scheme could be improved, such as by paying it earlier, in instalments or to only some women. The basic point is clear. The grant is unfocused, it can be spent on anything, and it is untargeted. We believe that there are better ways to support maternal health.

[Fiona O'Donnell (East Lothian) (Lab)]

Following that logic, does the Minister believe that because there is no guarantee about where housing benefit, child support and child benefit will be spent, they should be scrapped?

[Mr Hoban]

The hon. Lady has not participated in the debate today, but we have thought carefully about how to provide support during pregnancy to those on low incomes. There are vouchers under the Healthy Start scheme, and the Sure Start maternity grant, which we believe are more effective in providing targeted, better timed and more focused support to expectant mothers.

There is a choice. We could spend £120 million on the health in pregnancy scheme or we could scrap it and save the money so that we do not have to increase taxes or borrow so much. The latter is the right action to tackle the deficit. There are better ways to support maternal health, such as the Healthy Start scheme, which provides vouchers to enable pregnant women to buy fresh fruit and vegetables. The Department of Health is consulting on whether to extend that to plain frozen fruit and vegetables. Vouchers are also available for vitamin supplements, including folic acid, to provide a daily dose of vitamins B and C.

The Healthy Start scheme is effectively targeted at pregnant women and children living in low-income households, and is focused on supporting health and well-being, because it pays support in the form of vouchers rather than in cash. It is delivered at the earliest stage of pregnancy when dietary intervention is much more effective. That means that we can focus our resources better, but at the same time make some real savings—about £150 million a year. That is a vital contribution to tackling the deficit and ensuring that people are not burdened with the debt that we inherited from the previous Government.

That is the key point of the Bill. The changes that we are making to child trust funds, the decision not to introduce the saving gateway and the abolition of the health in pregnancy grant will save more than £3 billion over the spending review period. That is an important part of our plan to reduce the deficit and put our finances back on a stable footing.

As I said, this has involved some tough choices, but I believe that we have made the right ones. We found areas of spending, such as the child trust fund, which does not support people for up to 18 years, the saving gateway, which has not yet been introduced, so its removal will be less directly felt, and the health in pregnancy grant, which is untargeted and unfocused. We have confronted the questions, which I outlined earlier, of whether we could really afford to continue with those policies and whether they would represent the best use of taxpayers’ limited resources. The questions for anyone who wants to oppose this Bill and to continue with the policies are how they would find the money and what they would do instead. This is an important Bill. It is part of our work to tackle the unprecedented deficits that we inherited, and it will help us to put our public finances back in order. I commend it to the House.

21:21

[Mr Hanson]

I thank the Minister for his opening remarks on Third Reading. He and I have got to know each other, as Minister and Opposition spokesperson, and other members of the Committee quite well over the past few weeks. We have now discussed the key issues on Third Reading. He will know that we have had a total of 23 votes on Second Reading, in Committee and on Report. I hope that that illustrates the strength of feeling about the Bill among Labour Members. It contains only four clauses, yet we have managed to have 23 votes on a range of issues as we continue to oppose the Bill. We have fought the Bill at every opportunity, and will continue to do so in another place shortly.

We oppose the Bill because the abolition of the child trust fund will reduce the opportunity for the poorest in our society to have a capital asset at 18. We oppose it because the abolition of the saving gateway scheme will reduce saving opportunities for the poorest in our society. We also oppose it because it will reduce the help available to pregnant women by stopping the £190 grant that is available to them in the 25th week of their pregnancy. Again, I must point out, for the Minister’s benefit, that that will hit the poorest in our society the hardest.

As Opposition spokesman, I have tried to be as pragmatic and helpful to the Minister as possible on a number of occasions. I have tried to help him by giving him an opportunity to delay the implementation of the Bill, so that we could see whether some of our economic woes—which are difficult and challenging at the moment—are overcome in the next three years. We offered the Minister the opportunity to postpone implementation of the bill until 2014, or 2016, but he rejected it. We offered him the opportunity to have payment holidays, but he rejected it. We also offered him the opportunity to deal with Wales, Scotland and Northern Ireland differently, but he rejected it.

We offered the Minister the opportunity to fulfil his manifesto commitment to keep the child trust fund for the poorest third of our society, for those on disability living allowance and for looked-after children—a point that my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) has particularly focused on during the debate. We have considered a range of issues, including whether the Bill needed a proper equality impact assessment, but the Minister has chosen to reject them all. Well, so be it; that is his prerogative. I believe that he has made the wrong choices in relation to tackling the deficit, by putting women, children and the poorest at the forefront of his deficit reduction plan.

In doing that, the Minister has broken his manifesto commitments on the child trust fund for the poorest third, for looked-after children and for those on DLA. He has made a U-turn by abolishing the saving gateway scheme, which he supported during the election and right up to the moment when the Bill was introduced, and by abolishing the health in the pregnancy grant, for which he had no mandate. He never argued for its abolition at the general election, or mentioned having to cut it; he never said that he was concerned about it at all. He must have known at that stage that there would be, as there are, challenges for whoever won the general election to ensure that we met those needs.

The Bill abolishes the child trust fund completely; it abolishes the saving gateway completely; it abolishes the health in pregnancy grant completely. It is the deficit reduction plan hitting women, children and the poorest in our society the hardest. The Minister will know that the child trust fund was introduced by the Labour Government not just as a way of helping poorer people to save, but as a means of ensuring that we have individuals with a capital asset at the age of 18. He will know that there was a take-up of about 70,000 a month until he introduced this measure in July; with this Bill, we now look to 3 January 2011. He will know that 6 million families and people have the child trust fund in operation at the moment, but that in future that opportunity will be denied to individuals across the UK because this Minister has chosen—of all the choices he could have made—to ensure that the deficit reduction plan falls on those people who need the help and support the most. The Minister will also know that £2 billion of saving has been generated by the child trust fund to date. He will know that it might not be generated in future because the partnership between Government, the state and individuals will no longer be there in future.

In its place, the Minister wafts in front of us the prospect of a child ISA for the future. I await the details, but so rushed is this proposal that it was not even worked out fully for the Committee. So rushed is this Minister that he brings a proposal before the House today, yet he cannot even say what the child ISA scheme will be in detail. He cannot say when it will definitely be introduced. He cannot say whether contributions from looked-after children—an issue brought to our attention by my right hon. Friend the Member for Wythenshawe and Sale East—will be possible. He cannot say how much will be involved or how the scheme will operate downstream, yet he asks us today to abolish the child trust fund, which has had a proven record of saving success to date.

The Minister brings forward the abolition of the saving gateway, doing away with the Saving Gateway Accounts Act introduced in 2009, even though it was not opposed by the Conservatives on Third Reading. The purpose of that scheme was to promote savings habits among working-age people on lower incomes. He will know that we have had two pilots, neither of which was criticised by the Minister at the time, and they involved 22,000 people generating £15 million of savings—helping poorer people to save for the future. He does this at a time when his deficit reduction plan is going to put 500,000 people in the public sector on the dole. With VAT increases, with loan sharks operating in the community and with the collapse of schemes such as Farepak, which my hon. Friend the Member for Makerfield (Yvonne Fovargue) mentioned in Committee, the Minister will find that the need to give help and support to poorer savers is even greater now than before. But, no, the Minister will not even allow a three-year gap to see whether the economy recovers. The scheme would not cost him a penny in the next three years, but he wishes to abolish it because of dogma—nothing else but dogma.

When he abolishes the saving gateway scheme and when Government Members vote for that abolition this evening, they need to know that they are voting to ensure that people on working tax credit, income support, incapacity benefit and jobseeker’s allowance, and other low-income people will be denied the benefits of that scheme. Let us remind the Minister that a Labour Government would have brought this into play in July 2010, supported by our Chancellor and supported by a deficit reduction plan in last March’s Budget that would have ensured that we halved the deficit within four years.

Last of all, the Government are abolishing the health in pregnancy grant—a one-off tax-free payment of £190 to mothers-to-be who are 25 weeks pregnant. We can debate it and have debated it in detail, but nobody can deny that a £190 grant would have helped the poorest pregnant mothers in our society to meet the costs of their pregnancy and to ensure, as my hon. Friend the Member for Bristol East (Kerry McCarthy) said, that they receive further help and support through medical advice in the 25th week and beyond, linked to medical visits. The Minister knows that 750,000 qualifying pregnancies each year will not receive the grant. Again, he has hit women—pregnant women—and children hardest.

It would be different if the Government’s proposals were due merely to the fact that these were Labour Government initiatives. However, Mike O’Connor, chief executive of the watchdog group Consumer Focus, has said:

“The Saving Gateway would have been a great opportunity”.

The Child Poverty Action Group, which was led with distinction by my hon. Friend the Member for Stretford and Urmston (Kate Green), has said:

“It’s a real shame that this move to help people build up savings to deal with crises… should be scrapped.”

The National Childbirth Trust has said:

“At a time when families are trying to make ends meet, the Coalition Government has hit parents particularly hard. Cutting pregnancy and maternity grants”.

The Royal College of Midwives—this answers the point made by the hon. Member for Central Suffolk and North Ipswich (Dr Poulter)—has said that it is

“disappointed at the decisions to abolish the Health in Pregnancy Grant”.

A common thread runs through the Bill. The Government are hitting the poorest hardest. They are ensuring that those who need the help, support and partnership of the state are hit hardest; and although they claim to be doing it in the name of deficit reduction, they are actually doing it in the name of dogma. I urge my right hon. and hon. Friends to reject the Bill, but I also urge the Minister to reflect on the fact that, although there is much on which we have disagreed today, there are still areas on which we can reach agreement.

I particularly hope that the Minister will examine in detail the methods and discussions being undertaken by my right hon. Friend the Member for Wythenshawe and Sale East in regard to looked-after children, and that he will return with positive proposals so that, although the Bill has not been amended in this House, amendments may be made in another place. Whatever the Minister says about the need to abolish help and support through the child trust fund, or about the removal of the saving gateway or pregnancy grants, he must know that looked-after children do not have parents who are responsible for them. Their parents may be dead, or they may be in difficult circumstances—they may be in prison, or involved with alcohol or drugs. But the Minister knows that those parents are not there to support their children, and he should know that in that instance, if in no other, the state needs to step in.

[Graeme Morrice (Livingston) (Lab)]

I agree with my right hon. Friend that the Government’s proposals are a direct attack on the poor. In my constituency 7,824 children, many from backgrounds that are less than affluent, currently benefit from the child trust fund. The Minister said earlier that it was a luxury that we could not afford. Does my right hon. Friend agree that that is an affront to all those people in my constituency and throughout the country, many of whom are impoverished?

[Mr Hanson]

I am grateful for my hon. Friend’s comments. The Minister and the Conservative party—and let us not forget their partners, the Liberal Democrats—are ensuring that they hit such people hardest in abolishing the child trust funds, particularly looked-after children and those whom they said they would defend, the poorest third. They are hitting people on jobseeker’s allowance who would have benefited from the saving gateway. As for the removal of the health in pregnancy grant, the loss of £190 may not be the end of the world for many people, but for the poorest in our society it was a contribution on which they depended to ensure that they met the costs of pregnancy.

Whatever disagreements the Minister and I have had—and we have had many over the past few weeks—I hope that he will take the opportunity to consider some of the key issues that he can still salvage. I hope that he will at least ensure that we can provide a partnership for looked-after children. Undoubtedly all the promises that he made before the election will be quoted again in another place, and every one of the issues will be tackled again there. We shall see what is said in the other place, but I hope that the Minister will reflect on those issues. In the meantime—with some pride in what the Labour Government did—I urge my hon. Friends to reject the Conservative-Liberal Democrat proposals.

21:33

[John Hemming]

Let me ask a question. If the Labour party will not cut these three things, what will it cut? They are probably three of the easiest things to cut that could possibly be identified.

Let us take the child trust fund. At present we have a deficit. Every year, we borrow the deficit and add it to our debt. Putting money into the child trust fund means that the taxpayer—the state—borrows some money and then puts it into a fund. Some of the funds lose money while others gain money. Hopefully, 18 years later there will be a little bit of money for someone. If the Labour party cannot cut that, what will it cut? As the witnesses said, if we want to help people when they are 18, we can help them when they are 18. If we want to help 18-year-olds who are leaving care, we should help them at age 18, not so that they will have to wait for 18 years. It is absurd to borrow money today to put in a fund that might lose or might make money—there is evidence of both eventualities—and then 18 years later maybe a young person will have some money.

We have to make choices. A key question is whether people on lower incomes, and especially those who have just given birth, should spend money on food and health or save some money. In Committee, I asked Katherine Rake that question and she said:

“You cannot make a choice in that way.”––[Official Report, Savings Accounts and Health in Pregnancy Grant Public Bill Committee, 4 November 2010; c. 95, Q244.]

In essence, that is the Labour party’s argument. The Opposition are basically saying, “We don’t make choices. There’s no need to make choices. We can have this and this and this, and we can keep on going until the interest rates go sky high, we lose lots more jobs and we have a sovereign debt crisis.”

On Report, the hon. Member for Edinburgh East (Sheila Gilmore) talked about paying down the deficit. We do not pay down a deficit; we pay down debt. The deficit is the amount of money added each year to our debt, and the danger we face is that if we are not careful the interest rates on the debt will rise as well as the debt itself, and that would mean more cuts. If Opposition Members are going to argue this point of view, therefore, they have to explain where the cuts would come from, but they have not answered that. Are they going to close down hospitals to pay for these things? Are they going to sack more police officers? We face a very difficult time, but if the Opposition say they would keep these three particular projects, they have to explain where they would get the money from to pay for them. Would they put VAT up again?

[Pete Wishart]

If I had closed my eyes, I would have thought this was the hardest right-wing Thatcherite speech I had ever heard, yet it is being made by a Liberal, for goodness’ sake. Why are the Government taking this out on women and children? If cuts have to be made, why is it women and children who are in the firing line?

[John Hemming]

What we are talking about is putting some money in a fund and leaving it there for 18 years. That is not going to affect any woman or child for 18 years. What we should be doing is looking after people now. Our priorities have to be the vulnerable people now. We have to give priority to protecting the poorer, the less well off, the vulnerable and those with learning difficulties now, rather than putting some money away for 18 years.

[Kate Green]

Can the hon. Gentleman give me one single instance of where the incomes of the poorest are being increased by this Government?

[John Hemming]

Well—[Interruption.] Sorry? [Interruption.] Yes, that is a good one. The tax threshold is a good example. One area we are focusing on is low-paid people in work, so there is the first stage of gradually increasing the tax thresholds up to £10,000 a year, and the universal credit itself should be particularly helpful to those on benefits and low pay, such as many people who come to my advice bureau. On Saturday, I did some calculations with somebody who had worked out that when we took into account all the rules the Labour party had produced over the years, it was not worth his while to work. Interestingly, in that instance that was because of a Child Support Agency deduction. We need to focus on the low-paid and make sure that people get into work and through that route get themselves out of poverty. That is a good example of our putting money into the hands of low-paid families.

There is no evidence that the child trust fund produced extra saving, there is no evidence that the saving gateway produced extra savings—and there is only some evidence that, perhaps, it reduced spending on food outside the home—and there is no evidence that the health in pregnancy grant did any good for health in pregnancy. On that basis, if we are not going to cut these measures, what are we going to cut?

21:38

[Sheila Gilmore]

There are, indeed, choices to be made: there is a choice about the kind of society we want to live in, and there is a choice about how we resolve economic problems. Members on the coalition Benches want the public to believe that there is only one show in town, which is that we have the worst deficit in peacetime and that we have a situation that was entirely caused by the last Government spending too much over too many years. That is the only argument they want people to believe, but let us just unwind a couple of years.—

[Paul Maynard]

rose—

[Sheila Gilmore]

I am not going to take an intervention just now.

I recall that three years ago, at the beginning of the recession, people were predicting how high unemployment would rise, how difficult things would get and how high our deficit might be. Unemployment did not rise nearly as high as predicted under the Labour Government, and I will tell hon. Members why: because we were putting in money as part of an economic stimulus. Yes, we borrowed to do that but we did so because it was the right thing to do. We were told that it was the right thing to do by the junior partner in this coalition throughout that period. I remember those debates before the election—

[Mr James Gray (North Wiltshire) (Con)]

You were not here.

[Sheila Gilmore]

I was thinking about the public debates on television involving the Chancellor and the would-be Chancellors. I recall what the Liberal Democrat spokesman on finance said, and he put forward a completely different perspective from the current Chancellor. There was no agreement.

Members on the Government Benches may disagree with what I am saying, and I am happy for them to do so because that is legitimate in politics. We have a different view of how to do things, but that does not mean that our view is so unreasonable that we are not even allowed to put it. We are hearing that we are not allowed to argue any of these points and that we are not supposed to say that we would make different choices. The Minister gave this one away when he said that these measures would not really harm people; he said that the saving gateway had not even started and so nobody was being harmed, which is why it is an easy cut.

[Paul Maynard]

How does the hon. Lady respond to the point that there were no willing providers of the saving gateway? No matter how successful her party’s pilots were, no building societies were willing to make that provision. It is all very well her saying all this, but the gateway was not going to take place in reality; it was just going to take place in her own private make-believe world.

[Sheila Gilmore]

If the hon. Gentleman looks at all the evidence and the research, he will find that it is clear that this was going to take place—[Interruption.] It was going to take place because there were providers who were going to do it—[Interruption.] I do not know why he is waving his hands in the air—we could do that too. There were credit unions that wanted to get involved, as did two banks. The complaint made in Committee was that because only two banks wanted to get involved, there might not be enough access points. I have suggested other access points and I described the debate that took place when the housing association movement, with which I was involved, wanted to be one of the ones that would help people to make payments into a saving gateway scheme. That argument does not hold up.

We have heard a number of distortions of the evidence. We were told that the NCT thought that the money should go on women buying food, rather than saving, but we should recall that Belinda Phipps, the NCT’s chief executive, has written a foreword to the book that I mentioned earlier entitled “Asset Building for Children—Creating a new civic savings platform for young people”. It was written by two people, one of whom is Phillip Blond, who believes very strongly in the child trust fund; he believes that saving is very important and he suggests that we should have stuck with this arrangement. He does not say that it was without its faults—this is not a case of saying that it did not have faults—but he devotes a paragraph to saying that although it could be improved, that does not mean we should throw it out completely.

Some of the debate, particularly in Committee, was interesting and covered a lot of important material. If we want to do the best by people, we would not simply reach a point where, without looking at the wider context, we say, “Right. We have to make some savings now. Let’s just chop this, this and this.” It may be that we could have improved some of these schemes and they could have been differently focused. However, that is not the debate before us, but the stuff that has been thrown up in the course of it; the debate before us deals with the fact that either we have these schemes or we do not.

Labour Members believe that we could run our economy differently and that we do not need to cut so far and so fast. On that basis, we would be able to decide which things we wish to keep in place and which things we might want to save. I could talk about all sorts of savings that I might want to make, but I would also want to talk about the balance between savings and taxation. There are legitimate debates to be had about that.

We do not need to accept proposals that harm some of the most vulnerable in our society and the long-term view. It is astonishing that the Conservatives, in particular, whom I always understood to believe in saving, should not want to go ahead with the saving gateway. In 2003, it seems, the present Chancellor said:

“We think that having savings…gives people a stake in society, gives them independence, encourages self-reliance and bolsters the freedom of the individual against the overbearing state.”—[Official Report, 15 December 2003; Vol. 415, c. 1345.]

He has clearly changed his mind.

21:45

[Sarah Newton]

Thank you, Mr Deputy Speaker, for calling me to speak in the last moments of the debate. It was an enormous privilege to serve on the Public Bill Committee and to listen to my colleagues on the Opposition and Government Benches, as well as to the many organisations that gave evidence.

Listening for all that time brought home to me why I am so pleased to be sitting on the Government Benches and not on the other side. I believe absolutely that Government Members will form the most reforming Government that I have seen in my lifetime—a Government who are prepared to make the tough decisions that will provide the solutions to the problems, as the Bill seeks to do.

There is no doubt in my mind about the good intentions of the Opposition when they introduced these three measures some years ago. There is also no doubt in my mind from reading Hansard from that time and from re-examining the evidence that we have been given over the course of the past few weeks that there is no evidence base to show that the measures will tackle the vital issues of alleviating poverty and helping the most disadvantaged people in our society.

[Dr Poulter]

On that note, does my hon. Friend agree that it is a great pity that it has taken the advent of the deficit for us to examine properly some of the previous Government’s policies? We all want to look after the most vulnerable, but the only way to do that is to target our resources properly. At the moment, in difficult economic times, there are fewer resources than there once were, and the only way to do it is to base that targeting on the evidence and to ensure that the resources go to the most vulnerable. That is what the Government are about. We are getting rid of universal policies that do not work.

[Sarah Newton]

I am delighted to agree with my hon. Friend. It is essential that we use the evidence base, and I find it frustrating that the evidence was available when the legislation was introduced a couple of years ago. Let us consider the debate on maternal health—I know that my hon. Friend has great expertise in this area. It was very difficult for my colleagues who were in the House at the time to get evidence on maternal health from the then Government, but it was demonstrated that the data set that could reasonably be used to measure the impacts of any additional nutrition on maternal health did not exist. When hon. Members are pouring out their crocodile tears, as we have seen for weeks, saying how poor the affected people will be and how we must take more time and evaluate these measures, they know full well that the data set does not exist to measure the impacts.

We should listen to my hon. Friends, and to midwives and clinicians up and down the country as they give their practical experience of working with women of child-bearing age to improve maternal health. We have heard about policies and projects that deliver. For example, we know that not enough women understand how to cook nutritious meals on a low income. Much more needs to be done about cooking in schools and in the community so that people on low incomes can cook nutritious food, and plenty of evidence supports the idea that that is an effective thing to do.

As my hon. Friend said earlier, we know that the single most important thing that we can give to a mum in her early stages of pregnancy is folic acid. All the support that the Government are putting in place through their reforms to the NHS will target help at women of child-bearing age and at those who are the most vulnerable in our society and who need such effective services from the NHS.

This Government are all about giving people a hand up, not a handout. Week after week we sit here and Opposition Members’ answer to every problem is to throw some money at it. We in the Government will ensure that hard-earned taxpayers’ money is spent where the evidence shows it will be most effective.

21:50

[Ms Margaret Ritchie (South Down) (SDLP)]

Representing, as I do, a constituency in Northern Ireland where there is considerable dependency on benefit and high levels of deprivation in urban areas, I am particularly opposed, as are my colleagues in the Social Democratic and Labour party, to the abolition of the child trust fund, the saving gateway account and the health in pregnancy grant. We are therefore opposed to the Bill. The current Government seem to think, as the Minister has shown, that the child trust fund, the saving gateway account and the health in pregnancy grant would contribute to deepening the deficit and are therefore unaffordable. It is extremely unfair that the disadvantaged and vulnerable should be penalised when efforts should be made to help to support them, and I find it shameful and unacceptable.

As a former Minister in Northern Ireland, I, like my right hon. Friend the Member for Delyn (Mr Hanson), have been responsible for the Department for Social Development and, therefore, for social security benefits, community development and housing. I note, with some alarm, that Ministers in the Northern Ireland Executive have not been consulted or asked for their opinion of the Bill’s content or its possible impact on the most disadvantaged and their communities. It is worth noting that 36 neighbourhood renewal areas in Northern Ireland are defined statistically by the Noble statistics on deprivation as having acute levels of poverty.

The withdrawal of these funds, combined with the coming changes to the benefit system, will simply deepen poverty levels and plunge people into further depths of despair. The measures might push people who are already suffering undue financial burdens into the arms of loan sharks and, in certain parts of Northern Ireland, they could enable those with paramilitary control to have a tighter grip on people. But no cognisance has been taken of any of that and there has been no consultation. The Government should step back from the brink and avoid implementing the measures. They should think of Northern Ireland as a place that is coming out of the legacy of conflict. We are trying to mitigate the influence of poverty and conflict and we are trying to underpin devolutionary arrangements. I ask the Government to please abandon the Bill tonight; we will be voting against it.

21:53

[Stephen Williams]

I shall try to be brief so that the hon. Member for Stretford and Urmston (Kate Green) can get in. The right hon. Member for Delyn (Mr Hanson), who leads for the Labour party, said that there had been more than 20 Divisions during deliberations on the Bill, but I think that only two principles have been at stake. The first is deficit reduction, and that has been dealt with comprehensively by my hon. Friend the Member for Birmingham, Yardley (John Hemming) and the Minister. The second is a matter of dogma, to use the right hon. Gentleman’s word, and that is what I want to talk about.

What is the role of the state in ensuring that people can make a journey out of the poverty into which they were born into more successful adult lives? The Opposition say that it is to give out dollops of free money, which will somehow transform people’s life circumstances even if that free money will not be available until they are 18, which might be a decade away for some. It has been the contention of my party since the run-up to the election, and it is now the contention of the coalition Government, that the role of the state is to enable people, for themselves, to achieve while they are at school and then have successful careers in their adult lives, thereby generating surplus funds. That will contribute to the culture of saving far more effectively than any Government incentive. The biggest barrier to someone saving is having an income that enables them to save. The biggest barrier to someone having an income that enables them to save is lack of educational achievement and inability to find a job that transforms their long-term work prospects.

The comprehensive spending review is a package of measures, the main concentration of which is the reduction of expenditure over four years, but that is a net reduction and there are increases within it as well. One of those increases is one of the four main pledges that my party made during the election: the funding of the pupil premium. It is to be funded, as we laid out in the run-up to the election, specifically by the abolition of the child trust fund, which we opposed when the previous Government introduced it and opposed during the general election. That pledge has been carried forward into the coalition agreement.

[Anas Sarwar (Glasgow Central) (Lab)]

It is amazing to listen to the hon. Gentleman: the people of Bristol West voted for a Liberal and ended up with a Tory. Does he not recognise that there is no extra money in the pupil premium, that the Budget was about choices and that the choice that the Liberal Democrats and the Conservatives made is to hammer families, children and parents right across the country?

[Stephen Williams]

I thank the hon. Gentleman for his intervention, but let me tell him that the people of Bristol West voted for my No. 1 pledge, which I talked about continuously during the general election and which is something I have stood for all my political life: rescuing people from poverty, particularly children from poorer backgrounds. The introduction of the pupil premium will make a significant long-term difference to the life chances of young people in our country. It will be far more effective and make a far greater difference than telling everyone, whatever their circumstances, that when they are 18 they will get some money to spend on their birthday party or some other initiative.

The dogmatic difference between the two sides is that we believe that enabling people to make choices about their lives is far more important than the state saying, “Here is some money to spend at some point in the future.”

21:57

[Kate Green]

In the short time remaining I will address one or two of the points that were raised in the last part of the debate. Is it right to give people cash? Absolutely. There is much evidence of the fundamental difference that an adequate family income makes to a range of good outcomes. Do people squander that cash? Absolutely not. There is a wealth of evidence to show that when low-income families, particularly mothers, are given more money, they spend it on their families and they spend it on their kids. Is it right that we cannot afford that? Only if we look narrowly at the short term. Government Members have rightly challenged us on the long-term savings to be made by addressing inequalities, but savings achieved tomorrow by investing in families today must be taken account of, and that is something to which Government Members have given no thought.

The child trust fund, in offering the poorest young people the opportunity to start their adult lives with an asset behind them, makes a significant difference to those young people, and I am distressed that that is to be taken from them as a result of the Bill. We have offered the Government so many ways in these difficult circumstances to manage those policies through. We have offered them the opportunity to set a target for a time or to cease paying into those funds for a time. We have pleaded with the Government not to scrap them entirely, not least because they have nothing better to put in their place.

The Government are taking £18 billion out of the incomes of low-income households and half a million jobs out of the public sector, many of them for the lowest-paid workers, and then they have the temerity to say that, in addition, they will remove the £190 health in pregnancy grant because, they claim, there are other things to support pregnant women. That is indecent and ungenerous, and I am distressed that so many Government Members consider it acceptable, necessary or even desirable. I very much hope that when the Bill moves to another place, there will be an opportunity to amend the clauses in a way that we have regrettably not been able to do. I regret that the Bill is going forward in its current form, despite the best efforts of my right hon. and hon. Friends.

Question put, That the Bill be now read the Third time.

22:00

Division 125

Ayes: 311

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Conservative: 262
Liberal Democrat: 48

Noes: 224

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Labour: 211
Scottish National Party: 6
Plaid Cymru: 3
Democratic Unionist Party: 2
Social Democratic & Labour Party: 2
Green Party: 1

Bill read the Third time and passed.

Business without Debate

Monday 22nd November 2010 Commons Chamber

STANDARDS AND PRIVILEGES

Ordered,

That Mr Jim Cunningham be discharged from the Committee on Standards and Privileges and Tom Blenkinsop be added.—(Sir George Young.)

ADMINISTRATION

Ordered,

That Mr Tom Harris and Mrs Siân C. James be discharged from the Administration Committee and Mr John Spellar and Mr Dave Watts be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

WELSH AFFAIRS

Ordered,

That Nia Griffith be discharged from the Welsh Affairs Committee and Mrs Siân C. James be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

ADJOURNMENT (CHRISTMAS; AND FEBRUARY, EASTER AND MAY 2011)

Motion made, and Question put forthwith (Standing Order No. 25),

That this House, at its rising on Tuesday 21 December 2010, do adjourn till Monday 10 January 2011; at its rising on Thursday 17 February 2011, do adjourn till Monday 28 February 2011; at its rising on Tuesday 5 April 2011, do adjourn till Tuesday 26 April 2011; and at its rising on Thursday 28 April 2011, do adjourn till Tuesday 3 May 2011.—(Sir George Young.)

Question agreed to.

Housing Benefit (West Ham)

Monday 22nd November 2010 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn—(Miss Chloe Smith.)

22:14

[Lyn Brown (West Ham) (Lab)]

I am grateful to have secured this debate, which seems particularly timely given today’s announcement by the Minister for Housing and Local Government. Time and again, we have been told that the aim of the Government’s welfare reform package, including the reform of housing benefit, is to make work pay. Today, we have found out that if people living in social housing get a new job, or a promotion or pay rise, they may lose their home. So much for making work pay. However, that is a debate for another day.

I have a strong feeling of déjà vu about this debate. Housing benefit, and the difficulties that it poses to my constituents, has been a theme to which I have returned over past years, campaigning with a number of colleagues on the Labour Benches to identify an approach that makes work pay, and, by doing so, protects the public purse. I hope that despite the fact that the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), and I do not sit on the same side of the House, we too might work together to find some common ground and work towards common aims.

For the record, I do understand why housing benefit is seen as such a prize when the Government want public spending reduced. If I have my maths about right, housing benefit, combined with council tax benefit, is almost equal to all the other means-tested benefits added together. There are some rather easy, even cheap, political points to be scored by citing examples of abnormally high housing benefit for highly untypical large houses in high-rent areas. However, I do not believe that the changes proposed by the Government will solve the real difficulties faced by many of my constituents. They will, I believe, compound social and housing problems and become a greater cost to the taxpayer. Incidentally, a point worth noting and often forgotten is that many of those worst affected by the changes will be taxpayers too.

I represent a London borough—Newham—which has the fourth highest level of child poverty and the sixth highest level of deprivation in the country. The gross earnings figure for the bottom quarter of employees in Newham last year was 23% lower than the figure for London, and the average wage for those living in the borough is just £455 per week. As I am sure the Minister will acknowledge, that does not go far in an area where the costs of day-to-day essentials, including child care and housing, are so very high. The average house price in Newham is £221,801, which is 9.4 times the average income.

The implementation of the Government’s proposals will result in many private renters having their housing benefit, and therefore their income, driven down by a harsh reduction in local housing allowance rates. It is not as though private tenants claiming housing benefit have had it easy up to now. Even at the current rates, nearly half of local housing allowance claimants in Newham currently face shortfalls of almost £100 a month in meeting their rent obligations. Estimates by the London borough of Newham suggest that, as a result of the change in local housing allowance alone, more than 6,300 people in Newham—three quarters of the LHA claimants in the borough—will face shortfalls between the LHA that they receive and the rent they have to pay.

Some 40% of local housing allowance claimants work, and Newham council’s housing benefit team tells me that their average net annual earnings are just over £8,000 a year. I am sure the Minister will acknowledge that that is not a fortune, and makes it genuinely difficult to make ends meet in an expensive capital city. The cuts will push many already struggling families to breaking point.

Community Links is a fabulous local charity that, among its many activities, provides debt and benefit advice. As I am sure the Minister will appreciate, it is particularly concerned, given last week’s announcement on legal aid, that it will not be able to provide advice services for some of the most vulnerable in our community, and I expect that that will be the subject of much further, more anxious debate in this Chamber. In addition, Community Links reports that the numbers seeking debt advice have doubled in the past two years.

As Shelter has said:

“For those households already struggling to balance very tight budgets, a reduction in LHA will only push more of them over the edge, triggering a spiral of debt, eviction and homelessness.”

Things can only get worse, as the LHA allowance will effectively be cut year by year for ever. I must admit that even the ingrained cynic in me was a little staggered to learn that the measure of inflation to be used in calculating increases in LHA is the one that deliberately excludes housing costs. Over the past decade alone, it has risen at a third of the rate of private sector rents. How cynical is that?

Citizens Advice believes that many will face eviction in a matter of weeks after the cuts are imposed. The non-regional, one-size-fits-all LHA cap will make it almost impossible for low-income households to rent in the private sector in inner London. That will have an impact on outer London areas such as my own. In east London, low-income households will be priced out of areas such as Hackney and Tower Hamlets, forcing people to look for accommodation where rents are lower. Rents in Newham are lower than in neighbouring Whitechapel, in Tower Hamlets, and far lower than in Islington and Westminster. According to information sourced from the Greater London authority, the cost of a two-bedroom property in Whitechapel ranges from £271 to £369 per week. In Stratford, which is just a few short miles away, it ranges from £204 to £250.

I believe we will see evictees from Tower Hamlets crossing the border to stay with families in Newham and declaring themselves homeless once there. The impact on homelessness rates could be catastrophic. The Minister will be aware that Newham is already home to high proportions and concentrations of low-income households. The private rented sector is large and expanding. In my borough, 30,000-plus people are on the council waiting list. Newham already has more people on waiting lists for social housing and living in temporary accommodation than any other London borough. As well as housing, other services will be badly hit as a consequence of the cap in other areas. Newham will be left dealing with more pressure on school places, doctors’ surgeries, jobcentres and social services. Our schools are already over-subscribed.

Those problems will emerge as the council and other providers are forced to retract services due to the swingeing cuts in their budgets, and—I assure the Minister that this is not rhetoric—the cuts to Newham council’s budget are, by any definition, swingeing. Just to heap coals on the heads of our people, it is also clear that the employed residents of Newham are very reliant on public sector jobs; indeed, they are in the highest category in that respect according to the latest survey. That is what is called a double whammy.

I want to touch on the suggestion that the changes will give us an opportunity to renegotiate rents and place more power in the hands of the citizen. Westminster council’s cabinet member for housing writes of the need to

“support the reduction of the housing benefit bill…which was distorting private sector rents.”

Councillor Roe explains:

“Once the lower rate is in place, we believe rents will fall, as landlords will not be able to charge such high sums.”

I gently suggest, first, that the distortion of private sector rents was brought about by the deregulation of rents. I would also suggest that Councillor Roe is sadly over-optimistic about the direction of private sector rents, certainly in London. A survey of London landlords finds that when the shortfall in rent rises to more than £20 a week, more than 90% of landlords renting properties to LHA recipients in London would look to evict tenants who fall into arrears or not to renew the tenancy at the end of the rental period. Controls to limit evictions for families with manageable arrears are completely absent from the system. Using Department for Work and Pensions figures and results from the survey, it can be estimated that 82,000 households across London will be at risk of losing their home as a result of the changes.

The elected mayor of Newham, Sir Robin Wales, wrote to Lord Freud outlining his concerns about the LHA cap and the impact on Newham. In his reply, Lord Freud acknowledges the concerns, stating:

“We appreciate that outer London boroughs could be faced with an increased number of new Housing Benefit customers needing access to additional services such as schools and health care. We will look at the wider impacts on local authority housing departments, and other local services particularly with regard to social mobility, homelessness and overcrowding…We will ensure that the full range of options for customers facing a shortfall in their rent, from renegotiating their rent levels through to applying to their local authority for assistance in obtaining alternative accommodation, is publicised, and that people are encouraged to consider those options in good time”.

[Stephen Pound (Ealing North) (Lab)]

I am reluctant to interrupt my hon. Friend because she is making an extremely powerful case, but is she as nauseated as I am by the use of the word “customer” in that context? A “customer” is a person who makes a decision on alternatives in a market economy, so are recipients of housing benefit—those human beings—to be denigrated as “customers”?

[Lyn Brown]

I am happy to agree with my hon. Friend. A customer has choice, but I am sad to say that the people of Newham will have very little choice. What options are open to those facing a shortfall in rent? What alternative accommodation and what options to renegotiate will they have? There are 35,000 households in private rented accommodation in Newham, almost a third of which are on housing benefit. Given that the rents in my area are relatively low compared with the boroughs immediately adjacent and to the west, it is absurd to suggest that the changes will force down rents in the area, or that residents will have the option to renegotiate their rents downwards. The private sector in Newham can and will soak up the properties left by those who, owing to the changes, have to leave their homes. The changes will mean that those dependent on housing benefit will be unable to afford to live in Newham.

The Minister will also know that, despite the Housing Act 2004, there is a dark side to a small proportion of the private rented market. Anecdotal evidence from head teachers in my local schools suggests that a new breed of slum landlords who rent out houses to families by the room is emerging. I am also told that some landlords will rent only to migrants, because they are less likely to know their rights. As we know, landlords should turn down families who have too many children for the rooms available. Instead, vulnerable tenants are claiming for space that they are not allowed to use as other families are squeezed alongside them. That is a benefit fraud, and it is perpetrated at the behest of landlords.

There are currently not enough resources to police the growth in multiple occupation, which will increase exponentially as the single-room rent is extended up to the age of 35. However, regardless of those extreme cases, it is clear that the cuts in housing benefit will force many more households into overcrowded and substandard accommodation.

My hon. Friends and I have spoken many times before of the knock-on effects on families of being shunted around from house to house and living in poor conditions; of the profound impact that that can have on health, education, inclusion in the community and mental well-being; and of the dreadful impact on children and their ability to achieve their potential. There will be more stress and conflict as unemployed family members are unable to pay their non-dependant deductions, which are set to increase disproportionately. As Crisis has pointed out, there will be more single homelessness and, yes, more NEETS—people not in education, employment or training—in this big society.

I believe that the situation will now get worse. Last week’s announcements by the Secretary of State for Work and Pensions compounded all the problems that I have outlined. The universal benefit and its cap, set at £500 per week per family, will effectively mean pricing low-income families out of the capital. Citizens Advice has stated that

“we are very concerned that the Government appears to be rushing into benefits policies that have not been thought through, or tested for their impact on individuals…The fact that the cap applies regardless of household size means that it will inevitably fall hardest on families with children.

Coming as it does on top of the cuts to housing benefit announced in June’s emergency budget, a cap of £500 a week on household benefits will price many low income families out of living in London and the south-east of England altogether, and if it goes ahead will inevitably lead to widespread hardship, debt and homelessness…For example, a couple with four children currently receiving £350 a week in jobseekers allowance…child tax credit…and child benefit…and £25 in council tax benefit would be left with a maximum of £125 per week for rent.”

The Government’s impact assessment had little to say about the impact on children and poverty, yet London Councils calculates that nearly 80% of the households affected by the cap in London will be households with children.

Let us also recognise that there will be many thousands of families whose breadwinners may lose their jobs, but be horrified at the thought of claiming benefits. It is insulting to suggest that those people will have made a lifestyle choice to claim jobseeker’s allowance. In Newham, it is currently estimated that 1,900 families will be affected by the absolute cap. There will be many more after the cuts to the public sector have impacted and unemployment in my constituency has risen. The 10% sanction on housing benefit for people who have been unemployed for 12 months will hit my constituents especially hard. There are 1,910 JSA claimants who have been out of work for a year or more in Newham, and 10,196 people claiming JSA in the borough. Nine JSA claimants are competing for each unfilled job vacancy in Newham, compared with a national average of 5:1. I genuinely believe that the 10% cut presupposes that living on £65 a week jobseeker’s allowance is a lifestyle choice.

The Budget and the comprehensive spending review proposals are unjust, and they appear to have been thrown together with a disregard for the consequences. This attempt to save money will, I believe, store up problems for the future. The problems of homelessness, debt, unstable homes and constant moves impact on children and families, preventing children from belonging to a community and fulfilling their potential, and storing up social problems that all the Sure Start facilities in the world will not be able to solve. It is truly difficult to see how that fits with the Government’s commitment to end child poverty. This is not the big society. Quite the reverse: it is the sound of doors clanging shut and communities breaking apart. There appears to be a poverty of compassion in the coalition.

I hope that I have begun to outline some of the difficulties that I believe my community will face, given the changing benefit scene. I hope that the Minister will be able to address those concerns and offer some understanding both of the circumstances of Londoners and my constituents on low incomes, and of their challenges ahead. I and many anxious residents of Newham will listen eagerly to what he has to offer.

22:34

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I congratulate the hon. Member for West Ham (Lyn Brown) on securing this important debate and on her track record of raising such issues in the House—as she said, from the Government Benches, which are indeed still here. I agree with a good deal of what she has said in the past about the issue. Two years ago she told the House:

“My message is that the housing benefit system is in desperate need of reform.”

She then quoted one of her constituents, who had said that they were

“trapped in benefits, prevented from returning to work—all my wages would just go to pay the rent and I would be worse off.”—[Official Report, 5 November 2008; Vol. 482, c. 293-94.]

I suppose I was hoping that today she would come up with some suggestions for how housing benefit should be reformed to address those problems. In anticipation of her speech, I checked what the Labour manifesto said on the subject. Surprisingly, I found that I entirely agreed with that as well. It said:

“Housing Benefit will be reformed to ensure that we do not subsidise people to live in the private sector on rents that other ordinary working families could not afford.”

The basis for one of the key reforms to which the hon. Lady referred and which has most impact in Newham is the switch to paying rent based not on the 50th percentile, which is the current regime, but on the 30th percentile, which is more or less the typical rent for a low-income working household. That seems to be, almost verbatim, the policy on which she stood at the last election and which we are now implementing. Yet she is saying that the impact of that will have the single biggest impact on her constituency because the cap overall has relatively little impact, and that she now opposes that policy. I am not entirely sure that that is consistent.

The hon. Lady was critical of the universal credit, which my right hon. Friend the Secretary of State has proposed and which is designed to address just the sort of barriers to work that she is worried about by reducing withdrawal rates, albeit relatively modestly, and reducing barriers to work so that when people such as her constituents take jobs they will know that they are better off. I hope that on reflection she will be more charitably disposed to those reforms.

I will not dwell at length on the reasons for the reform, because time is limited, but it is true that cost is one. Housing benefit costs have risen by £1 billion a year in each of the past five years, partly due to the recession, but also to rising rent levels, so there is a need for action. But the issue is not just about cost; it is about fairness. The hon. Lady did not address why it is fair that someone on benefit, albeit not through any fault of their own, should have a wider choice of properties than someone in a low-paid job, and that is how the current system works. That is the current regime.

[Lyn Brown]

My basic tenet is that it is not possible to exist with the universal cap level and pay the rent of a London property, whether it is a two-bedroom flat over a fish and chip shop in Green street, or somewhere a little more palatial, perhaps further out. The taper in the benefit system, which the Minister rightly said I spoke about previously, is a disincentive for people who are trying to work, but we now have a cap and there will be no opportunity for them to negotiate their rent downwards. I cannot see how the reform that the Minister talks about will improve matters at all.

[Steve Webb]

With respect, the hon. Lady is conflating about three different changes. The universal credit is nothing to do with the cap. It is a separate proposition, and the details are yet to be announced. We have already announced exemptions, and people in work who receive working tax credit will not face the cap at all. That is part of the response to her point. No one in work and receiving working tax credit will be affected by the overall benefit cap, nor will anyone on disability living allowance, but the details have yet to be worked out. The universal credit—not the universal cap—is a separate reform designed precisely to address the points that she raises.

I shall try to respond to some of the more specific issues that the hon. Lady raised about her constituency. Our estimate is that in her borough of Newham, 32% of properties in the private rented sector will be available to people on local housing allowance.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will the Minister give way?

[Steve Webb]

I have only six minutes left in which to respond to the hon. Lady, and it is probably important to do that rather than to respond to another hon. Member.

I have explained our broad estimate. A good proportion of rental properties will be available throughout the borough, but I agree that we do not want constant moves. No one wants that. The challenge is to ensure that when people enter a tenancy agreement they do so sustainably. All we are trying to do is to ensure that the choices made by people on benefit at the start of a tenancy, when they choose a property and a rent, involve the same constraints as for someone in low-paid work. The change is not designed to be penal; it is designed to be fair and equal. That is the idea.

The hon. Lady cited a figure of 82,000 people being at risk of losing their home, but that was based on London Councils research and not that of the Department for Work and Pensions, and it was based on a fairly low response rate from landlords. Moreover, landlords are bound to say that they do not want any reform that is going to cap what they get. Landlords have been the principal beneficiaries of the local housing allowance system. We have already seen private sector rents falling in the past 18 months, yet the rents paid to people on LHA have been going up. Through housing benefit and LHA, we are putting more than £21 billion a year into that market, and it would be implausible to suggest that we are not having an effect on it.

We believe in trying to restrain the growth in rents, although in four years’ time, we will still be spending more in cash terms on housing benefits than we are this year. I think that the hon. Lady used the term “swingeing cuts” about something else, but these are not swingeing cuts. This is about restraining the rate of growth of housing benefit, so it is a far more modest reform than she suggests.

The hon. Lady raised the issue of slum landlords, for whom we have no time, and one of the things we want to do is to change landlord behaviour, which is crucial. We are considering whether, by paying housing benefit directly to landlords, we could use that leverage to try to get rents down. Yes, some people might face shortfalls—I accept that point, although I think that the figures might sometimes be exaggerated—but we are not in a static situation. The question is: what happens next? If landlords, particularly those renting to housing benefit and LHA tenants, see that we are not simply going to follow the market up, that could change rent-setting behaviour.

The hon. Lady made a point about the consumer prices index, and about the way in which we are going to index LHA in the future. Her view seemed to be that we should simply follow the market, but we think that that has been the biggest problem with LHA over the years. We have actually stoked up the market, and then increased LHA to keep pace with the market, so that rents keep rising. We are not getting good quality accommodation, however; we are simply driving up rents, and that is not what we want to spend public money on.

I want to come back to the hon. Lady’s point about constant moves and people being constantly moved around an area. Clearly, there is an issue about the transition to the new regime, and we are trebling the discretionary housing payment system. More of that money will go to boroughs such as her own and to other inner London boroughs that are most affected, because we want the particularly hard cases, where people are particularly affected by the changes, to have extra resources to deal with that. However, the long-term goal has to be to try to get rent levels under control, rather than to keep stoking them up.

The hon. Lady referred in the debate in 2008 to the impact of high rents in temporary accommodation. She said:

“My constituents are virtually imprisoned by the excessively high rents charged for temporary accommodation”.—[Official Report, 5 November 2008; Vol. 482, c. 293.]

She was absolutely right, and in April 2010, a cap was introduced on the rents in temporary accommodation. Since then, the early evidence has shown that the rents in those properties have started to fall, so we have a precedent for what we are doing now. This is not nationwide, systematic evidence, but the early evidence suggests that what we are saying will happen in the wider market is already happening in the temporary accommodation market. That is what we as taxpayers, and as people who are concerned about our constituents, want to see. We want to see more of our money providing accommodation for people, and less of it simply stoking up the private rented sector.

The hon. Lady also raised the issue of the changes to non-dependant deductions. They have been frozen for a number of years instead of being indexed, which would have been a more natural policy, and all we are doing is returning them to the level at which they would have been, had they been indexed. So, yes, there is an increase, but we are simply taking them back to their real value of a few years ago. She mentioned the consumer prices index being applied for ever, but that is not the intention. It will come into the LHA rates in 2013 for two years, and we will then look at the market and the impact of the changes that have been made. So we are trying to introduce a cap and to restrain the rate of growth of rents, but we are trying to do that with some flexibility. We will look at the broad rental market areas when we do that and try to ensure that they fit the local housing market situation.

I want to try to draw some of those threads together. First, it is vital that we do not overstate the impact of the changes. There will be an impact, but some of the numbers that get thrown around, such as 82,000, are an exaggeration. We will see what impact they have, and there is the possibility of different rent levels as a result of the changes. There are also discretionary housing payments. The idea is to get good value for the taxpayer, but not to cause misery for the hon. Lady’s constituents. That is not our intention, and I do not believe that we will do that.

Question put and agreed to.

22:44

House adjourned.