Savings Accounts and Health in Pregnancy Grant Bill

Gavin Williamson Excerpts

Tuesday 26th October 2010 Commons Chamber

[Alex Cunningham]

I think that the point that the hon. Member for North East Somerset (Jacob Rees-Mogg) made was that perhaps families such as his do not need that sort of income. If he wants to forgo it, that is all well and good, but there are hard-working families in my community that need that money.

Let us add to all that the impact of the 27% cuts on local authorities and the effect that will have on services, including initiatives such as breakfast clubs, and again we see the family under attack. In the north-east, we already know that family dependency on benefits will grow, with some 43,000 public and private sector jobs lost over the next few years. People will see few jobs for them to chase as unemployment undoubtedly soars.

Today, the Government attack again. I object to the scrapping of both the child trust fund and the saving gateway and I believe the Government are making a big mistake by getting rid of them.

[Gavin Williamson]

The hon. Gentleman strikes me as a very enlightened individual, and I am sure that he is very aware that every Government have to make difficult choices. If he were to keep these areas of expenditure going to fund the benefit, what areas of Government expenditure would he cut?

[Alex Cunningham]

Personally, I would raise taxes in order to ensure that we could maintain this provision, and the bankers are a good place for us to start.

[Gavin Williamson]

Will the hon. Gentleman give way?

[Alex Cunningham]

No, I will not.

Both the child trust fund and the saving gateway were Labour initiatives, put in place by a party that understands the importance of fostering a culture of saving. Asset-based welfare can make a huge difference to the opportunities of the least well off in this country who often do not have access to the resources that many others are lucky enough to have, whether through inheritance or the generosity of family or because they recognise the importance of saving a little of their salary each and every month for a rainy day. The saving gateway aimed to encourage those from low-income households who do not save, for whatever reason, by promising the incentive of a Government contribution of 50p for every pound saved over the two-year life of the account. It had been trialled, and was due to be rolled out across the country in July.

We will not see the difference that the saving gateway would have made to thousands of low-income families at the relatively tiny cost to the Government of £100 million a year. The response to the trials was largely positive—one pilot saw the number of people saving rise from 16% to nearly 80%. In total, more than 22,000 people took part in two successful pilots, achieving more than £15 million in savings. Those people demonstrated that the scheme could generate both new savers and new saving, because individuals continued to save beyond the end of their gateway accounts.

Encouraging people to save promotes self-reliance and stability, allows long-term planning and provides security from sudden financial shocks. Saving just a few pounds a month makes a person feel in greater control of their life, and it can be transformative and provide a psychological boost. The difference that that can make to families and their quality of life should not be underestimated.

--- Later in debate ---

[Alex Cunningham]

I have never had a problem with taxing the rich a little bit more. If that means a penny on income tax, I would be fine with it, although I do not know what encouragement I would get from my Front Benchers.

[Gavin Williamson]

Will the hon. Gentleman give way?

[Alex Cunningham]

No, I will not. We need to raise taxes and target the results at the poorest people.

I hoped that the saving gateway would squeeze some of the doorstep lenders out of low-income communities, which is an issue close to my heart. Those companies charge outrageous interest rates, and if people had some money saved for a rainy day, such monsters would see their customer base shrink.

I also want to speak out in defence of the child trust fund, which acts as an incentive to save by adding to a Government contribution of either £250 or £500 at birth depending on a family’s income. The child trust fund was well established, having been introduced for all children born since September 2002. At a cost of around £500 million a year, including additional contributions when a child reaches the age of seven, this universal yet progressive fund ensures that all children, regardless of their family income, have a pot of money that they can access at the age of 18.

According to the Save Child Savings alliance, some industry data suggest that the child trust fund has seen the number of people saving for their children’s futures almost treble. More than £2 billion is currently being held in child trust funds. That form of asset welfare opens doors to young adults, particularly those from low-income families. No young person has yet benefited from this fund—the first recipients are just eight years old today—but I would have hoped that when they can start accessing it in 10 years’ time, that money would go some way to improving social mobility, which is an issue that some hon. Members highlighted earlier.

A policy that spreads wealth to the asset poor should be backed by anyone who is dismayed by the lack of social mobility in the UK today. Yes, education plays a major role in tackling that problem, but so do assets, which is something that the Liberal Democrats have failed to address in recent years. The Deputy Prime Minister spent some of the summer discussing the Government’s programme for social mobility, but this measure goes against it. The child trust fund was one way in which the previous Labour Government hoped to tackle this issue, and scrapping it will be a step backwards.

At a time when the coalition proposes to increase university tuition fees, I would have thought it wise to defend child trust funds as one way in which young people could choose to shoulder at least a tiny bit of the burden of those costs. Even if they do not go to university, any funds available to 18-year-olds must give them a better start in life, which the better-off take entirely for granted. It may only help to fund their driving lessons, but that will give them the mobility and employability which would otherwise be denied.

Instead, having promised huge and unnecessary cuts over the next four years, the Government must cancel valuable programmes that are relatively inexpensive. Scrapping the child trust fund is a decision made with an eye on the short-term political goal of cutting the deficit, not the long-term responsible goal of encouraging families to save for their children’s future. The age group facing the most debt is 16 to 34-year-olds. Surely a responsible Government should be seriously considering measures to help the next generation of young people, particularly given that university fees are set to rise to eye-wateringly high levels.

The Government are intent on pressing ahead with these family cuts, but when will the Minister tell us how the plans to fund and retain the infrastructure of the fund, to enable contributions to be restarted when the economic position improves, will work? I am told by the Save Child Savings alliance that it would cost £2 million a year to do so—a very small fraction of the total overall cost. There is an alternative to these draconian cuts, despite what the coalition says. Labour would deal with the deficit by halving it over four years. Yes, there would still be cuts, but we could cut carefully and always with an eye on the human impact. I am not confident that I can say the same about the coalition.