Savings Accounts and Health in Pregnancy Grant Bill

Nicholas Dakin Excerpts

Tuesday 26th October 2010 Commons Chamber

[Nic Dakin (Scunthorpe) (Lab)]

To take a gamble with your own money, especially if you are a millionaire, is a reasonable choice to make, but to take a gamble with other people’s money—or, worse still, other people’s livelihoods and futures—is reckless in the extreme. But that is what the Government are doing. It is not Labour MPs who are saying that, but respected commentators such as Andrew Rawnsley of The Observer. On Thursday, the Financial Times described the Government’s plan as “an audacious gamble”. With economics Nobel prize winners queuing up to say that the policy of this naive Tory-Liberal coalition Government will have us floundering on the rocks of high unemployment and economic stagnation, we are in very difficult times.

Paul Krugman, the 2008 Nobel prize winner, said:

“The best guess is that Britain 2011 will look like Britain 1931.”

It is hardly surprising therefore that the Chancellor of the Exchequer most evoked by the policies being pursued is Philip Snowden, whose policies plunged the country into recession in the 1930s. At least the hon. Member for North East Somerset (Jacob Rees-Mogg) was frank when he said that the Government are following the policies of the 1930s. The Bill is part of an overall picture that shows that this Government are targeting their cuts at families and children, making them pay more than the banks whose proclivities got us into these difficulties.

The Bill will remove child trust funds, abandon the saving gateway and abolish the health in pregnancy grant. The Institute for Fiscal Studies clearly demonstrated in its analysis that the Government’s plan will have a more severe impact on the lowest-income households. These proposals are further proof of this Government’s desire to penalise children and jeopardise the nation’s future.

The child trust fund is a savings account for children born in or after September 2002. The Bill will end new child trust funds—worth £1,000 in their lifetime for the poorest children—from January 2011. The poorest children who were due to receive a £500 top-up on their seventh birthday will now not do so. Child trust funds have not only given children, especially the poorest children, a financial start in life, but shown the state encouraging saving and investment by example. These are habits that we need to establish in as many people as possible. If such habits are formed and nurtured, they will help us to address many of the great challenges of our age.

The saving gateway was designed to build on the child trust fund by promoting a savings habit among those of working age on lower incomes by providing an incentive to save. There would be a Government contribution of 50p for each £1 saved. That would promote financial inclusion by encouraging those most at risk to get involved with mainstream financial services. More than 22,000 people took part in the two very successful pilots, achieving more than £15 million in savings. A letter from the Save Child Savings alliance to The Sunday Times said:

“For a government that claims to want to promote savings, the decision to abolish the Child Trust Fund along with the Savings Gateway is short-term and misguided.”

The investment in the UK’s savings culture is under threat from these measures. Supporting and creating a national environment in which people are encouraged to save for their future should be a fundamental goal of any responsible Government. However, with overall savings ratios close to their 2009 all-time low and, according to the Office for Budget Responsibility, set to fall to 5.5% by 2015, the UK under this Government is sleepwalking into a situation in which the culture that we are encouraging on savings is exactly the opposite of the one that we need. Whatever their politics, all hon. Members surely agree that the fostering of a long-term savings culture is something that the UK badly needs. The process of achieving that must start with the initiatives that this Bill seeks to remove.

Even if one accepts the repealing of those positive initiatives, there can surely be no financial or policy logic in scrapping the core infrastructure of the child trust fund scheme, given that it demonstrably works. It would surely be far more sensible to leave that infrastructure in place to support future schemes that might be introduced. When introducing the Bill this afternoon, the Minister said that future initiatives would be coming forward. I ask him and the Government to consider leaving this infrastructure in place, because it is proven to support initiatives and, as mentioned earlier, would enable the state to show its corporate parenthood, via child trust funds, at least for looked-after children.

The other casualty of the Bill, if Liberal Democrats and Conservative Members, who tell us they care about children, troop into the Lobby and vote for it, will be the health in pregnancy grant, which is a one-off, tax-free payment for mothers who are 25 weeks into their pregnancy. My hon. Friend the Member for Stretford and Urmston (Kate Green) gave a full and cogent explanation of why the grant is effective and makes a difference, and if we cannot invest to ensure that our babies and children get the best start possible in life, what on earth are we about? Belinda Phipps, chief executive of the National Childbirth Trust, whom my hon. Friend quoted, said recently:

“At a time when families are trying to make ends meet, the Coalition Government has hit parents particularly hard. Cutting pregnancy and maternity grants, as well as child benefit and tax credits, will make it even more difficult for new parents or those wanting to start a family.”

The Bill is part of a pattern of penalising families and children for the economic problems caused by the meltdown of the global economy. [Hon. Members: “It was caused by Labour.”] No, it was caused by the meltdown of the global economy. Conservative Members cannot rewrite history and pretend that there was no global financial crisis and that their party in opposition did not support every spending plan up to the end of 2008. It was only when the global meltdown came that they did not want to spend the money to save this country from recession. That is the sort of party we are up against.

Withdrawing the child trust fund, ending the saving gateway and abolishing the health in pregnancy grant is bad enough, but add to that reducing tax credits, the withdrawal of the future jobs fund, the destruction of the education maintenance allowance and the hike in tuition fees, not to mention the significant cuts in funding to schools and colleges currently camouflaged by the smoke and mirrors of Government chicanery, and this represents a devastating programme. The Government are making families with children pay more than double what the banks are to pay to bring down the deficit—hardly fair, Mr Speaker, hardly fair at all.