Autumn Forecast

Kate Green Excerpts

Monday 29th November 2010 Commons Chamber

[Mr Osborne]

It is not a bad test of the policy offered to the Government from the Opposition to consider what would happen if we actually did it tomorrow. If the shadow Chancellor stood up tomorrow, or if I adopted his plan, and announced that the UK was backing off its fiscal consolidation plan and that it would take much longer, where do we actually think the UK would be within about 30 minutes of that statement?

[Kate Green (Stretford and Urmston) (Lab)]

I am naturally pleased that the number of job losses in the public sector has been revised downwards, but I am very concerned that it seems that the £18 billion of welfare cuts, which will affect the poorest, will be picking up the price tag. Was that the Chancellor’s explicit decision and policy, and if so does he think it was fair?

[Mr Osborne]

I do of course think the spending review was fair, but as I said at the time—[Interruption.] If the Opposition would actually produce a spending review, perhaps we could compare the two—but they do not want to do that.

The point I was making to the hon. Lady is that I said at the time of the Budget and the spending review that I was making a conscious decision to seek further welfare reform to try to reduce the rapidly escalating costs of the welfare state. That was a challenge that anyone doing my job would face, and I said that if we were able to find further welfare reforms, we would be able to reduce the cuts in Departments, and that is exactly what we were able to do.

Savings Accounts and Health in Pregnancy Grant Bill

Kate Green Excerpts

Monday 22nd November 2010 Commons Chamber

[John Hemming]

At this point, I should declare my interest, which is on the Register of Members’ Financial Interests, as the chair of a company, John Hemming and Co., which provides software to ISA providers. I understand how ISAs operate and that the value of ISAs that are exposed to the stock market can go up as well as down. The difficulty with the child trust fund is that it is relatively small and that there is a great challenge in managing small funds. As a proportion of the fund, the 1.5% charges rate is higher than that for many other funds.

[Kate Green (Stretford and Urmston) (Lab)]

Is the hon. Gentleman confident that the junior ISA will be more cost-effective for the local authorities that are the corporate parents of children in care than the child trust fund?

[John Hemming]

There is no reason why a junior ISA should be any less effective for the corporate parents. The issue is that running the computer systems for the child trust fund costs £5 million a year. That cost would not affect local authorities but would mean central Government incurring an extra £5 million in administrative costs now to give children in care £2 million in 18 years’ time.

[Kate Green]

Rather than this being about whether there will be more or less cost, is it not simply about whether the cost will be borne by central or local government? In the scheme of things, that makes very little difference when we are talking about overall cost to the public purse.

[John Hemming]

The Opposition’s proposal to maintain the child trust fund and give £2 million to children would cost £7 million, so they would waste £5 million on the process. In the sphere of the massive deficit, £5 million might not seem like much, but it is the responsibility of Government to be effective and efficient in their use of public funds.

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[Paul Maynard]

I agree entirely, and I wish that during the evidence taking in Committee and in the debate, we had had an either/or discussion, rather than an “and, and, and, and yet another idea” discussion. We had far too many shopping lists and not enough recognition that hard choices had to be made. It is important to recognise, as Marc Bush from Scope did when he gave evidence to us, that delivering an asset at age 18 is not the solution to the problems faced by families engaging in the transition of their child from childhood to adulthood, when faced with a complex disability. That starts at age 14 and can continue to age 30. The hon. Member for Stretford and Urmston (Kate Green) recognised that when I intervened on her, and that was a useful move forward.

When we are discussing the future of child ISAs, I hope it is taken into account that families who are particularly vulnerable may need access before the age of 18. Locking the ISA away until age 18 is not always the best solution.

[Kate Green]

rose—

[Paul Maynard]

I will give way, for the last time.

[Kate Green]

I am grateful to the hon. Gentleman. He is right to say that if the junior ISA can offer that flexibility to disabled children, it would be a useful enhancement—I look forward to hearing the Minister’s response on that—but does he accept that another advantage of the child trust fund, which he and I would welcome in the junior ISA, was that it delivered extra money to more vulnerable children in the double payments that were available to children from low-income households or with disabilities, for example?

--- Later in debate ---

[Yvonne Fovargue (Makerfield) (Lab)]

The child trust fund has a dual purpose—not only to give the young person a lump sum, but to nurture in them a savings habit for life. Some 74% of those eligible have taken up the responsibility of the child trust fund account. It is the most successful savings product on the market; ISAs and pensions fall well behind that figure. It is simple—much simpler than opening a deposit account—and it gives people a nudge to save.

Nearly a third of parents and grandparents have added to the fund, and the poorest 20% have added a higher proportion of their income to it. However, even for young people whose families do not contribute, the practical demonstration of saving in the account is invaluable. Organisations such as the Personal Finance Education Group, which works in schools, structure their lessons around it, certain in the knowledge that all pupils will have received a statement annually on their birthday, and that all pupils have such an account.

The very universality of the scheme provides a useful and practical foundation for learning and for influencing behaviour. In addition, it is especially useful for looked-after children and children with disabilities, who receive extra premiums. For looked-after children, it is a practical example of the state acting as parent and attempting to improve their prospects at 18—an ambition that all parents have for their children—by providing a lump sum at one of the most difficult periods of their lives, a time of transition that is difficult for any teenager, but especially for those leaving care.

For children with disabilities, the scheme provides an asset that allows them to take advantage of life opportunities or to invest in whatever they see as their priority. It is unfair to remove the scheme without a full impact assessment of groups who may be disproportionately affected, such as families with disabled children and people with disabilities, especially as the Demos report showed that the emergency Budget had a substantial financial impact on families with disabled children.

It has been suggested that a junior ISA may replace the child trust fund, but I cannot believe that it will provide an adequate replacement, even if a seamless transition in January 2011were possible, which has been disputed by a number of experts in the savings field. An ISA primarily benefits taxpayers and higher-rate taxpayers in particular, so what advantage does an ISA offer to a non-taxpaying family? Equally, the simplicity of the child trust fund product has been praised.

I have worked with people to whom ISAs and other financial products have little relevance, with people who need support to open a basic bank account and with people who have no notion of opening a deposit account. I urge Members, therefore, to retain the scheme in some form—even if only for looked-after children, children with disabilities and the poorest third of families—and not to scrap it completely. I urge Members to support the amendments.

[Kate Green]

I shall speak strongly in support of amendments 51 and 52, which my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) has tabled. As he says, Members from all parties share a deep concern about the continuing very poor outcomes that we, as corporate parents, deliver for children in the care of the state. Those children suffer difficult childhoods, often arriving in care in traumatic and traumatising circumstances. They are therefore significantly unsettled and disadvantaged in their childhoods, and that disadvantage continues, to our shame, into their adult lives.

Such children all too often achieve poorer outcomes in education and health: in adult life they are less likely to move into sustainable employment or further or higher education, and they are more at risk of poverty. I know all hon. Members feel deeply that that is wrong, so I shall speak strongly in support of my right hon. Friend’s amendments, because they open-mindedly ask us to address that endemic disadvantage. If Opposition Members are offered assurances that other financial instruments can meet those concerns, we will of course consider them, but we are clear about what those alternative instruments must deliver if they are to receive our approval tonight. They must deliver some of the advantages that the child trust fund was able to deliver for looked-after children—advantages that sought to some degree to adjust and compensate for the disadvantages that such children face as they embark on adult life.

The first important thing about a payment mechanism specifically designated to meet the needs of looked-after children is that it represents a signal from us as a community that we care about such children—that they are valued, and as precious as any child living with his or her family is to his or her parents. Too often, looked-after children feel that our society does not value or recognise them and that nobody has an interest in them, so a financial contribution to a savings fund for them is one of a number of steps that we can take to show that those children and their futures are important and matter to us all.

The child trust fund, in its design, also delivered much more hard-edged benefits to looked-after children. As Members have said, it put extra money aside for children through double payments, and in responding to my right hon. Friend’s questions it is important that the Minister should address how we ensure that those children do not suffer further financial disadvantage and inequality in adulthood by embarking on adult life with a significantly smaller asset than many other children. Adjusting wealth and asset inequality was one of the intended bonuses of the child trust fund—one that was particularly important for looked-after children, and one that I hope the Minister will address.

My hon. Friend the Member for Makerfield (Yvonne Fovargue) pointed out that the fund sought to meet costs at a time of transition, and reaching 18 is a particularly difficult time for children leaving care, because we leave them at the mercy of adult life as no familial parent would with her or his child. No mum or dad would throw their child out of the family home without so much as a kettle or an offer to underwrite the gas bill if they struggle as they set up home, but that is what we do to too many children who leave the state’s care. By providing those children with a financial asset, the child trust fund helped to smooth some of the extra costs that they faced at transition points, with which no other family member might have been available to help them. The fund therefore enabled those young people to embark on their adult life with the confidence, certainty and stability that other young people often draw from family support.

I hope the Minister will reassure me that any alternative financial model will replicate two other in-built advantages of the fund, one of which is the product’s relative simplicity. It was fairly clear what sums were going in, and it was fairly clear when they could be drawn out. Junior ISAs might offer more flexibility and allow more contributions and different points of withdrawal, and that might bring some advantages, but we must not set up a product that is too complex for corporate parents and others who might wish to donate to the funds of looked-after children to access readily and save within. I look forward, therefore, to the Minister’s assurances about how the product will prove accessible to anyone who wishes to save for a looked-after child or young person, and in particular how a corporate parent will be able, without unnecessary bureaucracy and expense, to make contributions for children in their care.

Right hon. and hon. Friends have mentioned how the child trust fund offered consistency throughout the country, between local authorities and in all four parts of the United Kingdom, ensuring that every looked-after child left care with the same opportunity of an asset with which to start adult life. Can the Minister assure us that the alternative mechanisms and products that he might bring forward will deliver such consistency? We do not need to perpetrate inequalities among children leaving care as we do between children leaving care and other young people as they start out on adult life.

My hon. Friend the Member for Makerfield rightly pointed out that the junior ISA offers little that is intrinsically attractive to savers who do not benefit from a tax break. By definition, that includes corporate savers who invest for the future of children leaving care. I very much want to hear how the Minister will at least incentivise, more than that exhort, and—preferably—insist that corporate parents save adequately and equally for every child who falls within their care. If those assurances are forthcoming this evening, like my right hon. Friend the Member for Wythenshawe and Sale East, I will be able to look again at his amendments. If we do not receive satisfactory assurances, however, every young person and every child who has been in care will expect the House to support the amendments, and I for one certainly will.

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[Paul Maynard]

I agree entirely. That is a very fair point. It was never clear whether the Opposition believed in universality or targeting. It seemed to depend on which amendment they happened to be pressing at any moment in time. It was part of the incoherent approach that they seemed to have to the debate.

The previous Government never tackled the issue of how it took up to eight weeks merely to process a health in pregnancy grant claim. The money often came through not in the 25th week but in the 33rd week—well beyond the time at which there was any hope of achieving real dietary change.

I specifically tackled the hon. Member for Bristol East on the issue of usefulness versus effectiveness. When she said in Committee that this was a useful grant, I asked her how she defined useful. She mentioned access, which I have dealt with, but never really dealt with the issue of effectiveness. That was my concern with the Opposition’s argument. At no point did they try to evaluate properly how effective the scheme was. I know that many amendments were tabled asking for such an evaluation, but all along the Opposition’s rhetoric was to use the word “useful” rather than “effective”. At no time did they argue that the scheme was effective, so we were left with not very much more than the shadow Minister trying to argue that it was nice to hand out other people’s money to other people. It might well be, but that is not a firm or solid foundation on which to build a health in pregnancy grant.

I support the abolition of the grant for the simple reason that we have a number of alternative mechanisms to support families who need assistance during pregnancy. The grant was not paid out at the right time in pregnancy, in my view, and I do not believe that it has achieved its goal. I do not believe that we would even be able to provide the evidence if that were the case. I wholly support the Government in what they are trying to do.

[Kate Green]

I am very sad that the Government have brought forward proposals to cancel the health in pregnancy grant. We have heard this evening and during the Bill’s earlier stages a number of criticisms of its structure. We have heard that it is paid at the wrong time—too late to have a significant impact on maternal nutrition and well-being—and that the money could have made more difference, even pre-conception, to low-income women of child-bearing age. We have heard that it misses the point and that women fritter it away on shoes and going to the spa. That might be true of a minority, but for many others the grant makes a crucial difference at a time when family finances become tight.

The Opposition have been asked whether we are not confused about wanting the grant to be universal or targeted at low-income and more vulnerable women. We are not confused. We are clear that we want a universal grant for all the reasons that we believe in universality: it is more effective at reaching the most disadvantaged, more cost-effective and simpler to administer, and it is easier to know when one is entitled to claim. We accept, however, that if we have to settle for a reduction in spending on pregnant women then, for a time at least, a targeted payment would have enabled us to keep the structure of the grant until it became affordable to offer it again on a universal basis.

--- Later in debate ---

[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.

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[Dr Poulter]

No, I will not.

The pregnancy grant would be much better directed if it was used to improve care at the time of delivery, when we know that maternity care matters most in reducing the number of foetal deaths and in reducing poor outcomes in pregnancy and delivery.

The hon. Member for Bristol East (Kerry McCarthy) made the point that we need to be able to measure the effectiveness of the grant, and that it should be a nudge in the direction of good behaviour. I accept that any intervention should encourage good behaviour. Unfortunately, what I saw in my clinical practice, and I speak also as the chair of the all-party parliamentary group on maternity, is that unfortunately many mothers from vulnerable backgrounds were spending the grant on, among other things, cigarettes, which we know have a detrimental effect in pregnancy. There is also a high though often unseen rate of drug and alcohol misuse in pregnancy. The grant is potentially spent on those harmful things as well. Giving an intervention, such as the grant, 25 weeks into pregnancy is far too late to help women deal effectively with those substance misuse problems.

[Kate Green]

I am sure the hon. Gentleman will agree that the majority of mothers are not substance misusers or alcoholics. Indeed, there is considerable evidence over many years, including from the Policy Studies Institute, that shows that if women are given more money, what they do, as my hon. Friend the Member for Bristol East (Kerry McCarthy) said, is spend it on their kids.

[Dr Poulter]

That is a fair point. Nevertheless, many women smoke during pregnancy and do not necessarily give up smoking. The hon. Lady made the point in her speech earlier about low birthweight babies, a factor which we know is linked to smoking. The grant can be used by mothers to support their smoking habit. To be used effectively, a grant must be tied in with results and effect. We all want mothers to have better nutrition, but unfortunately the grant was often spent on harmful substances. The main problem with the grant is that it was not targeted, it was not effective, and it was not making a difference at the time that we know matters to mothers, which is at birth and delivery.

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[John Hemming]

What we are talking about is putting some money in a fund and leaving it there for 18 years. That is not going to affect any woman or child for 18 years. What we should be doing is looking after people now. Our priorities have to be the vulnerable people now. We have to give priority to protecting the poorer, the less well off, the vulnerable and those with learning difficulties now, rather than putting some money away for 18 years.

[Kate Green]

Can the hon. Gentleman give me one single instance of where the incomes of the poorest are being increased by this Government?

[John Hemming]

Well—[Interruption.] Sorry? [Interruption.] Yes, that is a good one. The tax threshold is a good example. One area we are focusing on is low-paid people in work, so there is the first stage of gradually increasing the tax thresholds up to £10,000 a year, and the universal credit itself should be particularly helpful to those on benefits and low pay, such as many people who come to my advice bureau. On Saturday, I did some calculations with somebody who had worked out that when we took into account all the rules the Labour party had produced over the years, it was not worth his while to work. Interestingly, in that instance that was because of a Child Support Agency deduction. We need to focus on the low-paid and make sure that people get into work and through that route get themselves out of poverty. That is a good example of our putting money into the hands of low-paid families.

There is no evidence that the child trust fund produced extra saving, there is no evidence that the saving gateway produced extra savings—and there is only some evidence that, perhaps, it reduced spending on food outside the home—and there is no evidence that the health in pregnancy grant did any good for health in pregnancy. On that basis, if we are not going to cut these measures, what are we going to cut?

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[Kate Green]

In the short time remaining I will address one or two of the points that were raised in the last part of the debate. Is it right to give people cash? Absolutely. There is much evidence of the fundamental difference that an adequate family income makes to a range of good outcomes. Do people squander that cash? Absolutely not. There is a wealth of evidence to show that when low-income families, particularly mothers, are given more money, they spend it on their families and they spend it on their kids. Is it right that we cannot afford that? Only if we look narrowly at the short term. Government Members have rightly challenged us on the long-term savings to be made by addressing inequalities, but savings achieved tomorrow by investing in families today must be taken account of, and that is something to which Government Members have given no thought.

The child trust fund, in offering the poorest young people the opportunity to start their adult lives with an asset behind them, makes a significant difference to those young people, and I am distressed that that is to be taken from them as a result of the Bill. We have offered the Government so many ways in these difficult circumstances to manage those policies through. We have offered them the opportunity to set a target for a time or to cease paying into those funds for a time. We have pleaded with the Government not to scrap them entirely, not least because they have nothing better to put in their place.

The Government are taking £18 billion out of the incomes of low-income households and half a million jobs out of the public sector, many of them for the lowest-paid workers, and then they have the temerity to say that, in addition, they will remove the £190 health in pregnancy grant because, they claim, there are other things to support pregnant women. That is indecent and ungenerous, and I am distressed that so many Government Members consider it acceptable, necessary or even desirable. I very much hope that when the Bill moves to another place, there will be an opportunity to amend the clauses in a way that we have regrettably not been able to do. I regret that the Bill is going forward in its current form, despite the best efforts of my right hon. and hon. Friends.

Question put, That the Bill be now read the Third time.

Oral Answers to Questions

Kate Green Excerpts

Tuesday 16th November 2010 Commons Chamber

[Mr Osborne]

We will remove the requirement to purchase an annuity by the age of 75. Draft legislation will be published in December, and we want the new rules in place by 2011, although we have also introduced transitional arrangements to help those who have reached the age of 75 since I made the announcement in the Budget. We think that people who have been responsible enough to save through their working lives are responsible enough to handle their savings in retirement.

[Kate Green (Stretford and Urmston) (Lab)]

Will the Chancellor commit to working closely with the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb) to introduce the universal, flat-rate, minimum pension for all citizens as quickly as possible?

[Mr Osborne]

Yes, absolutely. The Treasury is working with the Department for Work and Pensions on potential pension reform that could simplify pensions and provide a boost to pensioners for many years to come.

Comprehensive Spending Review

Kate Green Excerpts

Thursday 28th October 2010 Commons Chamber

[Danny Alexander]

I had planned to give way a few more times, but that intervention took so long that there will not be time to take any more for a while. The spending review is based on one simple principle: cleaning up the mess left behind by the Government of whom the hon. Gentleman was part.

We are making other welfare reforms too. We will cap household welfare payments at the average earnings of working households and we will reform housing benefit so that support better reflects the housing choices that working families have to make. That must be right. The welfare system should provide an effective safety net, but it should not pay workless families far more than most working families earn. That is where benefit traps and dependency start. Our reforms mark an historic shift from dependency to independence. Our measures are tough but fair.

[Kate Green (Stretford and Urmston) (Lab)]

Does the Minister accept that housing benefit is also an in-work benefit? The Government have presented very little evidence that out-of-work families who receive housing benefit live in significantly better conditions than any working family.

[Danny Alexander]

The cap that we propose, which will be debated in due course, is nearly £21,000-worth a year of housing benefit. That is more than equivalent to what most working families have to spend on their housing costs.

Savings Accounts and Health in Pregnancy Grant Bill

Kate Green Excerpts

Tuesday 26th October 2010 Commons Chamber

[Mr Hoban]

There was clearly a choice. We could have continued with these schemes and cut spending elsewhere, but we decided that it was better to take action now to tackle the deficit than to put that decision off, as the hon. Gentleman’s party would do, and therefore have to make deeper cuts in the future. I think the steps we are taking are the right course of action to tackle the deficit.

Although the previous Government had agreed with RBS and Lloyds Banking Group that they would introduce saving gateway schemes, none of the other big high street banks were planning to do so, and although the Post Office was going to offer the accounts, that was only because the previous Government had agreed to pay it to enable it to do so. Also, while a number of credit unions were signed up, not a single building society signed up to provide the saving gateway account. Therefore, although I appreciate the engagement of those who had planned to offer saving gateway accounts, I was concerned that not everyone in the eligible population would have had an accessible provider. For these reasons, we announced at the Budget that the saving gateway would not be introduced. We therefore stopped the Saving Gateway Accounts Act from coming into force, and this Bill repeals it altogether. Although we may want to come back to this idea at some point in the future, we have no plans to do so at present so it would be wrong to leave this legislation on the statute book.

[Kate Green (Stretford and Urmston) (Lab)]

The Minister alluded to the fact that credit unions were particularly interested in supporting this initiative, and he will be aware that credit unions are particularly likely to be located in communities with high concentrations of disadvantage and poverty. Therefore, although he says the scheme’s reach was not complete, does he accept that in fact it was potentially rather well targeted?

[Mr Hoban]

That assumes that there is a credit union in every deprived community, but in some such communities a credit union may not be accessible, and the Post Office would have stepped in only if a Government subsidy were provided, so I do not believe there was going to be a complete network of saving gateway account providers to ensure that every eligible person in this country would have been able to access an account.

Clause 3 addresses the health in pregnancy grant. It is a one-off cash payment of £190 to pregnant women. The previous Government said it was being introduced in recognition of the importance of a healthy diet during pregnancy. However, the National Childbirth Trust said that

“the evidence indicates that, if dietary intervention is to have an impact on birth weight and outcomes for the baby in later life, it should be started as early as possible.”

Given that the grant is not paid until the third trimester, it is not clear how effective it is, and although—

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[Mr Hanson]

It will indeed take away a key tool in helping to deal with inequality and poverty at the age of 18. The child trust fund encourages saving, particularly among people from the poorest parts of our communities.

[Kate Green]

Is not the Minister proposing tax breaks for savers’ children, benefiting families who pay tax—the better-off—and widening inequalities, because non-taxpayers will get no benefit at all?

[Mr Hanson]

My hon. Friend is exactly right, and from her background outside the House as well as inside it, she will know how important that contribution is, but let me move on to the Saving Gateway Accounts Bill, which was introduced in 2009 by the Labour Government, again to encourage people on low incomes to save for their future.

Cash savings accounts were created for those on lower incomes, providing a financial incentive to save, with the Government matching, pound for pound, the money that people saved in the scheme. The scheme was proposed in 2001: 22,000 people have so far taken part in the pilots, and £15 million has been invested in savings through those pilots. The accounts have run for two years, and they have been a positive way for people to start to save, with help and support for those in our poorest communities.

The first pilot ran between 2002 and 2004, and 1,500 saving gateway accounts have been opened in Cambridge, Cumbria, east London, Manchester and Hull, in the part of the world of my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson). Additional pilots have been run recently in South Yorkshire. Those schemes have shown that we can generate new savers, new saving and, indeed, help people on poorer incomes to put aside money to meet some of the challenges that they face in their daily lives.

Hon. Members need not listen to me about the importance of those schemes; let me give them an authoritative voice on the Saving Gateway Accounts Bill:

“The Bill serves a valuable purpose in encouraging people, particularly those on low incomes, to save. People on higher incomes have an opportunity to smooth out fluctuations in income and expenses to which those on low incomes do not have access. If the Bill is successful in encouraging people to save, it will enable them to create a modest buffer against variations in income, such as the unexpected expense of being laid-off for a short period. It will give people a degree of financial security they have not had hitherto.”—[Official Report, 25 February 2009; Vol. 488, c. 323.]

Those are not my words, nor those of my right hon. and hon. Friends; they are the words of the Minister, who is now introducing proposals to end such schemes, although he supported the 2009 Bill—doing one thing in opposition and, yet again, another thing in government. At a time when potentially 500,000 people are being laid off because of the public sector cuts as part of the comprehensive spending review, the Government will take that support away from those who need it most.

In the absence of the saving gateway scheme, how does the Minister propose to promote the culture of saving among people on lower incomes? As my hon. Friend the Member for Stretford and Urmston (Kate Green) said, how do we ensure that saving is not the preserve of the rich and that it is done throughout society, so that people can help themselves and ensure that they save for the future in partnership with the state?

If we turn to the last part of the Bill, we see the full force of the coalition’s new politics turning itself on those who are pregnant. Any hon. Member who is a parent knows that raising a child is a uniquely rewarding experience, but we all need to recognise that it can be financially challenging in the run-up to a birth and that it can be difficult for young mothers and young families. Not only was the health in pregnancy grant introduced in recognition of the health benefits of covering some of the additional costs involved during pregnancy, but it was paid universally to all mothers to ensure that they could buy help and support during the last weeks of their pregnancies. Such support covered healthy eating, vitamins, medicines, books on healthy pregnancy or the cost of maternity clothes or folic acid, as mentioned by my hon. Friend the Member for Bolton South East (Yasmin Qureshi). Folic acid can help to reduce the risk of spina bifida, but 400 mg costs £9.99 at Boots. The health in pregnancy grant can be used for those costs and put towards getting help and support for health, and it is linked specifically to ensure that advice is given to mothers in pregnancy as part of the deal.

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[Mr Hanson]

My hon. Friend quotes the chief executive of the National Childbirth Trust, but she could have also quoted the Royal College of Midwives, which said that there is an opportunity for midwives to communicate health advice to women and their families, as the grant is dependent on engagement with health practitioners. Never mind the cost of maternity dresses and other clothes, minerals, healthy eating, advice or taking time off work, these are important grants.

The Bill shows that the Government are out of touch with the needs of the vast majority of the British people. A £190 maternity grant may not seem much to some Government Members, but for the shop worker getting by on the minimum wage, it is a significant amount of money. For a woman with an unemployed partner, it might make a difference to the future health of their child. For those people, the grant makes a difference. Like the child trust fund, the grant is about investing in our future and in our children’s health and in giving them a good start and ensuring that they have a break at the age of 18, to make their way in life with positive support.

[Kate Green]

Does my right hon. Friend agree that one of the things that is likely to happen if women are given a sum of money in the seventh month of pregnancy is that they will go out and spend it, thereby also helping to regenerate their local economies?

[Mr Hanson]

Indeed. That is a good point, but I would say in passing to my hon. Friend that, unless I missed something, the Minister seemed to indicate that he did not feel that women would spend the money on things that matter for their pregnancy. He seemed to take a “shoes and nail varnish” approach in relation to what the grant has done. Most women take a great interest in the development of their children—that is the most important thing in their pregnancies—and they will do things to ensure that their children have a great start in life, and the grant was an opportunity to help in that respect.

--- Later in debate ---

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

It is a pleasure to follow the shadow Minister, the right hon. Member for Delyn (Mr Hanson), who was my first political foe when I was just 14 and he was leader of Vale Royal borough council. In the intervening 20 years, he has only got worse. That is a sad thing to have to say.

It is important that we remember why we are here today and what we are here to discuss. We are not here to discuss whether it is a good idea for families to save, or to encourage children to save. We are not here to discuss whether it is a good idea that pregnant women should enjoy good health during pregnancy. We are here to discuss whether the specific items of legislation introduced by the previous Government achieved their goals and warrant continuation.

The Labour Government had a fondness for introducing legislation willy-nilly, volume after volume of it. At no point did they ever feel a need to investigate whether their legislation achieved its goal. I have nothing against innovation in public policy. The work of think-tanks is important, and it is a disappointment to me that the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), is not in his place today to defend his creation, as I know he felt such a passion for it at the time.

What we are here to do today is to decide whether specific items of legislation were effective—not whether they were popular, whether they made Labour Members feel good about themselves, or whether they excited think-tanks, interest groups, pressure groups or campaigners. The question is whether they achieved what they set out to achieve. We cannot have such a discussion without considering the wider economic issues. Every day we are spending £120 million just paying off the debt that we inherited from Labour. I could spend that money in my constituency alone 40 times over. I am sure every Member in the House could do so. We must place the debate in the wider economic context.

There are two important tests that we should apply to any legislation. I call them the Ronseal test and the rhododendron test. The Ronseal test, for those who watch commercial television, might be a bit obvious: does it do what it says on the tin? Any piece of legislation and its effectiveness must be assessed on whether it achieves its goal.

The rhododendron test might be a little more obscure. I often find when listening to those who represent the left in British politics that they identify totemic pieces of legislation that they consider vital and which become representative of a much wider public policy area. They go on to defend that legislation to the hilt, thereby ignoring every other aspect of public policy in that area that could make a difference, just as in a parkland, where rhododendron may look beautiful but it covers so much ground that it chokes off wider growth that might be beneficial.

If we apply those two tests to the child trust fund, for example, how do they stack up? Originally, the former Prime Minister called it the baby bond. It was meant to be a nest egg, a form of what was then in vogue—asset-based welfare. Unfortunately, the fund was not much of an asset by the time the child got to 18. The scheme certainly was not what the philosophers behind the idea of asset-based welfare had in mind. Others sought to define it as progressive universalism. We have a habit in this country of trying to adopt fancy-pants names for new ideas, philosophies and ways of looking at politics, and I am not entirely clear what progressive universalism actually means.

[Kate Green]

I shall be happy to explain to the hon. Gentleman what progressive universalism means in the context of the child trust fund. It means that all children receive something but the poorest receive more. In that way, we obtain the benefit of popular support for a policy that directs more money to those who need it most.

[Paul Maynard]

I thank the hon. Lady for what I presume she thought would be a helpful contribution for idiots like me. I shall read a useful quotation from the Child Poverty Action Group in 2005, which I believe the hon. Lady chaired at the time. It is a lengthy quotation on the group’s approach to the fund, but it bears repeating:

“Although the Child Trust Fund will benefit some lower income families, we are concerned that families who are at greatest risk of living in severe and persistent poverty are the least likely to be able to contribute to the CTF, so their children will derive little or no financial benefits when they turn 18.”

--- Later in debate ---

[Kate Green]

rose—

[Paul Maynard]

Forgive me, I shall not give way because I have not yet finished the quotation.

[Paul Maynard]

If the hon. Gentleman will calm down and let me finish the quotation, I shall happily give way. Learn some manners, sir, please.

The CPAG continued:

“The very children who would benefit most from having savings and assets are likely to derive least financial advantage from the scheme.”

I shall now give way to the hon. Lady.

[Kate Green]

I am very grateful to the hon. Gentleman. It is true that the CPAG, of which I was chief executive at the time to which he refers, had some misgivings about the initial design of the child trust fund. Thanks to our lobbying, I like to think, the product was improved over time and the extra payments for low-income children were then introduced. Does the hon. Gentleman not agree that that was rather a good development in a policy that is certainly still ripe for improvement, as he rightly says, but not for abolition?

[Paul Maynard]

Let us rejoin the theme of progressive universalism, which the hon. Lady so kindly and patronisingly explained to me. If the fund is so universal, why in the first four years did 25% of people not apply for it? To me, that is not universal; that is rather partial.

--- Later in debate ---

[Richard Graham]

I have a specific suggestion on that, which I will come to in a moment. Meanwhile, I am sure that the hon. Lady will have noted earlier the intervention from my distinguished colleague on the Work and Pensions Committee, the hon. Member for Stretford and Urmston (Kate Green), who in an earlier career pointed out that CTFs do not necessarily reach the most vulnerable families. Arguably that was a flaw in the concept at the beginning.

[Kate Green]

It is important to clarify this point. I did not say that they did not reach the poorest. I said that it was difficult for the poorest to participate in the savings element. However, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) just pointed out, with an ISA product there would not be any element of asset building for the very poorest, because they would be unable to save for themselves.

[Richard Graham]

The only difference is that CTFs are funded by the Government, so we come to the argument about whether that funding can be used more effectively in the context of the goals. I was going to come on to that. I suggested that there are alternative forms of savings that are more effective than CTFs, have lower management fees and better performance, and come at no cost to the taxpayer.

I come to the next point made by the SCS alliance. It argues that CTFs have been

“one of the most successful government savings schemes ever”.

Members will agree that everything is relative. Clearly, CTFs did better than the previous Government’s attempt to create a savings scheme—the stakeholder scheme—which is a scheme that not even the right hon. Member for Delyn (Mr Hanson), in one of his more elaborate flights of fancy, could conceivably describe as having been an outstanding success. However, by comparison with the success of other savings schemes not run by the Government, CTFs have done only a relatively modest job.

The important thing is that, although Governments can, do and should create the structure for savings schemes, their track record in running them is not good. For example, do Members believe that we should be paying people to work for Her Majesty’s Revenue and Customs and spend their time advertising and promoting CTFs, or do we believe that they should be ensuring that benefits go to the right people and that we all pay the tax that we should pay? HMRC should not be in the advertising business.

--- Later in debate ---

[Kate Green (Stretford and Urmston) (Lab)]

This is an incredibly serious debate and I would like to address what I believe are important points raised on both sides of the House. I shall deal with all three elements of the Bill—the health in pregnancy grant, the child trust fund and the saving gateway proposals—in the context of what I understand to be important drivers for this Government, such as reducing inequalities, improving social mobility and improving child outcomes. I shall also consider the extent to which the proposals meet the Government’s own fairness test.

I start with the proposal to abolish the health in pregnancy grant. There is considerable evidence to show the impact of poor maternal nutrition—during pregnancy and, importantly, prior to conception—on low birth weight, and the impact of that on a series of outcomes for child development down the line, including educational attainment and health outcomes. I certainly agree with the Conservative Members who said that a grant in the seventh month of pregnancy was not sufficiently early to achieve everything we would want to improve the well-being of pregnant women and their unborn children.

For women on low incomes, affording a healthy diet is a challenge. Indeed, women reliant on safety net benefits will, if they are under 25, have an income of £51.85 a week; and if they are over 25, £65.45 a week. Those amounts are sufficient to meet the minimum income standard determined by the Joseph Rowntree Foundation—£44 a week in order to afford a healthy diet. However, once we take into account other expenditure that has to be met out of those benefit payments—fuel, clothes, travel, personal items, insurance, utilities and so forth—it means in practice that women conceiving and bearing children on benefits could find themselves with as little as £10 a week to spend on food. Clearly, none of us could eat a healthy diet on that.

It is right, as Opposition Members have repeatedly pointed out, that despite its perhaps unfortunate name, the health in pregnancy grant has the potential to achieve much more than simply help with a healthy diet. It helps to meet a number of the costs associated with preparing for and coping with the arrival of a new baby. Obviously, parents across the income spectrum will be grateful for any help. Although I was rather pooh-poohed by the Minister when I suggested that such a grant is likely to be spent pretty readily so it will also help the economy, there is lots of evidence to show that if we give money to parents at a time when their costs rise, they will go out and spend it quickly—they need to; there are items that they must buy. This will make a modest contribution to our economic regeneration, although that was hardly the overriding reason for introducing the grant in the first place.

[Alison McGovern]

Does my hon. Friend agree that this is similar to other kinds of grant such as the winter fuel payment, which we award in cash terms to get people through what is an expensive time? It is most efficient not to cross-question what it is actually spent on, but these grants are important in recognising that people go through difficult and expensive times.

[Kate Green]

That is absolutely right on a number of fronts. First, as my hon. Friend says, this sort of grant is designed to help with specific expensive times in the course of people’s lives. It is important to recognise that specifying what it gets spent on is not necessary to ensure that it does good. In fact, there is a lot of evidence to show that if we give more money to parents, particularly to mothers, they will spend it on things that will help their kids.

I understand the concerns of Government Members about universal benefits, but this is a universal benefit. It goes to people who are financially better off as well as to those in greater need. As Opposition Members have repeatedly sought to explain, universal benefits are the most effective for reaching the poorest. They are the easiest to administer and the easiest to claim; there are no complicated cliff edges or recalculations. As such, I believe it is important to retain a range of universal benefits within the totality of support for families with children. I therefore think that the health in pregnancy grant has a useful role to play.

Even if we accept for a moment Government Members’ concerns that the benefit has been poorly targeted, that is hardly a case for scrapping it outright, especially when basic benefits are too low for the poorest women to be able to afford to eat healthily before their child is born. Surely, far from seeking to abolish the benefit, an ambitious Government who were keen to improve the outcomes of the poorest families and children would want to extend its scope or consider other ways of improving the adequacy of out-of-work benefits.

[George Freeman]

I am enjoying the hon. Lady’s speech and I acknowledge her expertise. In recommending the extension of the benefit, however, will she explain where she would get the money from?

[Kate Green]

There is work to be done to consider the balance of taxation versus spending cuts, as Labour Members have repeatedly pointed out. As for where the money is taken from, it is notable that the coalition Government, whether by accident or design—I suspect that it is more by accident, but I give them the benefit of the doubt—have taken more from women and children. An evening up of the way in which the spending axe fell might provide more scope.

Far from seeking to improve the financial position of some of the poorest in society—those who are reliant on safety-net benefits—some of the coalition’s measures will make matters worse: the changes to housing benefit; the VAT rise, which will reduce the spending power of the poorest; and the plans to link safety-net benefits to the consumer prices index, which will, over time, significantly reduce the value of those benefits to low-income families, and will therefore have an impact on the disposable incomes of the poorest women before conception, during pregnancy and after birth. I urge Government Members to think about how they would address that.

[Chris Williamson (Derby North) (Lab)]

Does my hon. Friend agree that the policies pursued by the Con-Dem coalition will lead at best to the economy growing slowly, and at worst to a double-dip recession, which will result in a much lower income tax take for the Exchequer? Our proposals to improve and support growth in the economy would generate the tax revenues that would enable us to fund schemes such as the health in pregnancy grant.

[Kate Green]

Absolutely. Although you will not want this evening’s debate to extend into the whole range of economic policy, Mr Deputy Speaker, clearly, a strategy for growth and increasing tax receipts will be vital to protect the poorest families.

[Sarah Newton]

I, too, appreciate the hon. Lady’s expertise, but I must point her to the growth in the UK economy, which I hope she is reading about in the newspapers. We should celebrate the fact that we have the second-fastest growth rate in the G20.

[Kate Green]

I very much welcome the growth in the UK economy in the third quarter of this year, but, with respect, it is early days for Government Members to take all the credit for that. I suspect that it was the fiscal stimulus put into the economy by the previous Chancellor of the Exchequer that underpinned the ability of businesses to continue to hire and of people to stay in work. All Labour Members genuinely hope that that long tail effect will continue, but we feel that it is at risk.

On the savings aspects of the Bill, I cannot understand the Government’s logic, given their stated ambitions to reduce inequality and to encourage a savings habit and, in the case of the Secretary of State for Work and Pensions, the strong focus on helping people to reduce and stay out of debt. The child trust fund and saving gateway have helped low-income savers to acquire a savings habit and have assisted their money management. As child poverty has fallen since 2005, the child poverty impact of the measures is beside the point, because they have not diverted money from successful strategies to tackle child poverty, but are in addition to those strategies. They were intended to take on board the evidence of the protective effect of having an asset, which is especially important in social mobility.

[Cathy Jamieson]

Does my hon. Friend agree it is vital that looked-after children have that asset built? Given that their parents are not in a position to do that, we have a responsibility, as corporate parents, to find another way, if the Government will not reinstate child trust funds.

[Kate Green]

I hope that Conservative Members and the Minister will hear that contribution in the spirit in which we all feel it. This country has a poor record on outcomes for looked-after children, who enter adult life singularly poorly provided for financially. The child trust fund was a small step towards beginning to rectify that. As my hon. Friend says—and I hope the Government heed this—if the child trust fund is no longer to be the mechanism through which looked-after children are given some sort of nest egg with which to embark on adult life, I hope that Ministers will look for another way to secure the financial futures of such children. It is not sufficient to say that we will improve education, health and Sure Start support, important though those are. Plenty of evidence shows the importance for young people, especially those from disadvantaged backgrounds—and looked-after young people most of all—of having a financial asset behind them.

The hon. Member for Gloucester (Richard Graham), who I am sorry is no longer in the Chamber, cited the briefing that some Members had received from the Save Child Savings alliance. I was struck by the numbers he shared with us: 4.5 million child trust fund accounts are open; £2 billion is under management; and £22 million a month is saved in those funds. That is a lot of money being saved and set aside for our children’s futures. I strongly urge the Government to take note of that success. The vast majority of families saving are on modest, medium or lower incomes, certainly of less than £50,000, and many of them on much less. The hon. Gentleman mentioned that, I think, 24% of families were not saving at all. He is right to draw attention to the position of those families, but I question what they will save with instead, if we remove the child trust fund. If the Government do not save on behalf of the poorest children, I very much doubt that a tax break, for families who probably do not pay tax anyway, will suddenly magic up savings for the poorest children. I ask the Government to address that point.

The child trust fund is well targeted for its purpose, which is to deliver an asset to young people as they start out on adult life. Better-off families can afford to support their children with university fees, renting their first flat, buying their first car, perhaps starting a business, having a gap year—all markers of social stability, and therefore at the heart of what the Government rightly want young people from low-income backgrounds to be able to participate in. I am genuinely at a loss to understand why a Government who repeatedly, and unjustly, lambast Labour’s record in relation to social mobility and inequality, should totally dismantle a savings vehicle that has the potential to reduce inequalities, and instead propose a savings vehicle that will widen those inequalities by benefiting only those who are better off.

I am just as puzzled by the Government’s attitude to the saving gateway. Pilots in different parts of the country have shown that, coupled with outreach and money advice, it helped to support a savings habit, provided low-income families with a cushion enabling them to cope with crises, allowed them to build up modest assets over time, and made possible additional savings that would not have been possible otherwise.

I am surprised—more than surprised; indeed, I am shocked—that a Government who are happy to extend tax breaks to savers and to maintain them on ISA savings, pension contributions and inheritance tax will not provide support to boost the savings of the poorest. I ask Ministers how that can possibly be fair.

[Alison McGovern]

I thank my hon. Friend for giving way again. She is making a comprehensive and excellent speech. Does she agree that what the financial services sector needs now are additional deposits, and that offering tax breaks to those who are already saving will not be half as effective as continuing programmes which, according to all the evidence, produced those additional deposits and improved the savings culture?

[Kate Green]

I think that the Government should be very wary about dismantling a scheme that has generated additional savings, for exactly the reason that my hon. Friend has given.

What concerns me most is the impact of the Bill on the Government’s commitment to reducing inequality. We already have a significantly unequal distribution of assets. Up to 20% of households have no assets at all. The highest-earning 10% hold half the assets, and two thirds of households have savings of less than £3,000. I accept that we are not handing on a proud record to the incoming Government, but I would have expected them to conduct a rigorous equality impact assessment of their own proposals as a result of their determination to do a little better than that.

The equality impact assessment that accompanies the Bill is thin in the extreme. It fails in any way to recognise the lower earning power in the labour market of women, disabled people and members of ethnic minorities: a lower earning power that translates into a lesser ability to set money aside in savings, and ultimately, therefore, into lower asset holding. Its analysis of the saving habits of members of ethnic minorities is scanty, although research from the Runnymede Trust would have informed the Government quite quickly that at least 60% of Asian and black British families have no savings at all. The fact that that is twice the number of white households in the same position should concern us greatly.

[Sarah Newton]

I am just as passionate about the inequalities in our country as Labour Members, and I am sure that I speak for all Conservative Members. Our drive to enter politics was prompted by a wish to end the vast inequalities that have arisen over the past decade. Does the hon. Lady agree that the best way to help people to help themselves in that regard is through education and employment?

[Kate Green]

It is not a case of either/or. We should be doing everything possible. We should be maximising families’ financial stability and security through education, employment and a redistribution of income and wealth.

One misconception should be properly analysed. It is absolutely not the case that inequality rose exponentially under Labour. In fact, it more or less flatlined. It rose a bit during the last couple of years of Labour government, but according to the Institute for Fiscal Studies—admittedly not the Government’s favourite think tank—without the measures taken by Labour between 1997 and 2010, given the trends experienced under the previous Conservative Government, it would have been very much worse.

The hon. Lady and other Members on the Government Benches are right to say that we are all anxious to reduce inequalities; what I do not understand is how on earth the Government think that proposals of this kind will do that. How on earth do they think that removing the saving gateway will address the gender inequality involved in the fact that women have 40% less in savings than men? How on earth do they think that removing the child trust fund and the saving gateway—benefits that provided extra money or extra access for people with disabilities—will deal with the inequality of disabled people?

[John Hemming (Birmingham, Yardley) (LD)]

The hon. Lady asks how on earth the Bill will reduce inequality. It will do so by removing universal benefits and replacing them with targeted benefits.

[Kate Green]

First, let me remind the hon. Gentleman of what I said earlier about the effectiveness of universal benefits in reaching the poorest. Secondly, even if we accept the hon. Gentleman’s contention on its own terms, it does not provide a case for abolishing those benefits. It may provide a case for retaining the existing structures and targeting them for a time. Obviously I do not want that to happen—I want us to maintain as much universal support as we can—but at the very least I ask Government Members why they want to rip the whole thing up and throw it out, rather than trying to target it more effectively.

[John Hemming]

rose—

[Kate Green]

I will not give way, because I am about to end my speech.

I urge the Government to reconsider their proposal to abolish these benefits. I ask them to examine ways in which they might be able to maintain structures that have been effective, and have the potential to continue to be effective, in supporting the poorest families in the immediate future and—this is also important—in the longer term. Unless they come up with credible alternatives to reduce and remove income and wealth inequalities, I will not support their proposals, and I will not support the Second Reading of the Bill.

[Several hon. Members]

rose—

--- Later in debate ---

[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.

Proposed Public Expenditure Cuts

Kate Green Excerpts

Monday 13th September 2010 Commons Chamber

[Mr Osborne]

First, let me say to my hon. Friend that the previous Government never published any distributional impacts as part of their Budgets. We have begun that work in the Red Book. We said that we wanted to receive comments about how we could improve the work. There is a real challenge, of which my hon. Friend is well aware, given all his experience, to do with the modelling of some of the impacts. The Treasury model, which, of course, we inherited—we did not create a new Treasury model—has made it very difficult to model certain expenditure changes.

We will continue to try to provide Parliament with the best information that we can, but I do not want to promise to deliver something that I cannot actually deliver.

[Kate Green (Stretford and Urmston) (Lab)]

I welcome the Chancellor’s repeated commitment to supporting people back into work. Can he confirm that benefits savings that may be achieved will be prioritised for DWP back-to-work programmes and, in particular, that the funding needed to meet the objectives of dynamic benefits will be provided to the Secretary of State for Work and Pensions as a first call on any savings on the benefits bill?

[Mr Osborne]

We have a dual task. We have a welfare bill that represents a third of all Government spending; and, given that at least half the Labour party—I think—still believes in trying to reduce the deficit, we have to find savings from the welfare bill. At the same time, we are seeking a fundamental reform of welfare to encourage people into work. Bringing those two objectives together is precisely what I am working on with the Secretary of State for Work and Pensions.

Office of Tax Simplification

Kate Green Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right. As I said, we want to ensure that our tax system is an asset to the UK, so that we can go out there and sell the UK as a place to do business. We want one advantage of doing business in the UK to be a certain, stable, predictable and simple tax system.

[Kate Green (Stretford and Urmston) (Lab)]

When simplification is in conflict with fairness, which will prevail?

[Mr Gauke]

All policy decisions will be for the House and Ministers. The hon. Lady makes the fair point that one cannot take politics entirely out of the tax system, but there are times when it is simply a question of complexity versus simplicity. There is scope for improvement, which is what I hope the OTS will be able to deliver.

Finance Bill

Kate Green Excerpts

Tuesday 6th July 2010 Commons Chamber

[Danny Alexander]

No party proposed an increase in VAT at the election, and no party ruled one out. The Liberal Democrat manifesto—[Interruption.] If Opposition Members will listen, I will explain the situation. In the Liberal Democrat manifesto, we made it clear that we would seek to reduce the deficit through spending measures alone, unless, on grounds of fairness, it was necessary to increase taxes. That was a clear statement in our election manifesto. The rationale that I have just set out is based on the decision that we made. We felt that, given the £12 billion of extra structural deficit left us by the previous Government, the right decision was a rise in VAT rather than increased spending cuts.

[Kate Green (Stretford and Urmston) (Lab)]

I am grateful to the Chief Secretary for explaining his approach to fairness. Can he explain why it is fairer to cut spending on public services, on which the poorest rely most, than to use a progressive system of taxation? Why does the balance have to be 20% in favour of taxation and a whopping 80% in favour of public spending cuts?

[Danny Alexander]

In a way, the hon. Lady makes my point for me. The point that I just made is that given the additional £12 billion of structural deficit, as revealed by the OBR forecast, that was left us by the previous Government, we had to decide whether to make £12 billion of further spending cuts or to establish a tax measure to fill the gap. We made the right decision. The tables in the Budget book show that the overall impact on fairness—particularly for children living in poverty, which is a long-standing concern of the hon. Lady’s and on which she has a strong track record—is minimised.

--- Later in debate ---

[Danny Alexander]

No, I am going to make some progress. I have given way a great deal and an awful lot of questions have been asked, and no apology has been heard from any Opposition Member for the dreadful mess they left the economy in.

Fairness in the tax system is also about ensuring that everyone pays their fair share of taxes due. Too many individuals and firms in Britain today exploit the tax system through tax avoidance, a practice that ultimately means the rest of us have to pay more tax. The Bill puts in place measures to protect about £200 million of revenues per annum from tax avoidance. Clause 8 sets out an anti-avoidance measure to prevent matched income and expenses from being derecognised in a company’s accounts. That will ensure that income from financial instruments such as loans and derivatives can no longer be excluded from the accounts and go untaxed.

Clause 9 sets out a further anti-avoidance rule, building on section 47 of the Finance Act 2010 to prevent life insurance companies from avoiding tax on previously unrecognised profits. It will do so by ensuring that section 47 will be effective in cases in which life insurance business is transferred to another company. We will take further measures in future to tackle avoidance. In particular, a consultation on a general anti-avoidance rule was announced in the Budget.

[Kate Green]

How will the welcome measures to reduce tax avoidance be squared with job cuts in HM Revenue and Customs?

[Danny Alexander]

On the plans for HM Revenue and Customs, I am confident that the anti-avoidance measures are deliverable and can be expected to yield the amount that I described.

--- Later in debate ---

[Lorely Burt]

Thank you, Mr Deputy Speaker. The other point that I want to make is that the purchases that represent more disproportionately a part of the income of lower-paid people tend to be zero-rated.

[Kate Green]

It is clear that this is the story that we are going to hear again and again: we are going to be told that the items that the poorest need to buy are zero-rated, so the VAT rise does not hurt them. How can the hon. Lady say that essentials for families, such as saucepans and clothes for work, are items that the poorest do not have to find the money for? This is a regressive tax.

[Lorely Burt]

The hon. Lady misunderstands me. I understand that people have to buy all those capital items, and I know that this is going to be regressive in that respect. [Hon. Members: “Oh!”] There is no question or doubt about that. I said to the House a moment ago that nobody likes the idea of having to increase VAT.

--- Later in debate ---

[Mr Meacher]

Indeed. The hon. Gentleman is wrong on the figure; the last figure available for when Labour were still in government suggested an increase of about 100,000. That, of course, was the result of a recession caused by the bankers. The Labour party protected the poor and the unemployed to a significant degree, as those groups are about to find out from the very different treatment meted out to them by this Government.

[Kate Green]

I have no idea what statistics the hon. Member for Dover (Charlie Elphicke) is looking at. Over the period Labour were in power, between 1997 and 2010, child poverty fell by 500,000 on every measure. While it is true that it rose in one or two years, it still finished significantly lower than it had been at the beginning of the first Labour Government’s term.

[Mr Meacher]

I think I must move on—and we must move on—from debating poverty between the parties. Since I have the privilege of speaking, however, I have the last word. The fact is that the Thatcher Government tripled poverty to more than 3 million over the period between the early 1980s and the end of the 1990s; Labour reduced that significantly, but did not, in my view, do as much as it could have done to reduce the enormous gains of the wealthy.

As always, it is the dog that did not bark in the night to which we should give most attention. There is nothing in the Bill about a financial activities tax on financial speculation, which is a domestic version of the Tobin tax. Considering that the banks’ recklessness was a major contributor to the crash, that would have a significant reforming potential as well as being a major revenue earner. There is nothing for a really tough crackdown on tax avoidance, which is still estimated to cost the Exchequer some £25 billion a year, nor is any action being taken on the indefensible non-dom loophole. Nor is there any reference to a wealth tax, which might have seemed reasonable when, according to The Sunday Times rich list—not a trendy-lefty organisation—the top 1,000 richest multimillionaires, a minuscule proportion of the population, have nearly quadrupled their wealth over the last decade and a half by no less than £335 billion. This was all in The Sunday Times rich list two or three months ago. In the last year alone, their wealth increased by £77 billion. The fact that they are not being required to make any significant sacrifice at all, when everyone else is—

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[Jacob Rees-Mogg]

I do not believe that I had mentioned Greece in the few words that I had spoken. I would say, however, that it is better to cut before getting into a Greek situation. I admire my right hon. Friend the Chancellor of the Exchequer because, in his foresight, he has brought forward action early. Countries in a Greek situation find that they can get no money from the financial markets and have to go cap in hand to the International Monetary Fund or the European Central Bank. How much better it is—how much more “prudent”, to use a word once popular with Labour Members—to get our house in order before reaching that state of desperation.

[Kate Green]

rose—

[Jacob Rees-Mogg]

Of course I will give way.

[Kate Green]

I am following the hon. Gentleman’s argument, I think, thanks to the probing questions of my hon. Friends. Are we not talking about a balance between getting the long-term interest rates sufficiently low and not overreacting and over-dramatising, which I fear the hon. Gentleman is in danger of doing?

[Jacob Rees-Mogg]

The hon. Lady ought to allow me to get over-dramatic before accusing me of being so. Her point is to some extent valid; of course we need to consider these things rationally and deal with them in a sensible and prudent fashion. That is exactly what we have done. The point that I am trying to establish is that the level of debt needs to be tackled urgently. I am not saying that the United Kingdom is bankrupt; there are studies that show that there has been no default on our debt since 1688. I do not believe that the situation was going to lead to a default on gilt-edged securities. We had not reached that stage.

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[Mr Jones]

That will be a double whammy for those new families. Something like 30,000 children in the north-east will also lose out through the abolition of the child trust fund. Their families will then be hit by the VAT increase, on top of the huge expense of a new child, which will have a disproportionate effect, as my right hon. Friend points out. It will have an even greater effect on low-income families and people who are on benefits.

We spoke earlier about where the burden of the cuts will fall. It was obviously a first outing for the hon. Member for Solihull (Lorely Burt), and the Government have obviously run out of people to put on the Front Bench, judging by the performance that we saw. She tried to argue that VAT was not a regressive tax, although the Liberal Democrats said throughout the election campaign that it was. She also tried to argue that the increase would not affect the poorest in society.

One of the great things about being a Member of Parliament is that we have access to a great Library here. I suggest that all hon. Members go and take a look at the excellent document on VAT and the new standard rate of 20%. Turn to page 4, which has a very useful graph that shows that, as a result of this increase, the poorest will pay some 19% more as a proportion of their net household income, while the richest will pay less than 11%. People in North Durham who are on benefits and those made unemployed over the last few weeks will find themselves being hit straight away next year by this tax. Also affected will be a lot of small businesses, shops and others.

[Kate Green]

Does my hon. Friend agree that the reason why the poor are hit so particularly hard is that for them this is not discretionary spending, but spending on essentials? While the rich might face paying out a higher proportion of their expenditure, that is because they choose to incur that extra expenditure, while poorer families are being fleeced for expenditure on items for which they have no choice but to spend.

[Mr Jones]

My hon. Friend makes a very good point. Unlike the hon. Member for North East Somerset, who might be able to forgo a visit to the tailor once this year, some of the families he is talking to will not have a choice about whether to buy a new pram or other essential equipment for their baby. I have some further examples to put to the House.

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[Andrew George]

I will take more interventions when I have responded to the right hon. Member for Stirling (Mrs McGuire), who asked a very significant question that deserves an answer and is the nub of the point that I wish to make.

The IFS says that not only do the highest spenders pay the most VAT, but that it is in relation to their incomes. Therefore, as the useful graph in the Library note shows, the highest contribution is made by the lowest-income households, which inevitably, under its definition, are those with the highest expenditure in relation to income. The IFS goes on to say that we should look at the impact on lower-income households from the perspective not just of a snapshot in time but across a longer period, if not entirely a lifetime. In other words, its conclusion is much more equivocal. In view of that, we need to understand to a far greater degree the extent to which the VAT rise is regressive or progressive. I think it is reasonable—

[Kate Green]

rose—

[Mr Lammy]

rose—

[Andrew George]

Just let me finish my sentence. When I have made this point, I will give way to the hon. Member for Stretford and Urmston (Kate Green).

I welcome annex A of the Red Book and congratulate those on the Treasury Benches on introducing it. For the first time, it provides an impact assessment and evidence of the kind that Labour Members must accept that they did not provide in the past. However, I still do not think that it is enough—it is too superficial. I have asked a large number of questions of the Chancellor of the Exchequer, as hon. Members will know, because I believe that it is important that we understand a great deal more about the impact of the VAT rise on low-income households, charities, businesses and others.

[Kate Green]

I am very grateful to the hon. Gentleman for giving way, and I hope that my sentences will be a little shorter than his.

Is it not the case that in a complex argument, we are beginning to unpick the cumulative effect on lower-income households? It is a combination of a hit on their expenditure—not on their luxury spending but on their essential spending—and a reduction of their income if they rely on safety-net benefits, because of the future link with the consumer prices index, as well as the risk of their falling out of work and having at least a period of unemployment. I believe that the hon. Gentleman is rightly striving to describe that cumulative effect. I very much welcomed his amendment on looking at the impact of the VAT measures on those households.

[Andrew George]

I am very grateful to the hon. Lady, and we will have to compete on sentence lengths in future. Given her experience on the issue, it is worth while to quote once again the Save the Children briefing note that was circulated to the House, as the hon. Member for North Durham did. As the hon. Lady says, there is a cumulative effect, but if any amendments are tabled to the Finance Bill, they will be directly related to VAT and other matters will have to be considered in other ways, not necessarily under the Bill.

The Bill is rather narrowly set, and the Budget mentioned other measures, which must presumably come forward in another Finance Bill that will be presented to us in the autumn, so I assume that there will be a further opportunity for those issues to be examined, because only seven measures are contained in the 11 clauses of this rather narrowly drawn Bill.

I realise that I have just committed myself to another very long sentence with an enormous sub-clause in it, but I said that I would quote from the evidence presented to us by Save the Children, which is important. It states:

“Increasing VAT will simply widen inequalities and entrench the unfairness that exists in the tax system...It is also worth noting that data from the Office for National Statistics shows that, on average, the wealthiest households contain fewer children than poorer and middle income households, meaning that the unfairness of the tax system is weighted against children.”

Further to the point about whether the increase will have an impact on low-income households, Save the Children therefore rightly raises another issue. I should like the Treasury Ministers, in response to my questions and those that others will no doubt raise, to elucidate on that a little further.

What we need in this debate and in the further stages of scrutiny that the Bill will necessarily go through is a lot more information. I would describe the situation as a tribal mire in which there is translucent evidence, and that evidence needs to be much clearer.

Budget Resolutions and Economic Situation

Kate Green Excerpts

Thursday 24th June 2010 Commons Chamber

[Angie Bray (Ealing Central and Acton) (Con)]

Let me start by congratulating the hon. Member for Kingston upon Hull East (Karl Turner) and my hon. Friends the Members for Staffordshire Moorlands (Karen Bradley) and for Hendon (Mr Offord) on their excellent maiden speeches. I am sure that they will all make great contributions to this House over the years to come.

I cannot imagine that many of us who sat in the Chamber on Tuesday to hear the Chancellor’s emergency Budget statement will have found it exactly an enjoyable experience. Theatrical, yes; dramatic, yes; enjoyable, no. It was a bleak Budget statement drawn from a grim economic landscape bequeathed to us by the previous Labour Administration. We will all now be thinking about getting back to our constituencies this weekend and discussing with our constituents how we can face these tough measures together. Yet I suspect, judging by the Leader of the Opposition’s response, that many of those on the Labour Benches will be blaming everyone and everything but themselves for the situation in which we find ourselves. That is neither wise nor credible. I hope that at least some of them will recognise that under their governance this country was living way beyond its means for far too long. As the well-worn but true saying goes, all good things come to an end—only on this occasion, not just an end, but a juddering halt that has shaken the whole country violently.

I would like to put on record how much I abhor the manner in which the previous Labour Government, in their last few months, went round dangling all sorts of promises—this project, that programme—to dazzle the electorate, all of them knowingly unfunded, so that they were inevitably withdrawn when reality kicked in with the new Government. Another Labour Government—heaven forfend—would have been in no position to do any different from what we are having to do.

I believe that the Chancellor’s Budget is tough but fair. Responsible governance means taking tough decisions now to get our country back on its feet down the road. Fair governance means the better-off shouldering the biggest share of the burden, but most important, it means taking account of everyone in our society, ensuring that pensioners can enjoy dignity in retirement and that families in poverty receive the support they need. The long overdue restoration of the link between pensions and earnings and the triple lock is to be welcomed. The increase in child tax credits for the poorest families demonstrates that fairness is a priority for this Government. Raising the income tax threshold for those on lower incomes is a huge step forward. It means that 880,000 of the lowest taxpayers will be taken out of tax altogether. I recognise that that was very much a Liberal Democrat manifesto pledge, but it is no less welcome in our coalition for that. It also resonates closely with Conservative values, and I hope that the Chancellor will be able to get even closer to the £10,000 threshold that we all want to see when we can afford it.

[Kate Green (Stretford and Urmston) (Lab)]

It is all very well to say that this Budget will protect the poorest, but how can that possibly be reconciled with a long-term freeze or cut in benefits as a result of linking them to the consumer price index rather than the retail price index? That is to be compensated for only by the short-term measure of increasing the child tax credit. Surely this is not a Budget that is fair to the poorest but one that will leave people who rely on those state benefits in a much worse position.

[Angie Bray]

I have to say to the hon. Lady that needs must, to an extent, and we find ourselves in these problems thanks to the appalling governance of the Labour party. I also suggest that part of the problem, and the reason why I agree with her that many will feel the pain, is that the previous Government had a record of allowing a dependency culture to grow. Far too many people in this country depend on benefits, and we need to turn that around if we possibly can.

Budget Resolutions and Economic Situation

Kate Green Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Sammy Wilson]

I would like to see that scheme initiated quickly in Northern Ireland. I suspect that it is one of the proposals that the Liberal Democrats were keen on pushing forward. Given the rural nature of much of Northern Ireland and the particular circumstances that we face, we would welcome it. We will be interested to see the outcome of the pilot scheme and how quickly it is rolled out across the rest of the UK, if at all.

I turn to fairness for individuals, on which there are things to be welcomed in the Budget. I suppose that at the end of the day, it will all be about balance. I am pleased to see that the pledge to restore the link between earnings and pensions has been honoured. For many pensioners who find themselves in difficulty, that will be an important gain. We also have the banking levy, the change to capital gains tax for those paying the top rate of tax and the fact that the pay freeze will not apply to those at the lower end of the public sector pay scale. There has been a genuine attempt to recognise that those who are already on low incomes should not be pushed down further.

On the other hand, there will be concern about the regressive nature of the VAT increase and the freezing of child benefit and tax credits. I am particularly concerned about the backdating of tax credits for one month instead of three, and I hope that the Chancellor will give us an answer about that. I hope that Her Majesty’s Revenue and Customs will improve its performance in dealing with tax credits, otherwise many people will have an unfair result through no fault of their own. They will be powerless against a bureaucracy that seems unable to move on the issue.

[Kate Green (Stretford and Urmston) (Lab)]

Is it not also the case that the families whose circumstances are most prone to change will be particularly hard-hit by a mere one-month backdating period? Those are families, of course, for whom jobs are particularly stop-go and at risk. The risk to families who already face dangerous and unstable economic circumstances will be heightened by that ungenerous measure.

[Sammy Wilson]

Not only are those the families whose circumstances are most liable to change, they are often the ones who find it the most difficult to deal with the bureaucratic maze that they face when making applications. I should like to hear from the Chancellor what proposals are in place to ensure more efficient processing of claims.

The final thing that I am looking for in the Budget is some certainty, particularly about its impact on Northern Ireland. We have been told that there will be a 25% cut in departmental expenditure limits over the next four years, but that it will not apply evenly and some Departments and areas of Government spending will be hit more than others. In Northern Ireland, we have now started the budget process. Because of the neglect of the previous Government, there was no comprehensive spending review announcement for the previous year, so we are planning in a vacuum. It is important that information be made available quickly to regional Assemblies as to what the impact on their departmental expenditure limits is likely to be, so that effective planning can take place. There is nothing worse than asking Departments to deal with difficult economic circumstances and then giving them a list of parameters and assumptions that are so vague that is almost impossible for them to make any long-term decisions.

If less money is going to be available, it has to be used more effectively. For that, there must be an ability to plan, so that we can look forward and see how that money can best be put to use and how Departments might work together to get more services from the available money. That can be done only if there is certainty, so I appeal for the information that regional Assemblies require to be given to them quickly.

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[Kate Green]

It is absolutely right that the measures need to be examined in great detail to discover their true impact on individuals and families. Is it not the case that the distribution effects go beyond simply looking at income and expenditure deciles to groups that are especially vulnerable to poverty? My hon. Friend will agree that the damage done by linking benefits over the medium term to the consumer price index, and the attack on benefits such as disability living allowance will be particularly harsh for some of the most vulnerable members of society. It is important that we do not take a simplistic view of the impact of the measures but look at their effect on the most vulnerable groups.

[Chris Leslie]

I could not agree more with my hon. Friend, who knows a great deal about these matters. These are stealth cuts from the Government. When they were in opposition, they liked to talk about stealthy measures. Well, these are the stealth cuts. The change from retail price index to the consumer price index is not something that many of our constituents would necessarily notice in the small print, but there are vast reductions affecting them.

There are all sorts of tricks in the Budget, such as linking pensions to earnings—at a time when the Government are going to freeze public sector pay and they know that earnings will be deliberately depressed. With supposed generosity, they can of course link the two at that point in the cycle.

The change to the personal tax allowance was another part of the Liberal Democrat manifesto. It seems that they were not able to fulfil that manifesto pledge, so they have managed to change it a little, but they do not recognise that the people who earn an amount that is below the existing threshold will benefit not at all from the change. We have to think about the very poorest in society, and I urge hon. Members to do that.