Savings Accounts and Health in Pregnancy Grant Bill

Debate between John Hemming and Fiona Bruce

Monday 22nd November 2010 Commons Chamber

[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.

--- Later in debate ---

[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.