Savings Accounts and Health in Pregnancy Grant Bill

Sandra Osborne Excerpts

Tuesday 26th October 2010 Commons Chamber

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I beg to move, That the Bill be now read a Second time.

The Bill does three things: it ends eligibility for child trust funds for children born from January 2011 onwards; it repeals the Saving Gateway Accounts Act 2009, following our decision not to introduce the saving gateway scheme; and it abolishes the health in pregnancy grant, again from January 2011. I will explain the detail of the measures shortly, but first I want to explain the rationale behind them, because they all have the same aim of helping to reduce Britain’s budget deficit.

As my right hon. Friend the Chancellor of the Exchequer set out clearly last week, the Government have inherited an exceptional fiscal challenge. Last year, we had the largest peacetime deficit in our history, and we were borrowing £1 in every £4 that we spent. We are now spending £120 million a day just to pay interest on our debt. As the Governor of the Bank of England said last month, that position is “clearly unsustainable”. Taking urgent action to tackle the budget deficit is clearly unavoidable.

[Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)]

Can the Minister tell me why this coalition Government are so determined to pick on children?

[Mr Hoban]

In September 2009 Carl Emmerson, acting director of the Institute for Fiscal Studies, said:

“Abolishing the Child Trust Fund would make newborns worse off in eighteen years time. But spending cuts in other areas might leave them worse off.”

That is the challenge that the coalition Government face. This is the question that the hon. Lady should be asking: why did her right hon. and hon. Friends leave the country in such a mess that the present Government are required to take these measures?

Without healthy public finances, we cannot have sustainable growth in our economy. The consequence of failing to act now would be higher interest rates, business failures, rising unemployment and even, potentially, the end of the recovery. So we set out a clear plan, in the Budget statement in June and in the comprehensive spending review statement last week, to tackle the deficit. Last Wednesday the Chancellor set out more than £80 billion of spending reductions to help to deliver the Government’s fiscal consolidation plan, which will reduce borrowing by £11 billion per year by 2014-15. The International Monetary Fund has said that our plan

“greatly reduces the risk of a costly loss of confidence in fiscal sustainability and will help rebalance the economy.”

The Bill is part of that plan.

I realise that the changes made by the Bill will disappoint some Members and others outside the House. Indeed, when we were in opposition, the Conservative party supported the introduction of the policies that have been removed, although at the time we raised some questions about their effectiveness.

--- Later in debate ---

[Mr Hoban]

No; I will continue. I have given way quite a lot, and I want to make some progress. This is an important Bill, which is why I want to ensure that I have given Opposition Members the opportunity to intervene, but I want to continue setting out the case for why we need to take these measures to tackle the problem that the previous Government left behind.

We announced in May that Government payments to child trust funds would be cut in two stages—they will be reduced first and then stopped altogether. In July, we made regulations to take the first step. For those born from August this year, payments at birth were reduced from £250 to £50, or from £500 to £100 for children in lower-income families or children in care. Government payments at the age of seven also stopped completely from August. The regulations will end the additional payments made to disabled children from 2011-12 onwards, although, as I have said, we will recycle the money that we have saved on those payments to provide additional respite breaks.

Those regulations could not end eligibility for child trust funds altogether, because that process requires primary legislation. This Bill completes the process by ending eligibility for child trust funds for all children born from January 2011 onwards, which means that the remaining Government payments will stop altogether.

[Sandra Osborne]

Will the Minister give way on that point?

[Mr Hoban]

No; I want to make some more progress.

I realise that many people, including some hon. Members, will find these changes disappointing. As I have explained, however, the child trust fund is simply unaffordable given the deficit that we face and the need to focus our resources on supporting people now.

Although we need to reduce spending on the child trust fund, we remain committed to encouraging people to save. I want to see a saving system that is based on our principles of freedom, fairness and responsibility, as well as being affordable and effective.

--- Later in debate ---

[Mr Hanson]

My hon. Friend is correct in the sense that there are ways in which we can tackle child poverty, such as by ensuring that people have an equal opportunity at the age of 18 to make progress in their lives through jobs, training and university. One way in which we were doing that was through the child trust fund.

[Sandra Osborne]

Does my right hon. Friend agree that if the measures were due to financial constraints, the Conservatives would have kept the CTF mechanism in place, given its success, and perhaps cut the contributions with a view to reinstating them when times were better rather than abolishing the funds altogether?

[Mr Hanson]

I shall come to that point later. The Government have chosen to take a sledgehammer to the funds and not even to consider other options such as that mentioned by my hon. Friend.