Savings Accounts and Health in Pregnancy Grant Bill

Jacob Rees-Mogg Excerpts

Tuesday 26th October 2010 Commons Chamber

[Jacob Rees-Mogg (North East Somerset) (Con)]

Thank you for calling me, Mr Deputy Speaker. I feel slightly guilty that you have had to do so three times in almost as many days. I assure you that I am not modelling myself on Psmith—with a silent “P”—and his haunting of John Bickersdyke, which you will remember from the book “Psmith in the City”. I am really not trying to do that, and I will be as brief as I can while discussing this important Bill.

Benjamin Disraeli famously said that the job of the Opposition was to oppose, and we have seen that today. Indeed, we have seen it all afternoon. We have seen rather specious opposition to the Bill. Whenever the subject of where the money is to come from arises, there is no answer. VAT should not go up to pay for our bills; benefits should not be cut to pay for our bills; so we must spend, and we must have no increase in taxation. What happens to the nation’s finances at that point? What happens to the national debt? What happens to the deficit? We go down the sorry road towards bankruptcy. That really is what Opposition Members have been arguing for. It is the “do nothing” school; the argument that, like Nero, we should fiddle while Rome burns.

[Chris Williamson]

Will the hon. Gentleman give way?

[Jacob Rees-Mogg]

I should be delighted.

[Chris Williamson]

Will the hon. Gentleman at least acknowledge that before the economic downturn, the debt ratio in this country was lower than the debt ratio that the Labour Government inherited in 1997? The fact is that it was the Labour Government who introduced measures to keep people in their homes and in employment, and to prevent the appalling circumstances to which ordinary working people were subject in the 1980s when the hon. Gentleman’s party cast people aside.

[Jacob Rees-Mogg]

The hon. Gentleman’s point is fundamentally flawed. In 1997, the socialist Government decided to stick to Conservative spending targets. That is the one sensible decision that they made. It is not surprising that they managed to reduce the public debt by doing what the Conservatives had said that they would do. As for the deficit that built up before the crisis hit, there was a structural deficit—probably equivalent to 7% or 8% of GDP—which had resulted from excessive and extravagant expenditure. That is the nub of what we are debating today. We need to examine these benefits, and establish whether they are right in principle.

I will declare an interest. My three children have been the fortunate beneficiaries of £250 each—£250 spent extraordinarily well, Members may think, beneficially and wisely, so that in 18 years’ time my children will have something to spend when they are a little older. Is this really a sensible use of taxpayers’ money? It is too small a sum to make a difference even with the benefits of compound interest, yet too large a sum for our public finances to stand when aggregated across the whole of the economy and the total number of children who will be born. It is a wrong benefit, which is rightly being abolished. To contradict the hon. Member for Stretford and Urmston (Kate Green), who spoke before me, it is also a benefit that cannot be spent for 18 years; it will be of no economic benefit until the child is 18.

[Kate Green]

I apologise if I have misled the hon. Gentleman, but what I said was that the health in pregnancy grant would be spent immediately. I absolutely accept that the child trust fund moneys are locked up until the child reaches the age of 18.

[Jacob Rees-Mogg]

I thank the hon. Lady for that useful clarification.

The health in pregnancy benefit is paid to ladies towards the end of their pregnancy so that they can eat properly. Again, my wife was entitled to it. I have in the past been mobbed up somewhat on nannies and issues relating to that subject, but the one type of nanny of which I most firmly disapprove is the nanny state. This patronising approach, saying to these ladies, “You ought to eat your greens and here’s some money so you can do so,” is not what government is about. The Government are here to allow people to lead their lives as freely as they possibly may, without interference from the state while also providing a safety net for those who fall on hard times, not to tell people how to lead their lives, at the expense of the taxpayer and the economy.

[Catherine McKinnell]

Does the hon. Gentleman agree that a “lady” of very low income who finds herself pregnant and expecting her baby in three months’ time will have increased expenditure relating to both the pregnancy and the upcoming birth?

[Jacob Rees-Mogg]

The hon. Lady makes a brilliant and inspired point with which I completely agree, and it is therefore wise to ensure that such benefits as there are are directed to the people who need them, not wasted on people who do not need them. [Interruption.] If the hon. Member for Nottingham East (Chris Leslie) wants to say something, I am more than happy to give way.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

The Bill does not achieve what the hon. Gentleman wants, however. While I am on my feet, may I ask him whether he knows how many children in the United Kingdom are born with spina bifida each year, possibly as a result of a folic acid deficiency?

[Jacob Rees-Mogg]

The hon. Gentleman says the Bill does not say where the money is going to be spent, but that is an absurd point to make because the public finances are in such a weak condition that, at this moment, money needs to be saved. The first principle for the Government—their first ambition and intention—must be to get the finances of this country on to a stable footing so that they can then, with economic growth, ensure that the money is there to help people in the future.

[Sarah Newton]

I quite understand that the hon. Member for Nottingham East (Chris Leslie) might not know about this—his partner may never have had a child—but folic acid should be taken before and during pregnancy to avoid the dreadful condition he mentioned, and all the supplements are available on the NHS.

[Jacob Rees-Mogg]

My hon. Friend makes an extraordinarily good and important point. The payment of this £190 comes too late in the process to be of benefit to people whose children may be at risk of spina bifida.

[Chris Leslie]

I would be surprised if many mothers—I certainly include my wife in this, when we were having our daughter—were able to discover that folic acid is available on the NHS. A multivitamin and folic acid supplement costs about £10, I think. Do the hon. Gentleman and the hon. Lady really think it is absolutely essential that these women having children should potentially be deprived of help to pay for that folic acid supplement because of this deficit reduction strategy?

[Jacob Rees-Mogg]

As my hon. Friend the Member for Truro and Falmouth (Sarah Newton) wonderfully and accurately pointed out, the hon. Gentleman had got the wrong part of the pregnancy; we have to go back, not forward.

[Sarah Newton]

The whole issue of maternal health is incredibly important. The problem with this benefit is that how the mum is to spend the money is completely unspecified. There is absolutely no guarantee whatever that the money will be spent in the way that has been suggested. It is far better, therefore, that a mum is supported through comprehensive care in the NHS so that she is informed of the choices and provided with the resources to enable her and her baby to thrive.

[Jacob Rees-Mogg]

My hon. Friend is absolutely right and spot on. That is a most helpful intervention. There is no point in giving money late in the day to everybody—those who need it and those who do not need it alike—for an unspecified purpose when other ways of spending money may prove to be more useful.

[Kerry McCarthy (Bristol East) (Lab)]

The hon. Gentleman is saying that benefits should be targeted rather than universal and that they should be for a very specific purpose—that the state should dictate what the benefit money is spent on, which contradicts what he said earlier about the nanny state. Given his support for targeting benefits, how does he justify the Government’s continued support for the winter fuel allowance?

[Jacob Rees-Mogg]

The winter fuel allowance goes to the elderly, many of whom will have paid full national insurance contributions, and it is therefore in some sense a recompense for what they have paid in. I think that to look after the old in society is an important and virtuous thing to do. It is right to give that help so that people can be warm in their homes, but we are talking at present about £250 for children when they are born that will give them a pitiful amount a few years later. We are talking about £190 given to every woman who is going to have a baby for no necessary benefit to her because she may not need the money or it may be received too late for her to address some of the problems referred to earlier. Those two benefits are therefore unnecessary and wrong.

The third benefit is the Government’s matching of personal savings, and there is a misconception here. Saving from a deficit is a dis-saving to the economy because there are costs associated with allocating that saving. To put that more simply, if someone borrows money from one account to put into another account they will pay a higher rate of interest on their borrowings than they will receive on their savings so, net, the country is dis-saving by topping up savings accounts. Opposition Members are therefore wrong to say that this is an encouragement to saving.

We need to look at all that is being done in the broader context. We have this phenomenal deficit—our highest peacetime deficit—which the Government have, in a workmanlike and serious-minded way, decided to tackle. They have decided to bring the deficit down so that we may have the conditions for economic growth. The essence of good government and of a sensible Treasury policy is to ensure that there are the conditions where business can thrive, jobs can be created and money can cascade through the economy. That is what really lifts people out of—

[Chris Williamson]

Will the hon. Gentleman give way?

[Jacob Rees-Mogg]

Of course I will.

[Chris Williamson]

The hon. Gentleman referred to job creation. Will he therefore comment on the fact that almost 500,000 jobs will go in the public sector as a direct consequence of the comprehensive spending review, followed by a further 500,000 jobs at least to go in the private sector? How does the hon. Gentleman square that circle?

[Jacob Rees-Mogg]

I am not going to try to square circles, which I believe is not possible, but those figures are fundamentally contentious, and it is also worth bearing in mind that outside the private sector the country has no income. Every penny spent by the Government either has to be raised in taxation or borrowed.

[Chris Williamson]

Is the hon. Gentleman therefore contesting the figures of the Office for Budget Responsibility?

[Jacob Rees-Mogg]

The hon. Gentleman knows the figures are contentious because he cited the figure of how many jobs will go in the private sector, but he is ignoring the jobs that will be created. We find ourselves in the extraordinary situation that 700,000 public sector jobs were created by the last Government without the money to pay for it. We cannot run a system under which we employ people and pay them what are essentially tokens because we have no real money. Are we to follow California and pay servants of the state IOUs because there is no proper currency with which to pay them? Are we going to so debauch our currency and print even more of it that there are no funds with which to pay people? Are we going to destroy our gilt market so that the Government are unable to raise money? No, Her Majesty’s Government have been brave, courageous and right, and they have taken tough decisions. They have taken decisions mocked by Labour Members because they dared not do this; they talked quietly in secret rooms about how much they were going to cut. These cuts then get leaked in the newspapers because Labour Members dare not come boldly to this House to say what they want to do.

[Chris Williamson]

I beg your pardon, Mr Deputy Speaker, and that of the House for continuing to intervene on the hon. Gentleman, but I cannot allow him to get away with his remarks. I wonder whether he studied history at all when he went to school and university, and whether he would care to ponder on what happened in the 1930s in America, when its plans put people back into work, compared with what happened then in this country. The prospectus that is being followed by this Administration was similar to what was done in the 1930s and saw mass unemployment.

[Jacob Rees-Mogg]

I am grateful to the hon. Gentleman for his kind and helpful intervention, because I happen to have with me some economic data from the 1930s. I believe they will prove helpful because they are from the United Kingdom. It is a common error—if I may say so, it is a schoolboy error—to confuse the situation in the United Kingdom with that in the United States in that decade. In 1931, public spending in the United Kingdom was £1.174 billion, a figure that had been cut to £1.061 billion by 1934. Unemployment peaked in 1932 and gross domestic product grew from £4.399 billion in 1931 to £4.813 billion in 1934. So there was a percentage cut of nine-odd per cent. in public spending accompanied by a 9% rise in GDP, and unemployment peaked long before the cut in public spending was at its maximum point.

So in fact this Government are rightly following what the British Government did in the 1930s, and the key thing, which I will give credit to the Labour Government for, was coming off the gold standard. In 1931, having an active monetary policy meant that the economy could grow even while public spending was being cut. Her Majesty’s previous Government, the one that she dispensed with on 6 May or thereabouts, allowed the pound to fall so much and allowed the Bank of England to ease quantitatively—or print money, to put it in less jargonistic terms—that the increased money supply created the conditions where this Government can and must cut fiscally, and can have economic growth and falling unemployment. We are already seeing some of the fruits of that coming through in the figures announced today.

[Gregg McClymont]

I was listening closely to the hon. Gentleman’s comments. Given what he was saying, will he support a further round of quantitative easing if that is necessary to stimulate the economy, given the possibility of a prolonged—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. This is going rather wide of the mark and now may be an appropriate time to remind colleagues that we have the wind-ups at 9.40 pm. I would be grateful if Mr Rees-Mogg could show some restraint, as well as everybody else that follows.

[Jacob Rees-Mogg]

I would have finished by now, but I have taken a number of interventions, which it is a privilege to do. [Interruption.] It is a privilege, because the interventions are very interesting and they allow us to get to the nub of this difficult matter. Of course it is not popular to take something away. Of course it is easy to stand up raging about £190 being taken away from women who are about to be pushing prams. Of course the decision to take £250 away from their children is a hard one, but it is right, because the country cannot afford this. If the economy is to grow, we must have sound public finances. If that happens and if people can keep their own money, rather than have it taken from one pocket by the Government to be put into another pocket by another Department of the same Government, we can get economic growth and we can see what we saw in the 1980s, when the economy boomed, individuals got increasingly prosperous and Britain was back among the top world nations. That is what I want to see, that is what the Government are doing and that is why I am thrilled to be supporting the Bill.

--- Later in debate ---

[Kerry McCarthy]

I am sorry, but I do not have time to give way because we are a bit under the cosh.

My hon. Friend the Member for Rochdale (Simon Danczuk) talked about how scrapping the child trust fund would heighten the contrast between the tax advantages for the wealthiest savers and the poorest and vulnerable slipping further and further behind. My hon. Friend the Member for Stockton North (Alex Cunningham) reminded the House of the old biblical tale of the widow’s mite and the comparison with the poor being made to contribute to deficit reduction at great sacrifice while the very richest in society will not feel the same pain.

My hon. Friend the Member for Kingston upon Hull North (Diana R. Johnson) talked about how the saving gateway had been piloted in Hull. That measure was not mentioned as much during today’s debate, but it is obviously important and it was praised by my hon. Friend the Member for Scunthorpe (Nic Dakin).

My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont)—I think that I finally pronounced that right after several attempts—talked about how the child trust fund is about freedom and opportunity, and not about the nanny state. That is such an important point to make, because the fund is about creating the ability for young people to go out into the adult world with a little bit behind them that they can put to good use.

My hon. Friend the Member for Bolton South East (Yasmin Qureshi) rightly pointed out that those on the Government Benches have been using specious arguments against universalism all afternoon, yet they are not arguing that the health in pregnancy grant should be targeted, although that would be the logical conclusion of their argument. They are also not using the same argument to say that the winter fuel allowance, for example, should be targeted.

We heard a passionate defence of the health in pregnancy grant and the child trust fund from my hon. Friends the Members for Walsall South (Valerie Vaz), for Newcastle upon Tyne North (Catherine McKinnell) and for Edinburgh East (Sheila Gilmore). The latter described some of the language used or some of the suggestions made by those on the Benches opposite about what the health in pregnancy grant could be used for as quite offensive. The suggestion that ladies, as my neighbour, the hon. Member for North East Somerset, would say, cannot be trusted to spend the money wisely in a way that would benefit their health and their child is quite offensive.

[Jacob Rees-Mogg]

rose—

[Kerry McCarthy]

By way of light relief today—[Hon. Members: “Give way.”] I would love to.

[Jacob Rees-Mogg]

I thank the hon. Lady for giving way, because I want to clarify that I had not made the point that people did not spend their money wisely. It may have been made by somebody else, but I would not like people to be confused.

[Kerry McCarthy]

My reference to the hon. Gentleman related just to the fact that he used the term “ladies” quite frequently during the debate, which is actually charming in its own way.

Earlier today, after a heavy morning spent in the Finance Bill Committee, by way of light relief I watched a video that had been posted on the ConservativeHome website in January this year. It was one of those videos that the Conservative party was very fond of when it was on a mission to convince the British voters that it really had changed and was no longer the nasty party. It featured the then Leader of the Opposition, now the Prime Minister, of course, in his shirt sleeves talking with well-rehearsed spontaneity to an audience carefully chosen to seem like a random cross-section of the general public. He said that he wanted this Government

“to be the most family friendly Government we’ve ever had in this country and that is about everything we do to support families and it’s about supporting every sort of family.”

What have this Government, in collusion with their friends from the Liberal Democrat party, done to support families? For a start, what have they done to support children? The so-called emergency Budget and the spending review take away almost £7 billion from funds to support children, three times the amount the bank levy is estimated to raise. According to the Institute for Fiscal Studies, families with children will lose the most from what this Government plan to do by 2014-15. The poorest 10% of families will lose 7% of their income. The Government are freezing child benefit, cutting child care tax credits, restricting the Sure Start maternity grant to just the first child and, of course, axing the child trust fund and the health in pregnancy grant under the Bill that we have considered today.

What about when the children get a bit older? Education maintenance allowances are being abolished, school spending per pupil is being cut in real terms and the IFS has said that the pupil premium could widen funding inequalities. As the End Child Poverty campaign said after the comprehensive spending review, it was

“a dark day for any family struggling to stay out of poverty, or deep in it already and fearing things will get worse still.”