Savings Accounts and Health in Pregnancy Grant Bill

Alison McGovern Excerpts

Tuesday 26th October 2010 Commons Chamber

[Alison McGovern (Wirral South) (Lab)]

The Minister has talked about what happened in the past and about the actions of the last Labour Government. Will he tell us whether his party supported the recapitalisation of the banks that protected our financial services system, which led to the deficit?

[Mr Hoban]

Yes, we did support the recapitalisation of the banks, but I am not sure where the hon. Lady’s point is leading. The deficit is a consequence of the huge growth in spending under the last Government, and their failure to ensure that the fiscal position was sustainable.

This year, the child trust fund would have cost more than half a billion pounds, and that money would have been locked in for up to 18 years instead of supporting people now. That is a luxury that we simply cannot afford, given the fiscal challenge that we face. We also could not afford to introduce a new scheme like the saving gateway, which would have cost £300 million over the next five years, just as we started to tackle that challenge. Nor can we afford to continue to spend £150 million every year on giving cash payments to all pregnant women, whatever they spend the money on and whatever their incomes.

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[George Freeman (Mid Norfolk) (Con)]

It is a pleasure to follow the hon. Member for Strangford (Jim Shannon). I am conscious of the number of Members who want to speak tonight, so I shall try to be brief. I want to make three key points. First, we need to draw breath and remind ourselves why we are having to take these measures. Secondly, I want to draw the House’s attention to some of what I believe to be the flawed thinking underlying the measures that we are withdrawing. Thirdly, I shall touch on the lack of support for them from a number of independent commentators whom one might have expected to be more vocal.

We heard a lot from Opposition Members earlier, accusing us in somewhat hysterical tones—it is nice that they have now calmed down a little—of unwarranted glee at cutting back from the most vulnerable in society. Those accusations almost reached the point of suggesting that that was what we had come into politics for, which is the most appalling and, frankly, shameful accusation, and one that they do not need to nod their heads at now.

It is worth reminding the House, and those listening in the Gallery, why the coalition is having to take these measures. It gives us no pleasure at all, but the truth is that we have inherited from Labour an historic crisis in our public finances. We have a debt of £700 billion, and debt interest would be set to rise to £67 billion a year if we had not set about tackling it, which these measures are part of. Our current debt interest payments are £120 million a day. Opposition Members need to bear all that in mind before they accuse the coalition of irresponsible measures. The irresponsibility is illustrated by the deficit that they bequeathed to us and to the future generations that we are all trying to help.

Without a plan to tackle the deficit, there would be a real risk that confidence in this country’s public finances would collapse, that international markets would lose confidence in our gilts, and that interest rates would start to rise. That would trigger the real catastrophe that we are trying to avoid. Everyone knows that we have to tackle the deficit. Surely no serious commentator, and no serious politician on the Opposition Benches, would suggest otherwise. It is simply disingenuous and mischievous to claim to be a serious party of government and then to scream foul when a responsible Government take the important measures to deal with the legacy that it has left us.

The flawed thinking behind some of the payments that the Bill covers can be seen as philosophical, economic and practical. First, as a number of speakers have highlighted, the measures do not target the poorest in society; they do not, in fact, do anything to tackle the really deep and challenging poverty traps into which many people fell through the complex layers of tax credits that the former Prime Minister insisted on imposing. They do nothing to undermine the dependency on the state, which all progressives in this House now seek to try to unravel. Anyone reading the work of Professor Giddens—new Labour’s philosopher-king—would understand that that is not an accident. In his seminal book—I commend it to Labour Members who have not read it—he sets about defining modern citizenship as a dependency on the state. It should be no surprise to us that the last Government took every opportunity they could to increase dependency on the state. Those of us in the coalition who want to release citizens from dependency would take issue with that philosophy.

Economically, there has been some flawed thinking. At a time when Labour Members were building up historic debt to £700 billion, some of my constituents might well have considered it something of a gimmick to set about giving back small amounts of money that the beneficiaries will not receive for 18 years in some form of apparent largesse when what people were really going to inherit was a historic deficit and all that went with it.

I defer to my hon. Friend the Member for Gloucester (Richard Graham) in respect of his earlier comments on the inefficiencies in management. I noticed in the Library briefing that management fees were running at £700 million, so it is odd to hear Labour Members defending putting money into the pockets of fund managers.

Finally, let me deal with the lack of support for these measures from independent commentators, whom we might have expected to be more vocal. When I went to the Library to find out what responses there had been to these cuts, I found two examples to which I would like to draw the House’s attention. Barnardo’s, commenting on the child poverty figures, said:

“We want to see child poverty reduced to 1.7 million by 2015—the missed 2010/11 target. The Government must now play catch-up. It can be done. Our Government has made the first step, by vowing to cut child tax credits to middle income families and the Child Trust Fund. To continue on the right foot all it has to do is invest that money saved in our country’s poorest children.”

The report of the Child Poverty Action Group—other Members have mentioned it—provides another example. Its briefing of 2005 pointed out that the child trust fund would not benefit children until they were 18, stating:

“Given ongoing problems with the administration of tax credits, and the much publicised inadequacies of the Social Fund, we believe it would be more appropriate and more effective to divert additional funds and administrative time and energies to improving elements of provision that are designed to support low income families rather than on a scheme which many commentators believe will disproportionately benefit higher income families.”

On the grounds of the nature of the deficit we have to deal with, the flawed thinking behind the policy and the lack of support for it, it seems to me that, far from being an hysterical over-reaction, these measures are perfectly reasonable and sensible, particularly in the light of the coalition’s commitment, set out in the Budget and the comprehensive spending review last week, to the retention of Sure Start, the introduction of the £7 billion pupil premium, the targeting of child benefit at the most needy families and tax credits. Some Members have already referred to them.

[Alison McGovern]

Will the hon. Gentleman give way?

[George Freeman]

I am just wrapping up.

Also important is the Institute for Fiscal Studies’ analysis, showing the Budget measures will not increase child poverty. Far from being irresponsible, I suggest to the House and to people more widely, that these are regrettable, but responsible, measures from a Government who take seriously their responsibilities to tackle the deficit left by the previous Government.

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

This is an incredibly serious debate and I would like to address what I believe are important points raised on both sides of the House. I shall deal with all three elements of the Bill—the health in pregnancy grant, the child trust fund and the saving gateway proposals—in the context of what I understand to be important drivers for this Government, such as reducing inequalities, improving social mobility and improving child outcomes. I shall also consider the extent to which the proposals meet the Government’s own fairness test.

I start with the proposal to abolish the health in pregnancy grant. There is considerable evidence to show the impact of poor maternal nutrition—during pregnancy and, importantly, prior to conception—on low birth weight, and the impact of that on a series of outcomes for child development down the line, including educational attainment and health outcomes. I certainly agree with the Conservative Members who said that a grant in the seventh month of pregnancy was not sufficiently early to achieve everything we would want to improve the well-being of pregnant women and their unborn children.

For women on low incomes, affording a healthy diet is a challenge. Indeed, women reliant on safety net benefits will, if they are under 25, have an income of £51.85 a week; and if they are over 25, £65.45 a week. Those amounts are sufficient to meet the minimum income standard determined by the Joseph Rowntree Foundation—£44 a week in order to afford a healthy diet. However, once we take into account other expenditure that has to be met out of those benefit payments—fuel, clothes, travel, personal items, insurance, utilities and so forth—it means in practice that women conceiving and bearing children on benefits could find themselves with as little as £10 a week to spend on food. Clearly, none of us could eat a healthy diet on that.

It is right, as Opposition Members have repeatedly pointed out, that despite its perhaps unfortunate name, the health in pregnancy grant has the potential to achieve much more than simply help with a healthy diet. It helps to meet a number of the costs associated with preparing for and coping with the arrival of a new baby. Obviously, parents across the income spectrum will be grateful for any help. Although I was rather pooh-poohed by the Minister when I suggested that such a grant is likely to be spent pretty readily so it will also help the economy, there is lots of evidence to show that if we give money to parents at a time when their costs rise, they will go out and spend it quickly—they need to; there are items that they must buy. This will make a modest contribution to our economic regeneration, although that was hardly the overriding reason for introducing the grant in the first place.

[Alison McGovern]

Does my hon. Friend agree that this is similar to other kinds of grant such as the winter fuel payment, which we award in cash terms to get people through what is an expensive time? It is most efficient not to cross-question what it is actually spent on, but these grants are important in recognising that people go through difficult and expensive times.

[Kate Green]

That is absolutely right on a number of fronts. First, as my hon. Friend says, this sort of grant is designed to help with specific expensive times in the course of people’s lives. It is important to recognise that specifying what it gets spent on is not necessary to ensure that it does good. In fact, there is a lot of evidence to show that if we give more money to parents, particularly to mothers, they will spend it on things that will help their kids.

I understand the concerns of Government Members about universal benefits, but this is a universal benefit. It goes to people who are financially better off as well as to those in greater need. As Opposition Members have repeatedly sought to explain, universal benefits are the most effective for reaching the poorest. They are the easiest to administer and the easiest to claim; there are no complicated cliff edges or recalculations. As such, I believe it is important to retain a range of universal benefits within the totality of support for families with children. I therefore think that the health in pregnancy grant has a useful role to play.

Even if we accept for a moment Government Members’ concerns that the benefit has been poorly targeted, that is hardly a case for scrapping it outright, especially when basic benefits are too low for the poorest women to be able to afford to eat healthily before their child is born. Surely, far from seeking to abolish the benefit, an ambitious Government who were keen to improve the outcomes of the poorest families and children would want to extend its scope or consider other ways of improving the adequacy of out-of-work benefits.

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[Kate Green]

I hope that Conservative Members and the Minister will hear that contribution in the spirit in which we all feel it. This country has a poor record on outcomes for looked-after children, who enter adult life singularly poorly provided for financially. The child trust fund was a small step towards beginning to rectify that. As my hon. Friend says—and I hope the Government heed this—if the child trust fund is no longer to be the mechanism through which looked-after children are given some sort of nest egg with which to embark on adult life, I hope that Ministers will look for another way to secure the financial futures of such children. It is not sufficient to say that we will improve education, health and Sure Start support, important though those are. Plenty of evidence shows the importance for young people, especially those from disadvantaged backgrounds—and looked-after young people most of all—of having a financial asset behind them.

The hon. Member for Gloucester (Richard Graham), who I am sorry is no longer in the Chamber, cited the briefing that some Members had received from the Save Child Savings alliance. I was struck by the numbers he shared with us: 4.5 million child trust fund accounts are open; £2 billion is under management; and £22 million a month is saved in those funds. That is a lot of money being saved and set aside for our children’s futures. I strongly urge the Government to take note of that success. The vast majority of families saving are on modest, medium or lower incomes, certainly of less than £50,000, and many of them on much less. The hon. Gentleman mentioned that, I think, 24% of families were not saving at all. He is right to draw attention to the position of those families, but I question what they will save with instead, if we remove the child trust fund. If the Government do not save on behalf of the poorest children, I very much doubt that a tax break, for families who probably do not pay tax anyway, will suddenly magic up savings for the poorest children. I ask the Government to address that point.

The child trust fund is well targeted for its purpose, which is to deliver an asset to young people as they start out on adult life. Better-off families can afford to support their children with university fees, renting their first flat, buying their first car, perhaps starting a business, having a gap year—all markers of social stability, and therefore at the heart of what the Government rightly want young people from low-income backgrounds to be able to participate in. I am genuinely at a loss to understand why a Government who repeatedly, and unjustly, lambast Labour’s record in relation to social mobility and inequality, should totally dismantle a savings vehicle that has the potential to reduce inequalities, and instead propose a savings vehicle that will widen those inequalities by benefiting only those who are better off.

I am just as puzzled by the Government’s attitude to the saving gateway. Pilots in different parts of the country have shown that, coupled with outreach and money advice, it helped to support a savings habit, provided low-income families with a cushion enabling them to cope with crises, allowed them to build up modest assets over time, and made possible additional savings that would not have been possible otherwise.

I am surprised—more than surprised; indeed, I am shocked—that a Government who are happy to extend tax breaks to savers and to maintain them on ISA savings, pension contributions and inheritance tax will not provide support to boost the savings of the poorest. I ask Ministers how that can possibly be fair.

[Alison McGovern]

I thank my hon. Friend for giving way again. She is making a comprehensive and excellent speech. Does she agree that what the financial services sector needs now are additional deposits, and that offering tax breaks to those who are already saving will not be half as effective as continuing programmes which, according to all the evidence, produced those additional deposits and improved the savings culture?

[Kate Green]

I think that the Government should be very wary about dismantling a scheme that has generated additional savings, for exactly the reason that my hon. Friend has given.

What concerns me most is the impact of the Bill on the Government’s commitment to reducing inequality. We already have a significantly unequal distribution of assets. Up to 20% of households have no assets at all. The highest-earning 10% hold half the assets, and two thirds of households have savings of less than £3,000. I accept that we are not handing on a proud record to the incoming Government, but I would have expected them to conduct a rigorous equality impact assessment of their own proposals as a result of their determination to do a little better than that.

The equality impact assessment that accompanies the Bill is thin in the extreme. It fails in any way to recognise the lower earning power in the labour market of women, disabled people and members of ethnic minorities: a lower earning power that translates into a lesser ability to set money aside in savings, and ultimately, therefore, into lower asset holding. Its analysis of the saving habits of members of ethnic minorities is scanty, although research from the Runnymede Trust would have informed the Government quite quickly that at least 60% of Asian and black British families have no savings at all. The fact that that is twice the number of white households in the same position should concern us greatly.