Financial Services Bill (First sitting)

Debate between Harriett Baldwin and Stella Creasy

Committee stage & Committee Debate: 1st sitting: House of Commons
Tuesday 17th November 2020 Public Bill Committees

[Harriett Baldwin]

Q The FCA has not prepared anything specific demonstrating that—it is a hunch based on what is in the Bill—but has it done any cost-benefit analysis of the breathing space measures that you mentioned?

Sheldon Mills: All these measures are Government proposals, so the cost-benefit analysis that is required will be carried out by the Government and not by us. Once the Bill has been passed, in whatever form—we are bringing forward rules and regulations—we will undertake a cost-benefit analysis. I am giving an indicative view, as opposed to one based on a cost-benefit analysis that we are not required to carry out at this stage.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

Q I should like to explore what you have said, particularly about how the Bill will benefit consumers—after all, we are all concerned about the regulation of financial services markets. You set out your interest in the debt respite scheme. We all agree that that is very welcome, but debt prevention is an ultimate aim. How do all three of you think that this way of regulation will help businesses and households with debt prevention?

Sheldon Mills: It is a broader question than the Bill, but I will answer by giving our approach to debt.

As a regulator, our approach is not to have a policy on whether people should be able to access credit, but we are concerned about the impact on people of firms providing credit. We want firms to be able to provide credit in a way that treats individuals fairly, takes account of their needs and circumstances and, in particular, supports vulnerable customers if they are in debt.

We work closely with debt charities. Some of the issues that we are seeing, which we all face and of which the FCA is cognisant, include the accumulation of debt among certain parts of the population, which is why it is important that rules and processes are in place to support people with debt management and why a breathing space policy forms an important part of that. I think that answers your question, but you might have more specific questions.

Savings Accounts and Health in Pregnancy Grant Bill

Debate between Harriett Baldwin and Stella Creasy

Tuesday 26th October 2010 Commons Chamber

[Stella Creasy]

I am glad that the hon. Lady asks about an Opposition Member looking for evidence. If she listens to me, she will find that I can refer to many different research points that can bring out exactly that. It would be useful in these debates to move from the examples given to what the independent academic research tells us the child trust fund has done in increasing savings in this country. I direct her to the work being done by the university of Bristol on this matter in particular.

As an MP in Walthamstow, I cannot help but see the impact of the Government’s decision. The latest figures tell me that more than 10,000 families in Walthamstow have a child trust fund voucher—well above the national average for a constituency. Nationally, we know that 70,000 are issued each month, including the top-ups, at a cost of just £500 million to the taxpayer. It is a relatively small investment compared to some of the other mechanisms that we have, but we know that it is money well spent, because until they were stopped, child trust funds were the most successful Government savings scheme ever.

My hon. Friend the Member for Stretford and Urmston (Kate Green) admirably set out the evidence that we have. It is worth repeating because of the questions being asked by Members on the Government Benches. Two million people were contributing to 4.5 million open accounts, resulting in more than £2 billion in assets, with £22 million in regular contributions. Critically, those are from families on less than £50,000 a year. In London that is not a high target rate to meet.

To get the full sense of what abolishing the scheme will mean, it is worth looking at the sums involved. Thanks to the Revenue’s child trust fund calculator, I was able to do just that. It tells me that a child born on my birthday this year eligible for just that basic payment of £250 from the Government and whose family saves just £100 a year, which is not even a tenner a month, could get about £3,000 in 2028. If the family started saving £20 a month, the figure could rise to £8,000. At £4 a week, it would be nearly £10,000.

[Harriett Baldwin]

Will the hon. Lady give way?

[Stella Creasy]

With respect, I have given way once.

We do not need to wait until 2028 to see the impact that such funding will have on the choices that young people could make. We know that in 2020 the first generation of child trust funds will mature. That means there will be 18-year-olds with access to £3 billion of investment for our nation. That may not be the riches of Croesus that some on the Government Benches will be able to bequeath to their children, but for the families that I work with in Walthamstow those first funds maturing in 10 years will transform the choices that their children are able to make.

In the context of the other debates that we have had in the House recently—on tuition fees, home ownership and entrepreneurship—we all know the difference that that kind of money will make. Putting that £3,000, the lowest sum, into context, it is worth reflecting that evidence shows us that parents are spending on average £4,000 on financing their children through university. We know, too, that more than half of 25 to 34-year-olds still rely on their parents for financial help. With tuition fees set to rocket under the present Government, that debt, that dependency and that distress for the parents concerned are only set to rocket.

Countless research studies show us that low income families aspire to saving for the long term, and that they want a nest egg for their children. The child trust fund is helping to make that ambition a reality, with almost 30% of the children who get the child trust fund also getting the top-up endowment of £500, meaning that their nest egg will be even bigger.

[Stella Creasy]

I thank my hon. Friend for that question. He precisely answers the point that many on the Government Benches wish to raise about where else money could be raised. There are ample other ways that we could raise money to reduce the deficit, such as the bankers levy.

[Harriett Baldwin]

Will the hon. Lady give way?

[Stella Creasy]

I shall make progress, as Mr Speaker has pointed out how many Members want to contribute.

I want to put on record my concern that children who will have the child trust fund removed—those 30% who are getting the extra payment—are kids from the families most likely to be hit by the cuts in public spending, as the housing benefit, tax credits, jobs and services that their parents rely on are also slashed by the Government. These are the kids of families who already struggle to make ends meet and for whom the scheme represents a lifeline of opportunity for their children in later life.

Members need not take my word for it. Let them look at the reports from the Treasury and the Institute for Fiscal Studies. They make it clear that the poorest will bear the brunt of the cuts. The Bill ensures that the burden will carry on to their children as well. This is not fantasy or wishful thinking, as some on the Government Benches may wish to claim. Since the scheme has been running, there has been clear evidence that it works in encouraging saving and supporting aspiration.

It is not fantasy to think that that money would be spent on the future of those young people. The research commissioned by the Treasury shows that families of all incomes see the money as the key to their kids getting on in life, whether it is used for higher education, setting up home or even having driving lessons. The research reflects the ample evidence and common-sense proposition that possession of even a small pot of money in early adulthood improves one’s life chances later on. It shows the strength of the economic argument for retaining the child trust fund, and that a savings culture can be ingrained in people from the early years of their lives. It shows also how counter-productive it is to cut the fund now, because the funding that would have been available to our economy in later years will also be absent from the choices that children are able to make.

The strength of the scheme, and what I want to concentrate my final remarks on, is the evidence that a small amount of capital at the beginning of life had a significant advantage for children 10 years on in life, even when accounting for employment, higher earnings and better health. At the heart of the scheme, and the reason why the previous Government introduced it, is a concern for social mobility, something that Government Members say that they too care about. If they do care about it, however, they will understand that assets are the key to social mobility.

Labour Members understand that if a child is born with a silver spoon in their mouth, it means not just nice baby clothes or a wonderful pram but the money, resources, confidence and networks that help to turn potential into reality. If a child does not have those assets, at every stage in their life their choices will be limited, and the decisions they make will be that much harder, whether they are about where to live or the lifestyle their family can afford, or whether they can even take the chance to go on to further and higher education. That is why Labour Members fought for the scheme and had planned to extend it if Labour won the election. It encourages not just savings, but aspiration.

We might look at our debates, and those that the UK Youth Parliament will have on Friday, about the right to vote and citizenship, but surely a truly progressive society is one in which we ensure that people have access to the capital endowment that gives them the same social power and responsibility of all their peers. I know that some Government Members agree. Only one day has been allotted to this debate, and attendance is low, but I hope that the country takes note of the fact that this Bill reflects the real impact of the Liberal Democrats on the coalition.

I urge those Government Members who consider themselves to be compassionate Conservatives to hold true to their own manifesto and to protect against this onslaught of Liberal callousness. The Conservatives’ manifesto at least pledged to protect the child trust fund for some children, so I urge them not to listen to the siren voices of the Liberal Democrats who, by abolishing the child trust fund, want to see the poorest families decimated.

The Liberals cannot even decide why they do not want the fund. Their claims run from “We can’t afford it,” to “It’s not the best way to secure asset-based mobility.” But as the former Chief Secretary to the Treasury said—