Savings Accounts and Health in Pregnancy Grant Bill

Fiona Bruce Excerpts

Monday 22nd November 2010 Commons Chamber

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.

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[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.

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[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.

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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.