Savings Accounts and Health in Pregnancy Grant Bill

Stella Creasy Excerpts

Tuesday 26th October 2010 Commons Chamber

[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.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

Is the hon. Gentleman aware of the research by Elaine Kempson of the university of Bristol on the increased take-up of the child trust fund? Three out of every five parents now take it up automatically, and the state picks up the rest.

[Paul Maynard]

Three quarters of those accounts opened since 2005 have failed to receive additional deposits; 99% have not received the maximum funding available; and only 71% of eligible children have a child trust fund. I am not trying to argue, as Opposition Members seem to think, that the fund is a failure; I am trying to argue a more subtle point, that this piece of legislation—this policy innovation—has not achieved its goal.

--- Later in debate ---

[Paul Maynard]

I thank the hon. Lady for those ifs and buts. We can all hope for what might happen at some point in the future.

The shadow Minister, the right hon. Member for Delyn, set out three reasons why Labour introduced the measure. It was about inculcating a savings culture, encouraging financial education and providing a nest egg. So, rather than assessing the measure against the legislation, let us try to assess it against what the shadow Minister said was important.

There is no evidence that the fund has encouraged a savings culture. Many organisations that promote financial education come to me time and again to ask, “Why didn’t the last Government do more to promote financial education, particularly at primary level?” In the average family, a piggy bank—

[Stella Creasy]

Will the hon. Gentleman give way?

[Paul Maynard]

Sorry, I am not going to give way any further. I have been very generous in giving way, but I am afraid that I am not a bus stop.

[Stella Creasy]

rose—

[Paul Maynard]

No, I am sorry, but I am not giving way to you, madam, so kindly take notice of that.

Having a piggy bank—[Interruption.] I am going to make the point that having a piggy bank in one’s bedroom is a much greater spur to saving and learning about the culture of savings than any attempt to lock away money until the age of 18.

The right hon. Member for Wythenshawe and Sale East (Paul Goggins), and the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) in her Westminster Hall debate, have raised the issue of looked-after children and how we deal with them. It is a very important issue, but the Opposition should hang their head in shame at the outcomes that looked-after children obtain after 13 years of Labour rule. The points that those Members made were an example of what I call the rhododendron test. By focusing on the tiny issue of whether such children should continue to receive child trust fund payments, they overlook the much wider public policy issues. There are many other ways in which we can and do help looked-after children.

--- Later in debate ---

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I wish to speak in the debate tonight because of my deep concern that these proposals will ensure a bleaker future for many young people and their families in our country. In particular, I am deeply concerned that cutting the measures that promote savings and financial stability for many of the poorest families in our society saves comparatively little for the public purse but will have a massive long-term impact on social mobility. I want to make my remarks in three stages: first, my concern that we need to do more to help families to manage their finances and plan for the future, which measures such as the saving gateway and the child trust fund help support; secondly, the evidence that those products were achieving the aims that they set out to achieve; and, finally, the wider social consequences of failing to support action on social mobility.

Members may know of my concerns about affordable credit and the financial hardships of many of the families in my local community. My concern that the Government should act to support measures that will help to tackle the causes of debt and improve access to affordable credit are expressed in the ten-minute Bill that I will table in the House next week. I fear that the forthcoming cuts to public services, which have already impacted on the incomes of families in Walthamstow, will make such problems worse, given the high number of local residents who work in the public sector.

To give some flavour of the financial planning problems that families in areas such as mine are facing, I want to refer to a survey recently undertaken by the Children’s Mutual society on the impact of the credit crunch on family finances. It found that one in four families in this country claim their household income is not enough to pay their bills each month. Given many people’s fears about redundancy and the impact of the cuts that the Government plan to their livelihoods, it will not surprise many Opposition Members to learn that one in 10 families fear that the main breadwinner will be made redundant in the next six months. Three quarters of them have debts in the shape of credit cards, loans and overdrafts, and a quarter of them have borrowed money from their parents in the past year. Without intervention, those cycles of debt will continue and deepen as these cuts bite.

Helping parents to plan for the financial future of their families is about not just a stable economic platform in Britain, but the quality of life itself. Some 29% of British families admit that they are already arguing over their family’s finances. A third of parents are suffering from sleepless nights because they are worried about money.

There is therefore a deep irony that the Chancellor makes comparisons between household debt and national debt, and then scraps the measures that help to address the former in the name of addressing the latter. Thinking of the future when the present is so fragile is tough at the best of times for such families. Taking away the mechanisms by which the Government can help them indeed makes the worst of times, but that is exactly what the Government are doing in this Bill to families such as those in Walthamstow whom I represent.

Abolishing the child trust fund and the saving gateway will do nothing to secure the culture that the Chancellor said just 18 months ago he wished to see in this country in a speech to Reform about a nation that supports savers. He is not the only member of the Government who wanted to support a savings culture in the UK; even after the election, when we know that many pledges have been broken, the Financial Secretary to the Treasury argued that the Government

“is committed to curbing unsustainable lending and helping individuals manage their finances better”.

Those are laudable aims. They are aims that I share and that also motivate my ten-minute Bill, but that is why I find this legislation all the more heartbreaking: it stops in their track programmes that we know have a proven track record in improving savings for some of the poorest families in our nation, including many in my own constituency of Walthamstow.

[Sarah Newton]

I wonder what analysis the hon. Lady has done to demonstrate that the programmes help in the way she suggests, to enable people in low-income households to save for the future, because I understand that very few families have made any additional contribution to the child trust funds.

[Stella Creasy]

I am glad that the hon. Lady asks about an Opposition Member looking for evidence. If she listens to me, she will find that I can refer to many different research points that can bring out exactly that. It would be useful in these debates to move from the examples given to what the independent academic research tells us the child trust fund has done in increasing savings in this country. I direct her to the work being done by the university of Bristol on this matter in particular.

As an MP in Walthamstow, I cannot help but see the impact of the Government’s decision. The latest figures tell me that more than 10,000 families in Walthamstow have a child trust fund voucher—well above the national average for a constituency. Nationally, we know that 70,000 are issued each month, including the top-ups, at a cost of just £500 million to the taxpayer. It is a relatively small investment compared to some of the other mechanisms that we have, but we know that it is money well spent, because until they were stopped, child trust funds were the most successful Government savings scheme ever.

My hon. Friend the Member for Stretford and Urmston (Kate Green) admirably set out the evidence that we have. It is worth repeating because of the questions being asked by Members on the Government Benches. Two million people were contributing to 4.5 million open accounts, resulting in more than £2 billion in assets, with £22 million in regular contributions. Critically, those are from families on less than £50,000 a year. In London that is not a high target rate to meet.

To get the full sense of what abolishing the scheme will mean, it is worth looking at the sums involved. Thanks to the Revenue’s child trust fund calculator, I was able to do just that. It tells me that a child born on my birthday this year eligible for just that basic payment of £250 from the Government and whose family saves just £100 a year, which is not even a tenner a month, could get about £3,000 in 2028. If the family started saving £20 a month, the figure could rise to £8,000. At £4 a week, it would be nearly £10,000.

[Harriett Baldwin]

Will the hon. Lady give way?

[Stella Creasy]

With respect, I have given way once.

We do not need to wait until 2028 to see the impact that such funding will have on the choices that young people could make. We know that in 2020 the first generation of child trust funds will mature. That means there will be 18-year-olds with access to £3 billion of investment for our nation. That may not be the riches of Croesus that some on the Government Benches will be able to bequeath to their children, but for the families that I work with in Walthamstow those first funds maturing in 10 years will transform the choices that their children are able to make.

In the context of the other debates that we have had in the House recently—on tuition fees, home ownership and entrepreneurship—we all know the difference that that kind of money will make. Putting that £3,000, the lowest sum, into context, it is worth reflecting that evidence shows us that parents are spending on average £4,000 on financing their children through university. We know, too, that more than half of 25 to 34-year-olds still rely on their parents for financial help. With tuition fees set to rocket under the present Government, that debt, that dependency and that distress for the parents concerned are only set to rocket.

Countless research studies show us that low income families aspire to saving for the long term, and that they want a nest egg for their children. The child trust fund is helping to make that ambition a reality, with almost 30% of the children who get the child trust fund also getting the top-up endowment of £500, meaning that their nest egg will be even bigger.

[Bill Esterson (Sefton Central) (Lab)]

My hon. Friend makes a good case for the evidence for saving, particularly in low-income families. Is she aware of the House of Commons Library research that predicts a £4 million saving from the abolition of the three schemes, which compares rather unfavourably with the amount to be saved by the levy on the banks? Will she comment on that?

[Stella Creasy]

I thank my hon. Friend for that question. He precisely answers the point that many on the Government Benches wish to raise about where else money could be raised. There are ample other ways that we could raise money to reduce the deficit, such as the bankers levy.

[Harriett Baldwin]

Will the hon. Lady give way?

[Stella Creasy]

I shall make progress, as Mr Speaker has pointed out how many Members want to contribute.

I want to put on record my concern that children who will have the child trust fund removed—those 30% who are getting the extra payment—are kids from the families most likely to be hit by the cuts in public spending, as the housing benefit, tax credits, jobs and services that their parents rely on are also slashed by the Government. These are the kids of families who already struggle to make ends meet and for whom the scheme represents a lifeline of opportunity for their children in later life.

Members need not take my word for it. Let them look at the reports from the Treasury and the Institute for Fiscal Studies. They make it clear that the poorest will bear the brunt of the cuts. The Bill ensures that the burden will carry on to their children as well. This is not fantasy or wishful thinking, as some on the Government Benches may wish to claim. Since the scheme has been running, there has been clear evidence that it works in encouraging saving and supporting aspiration.

It is not fantasy to think that that money would be spent on the future of those young people. The research commissioned by the Treasury shows that families of all incomes see the money as the key to their kids getting on in life, whether it is used for higher education, setting up home or even having driving lessons. The research reflects the ample evidence and common-sense proposition that possession of even a small pot of money in early adulthood improves one’s life chances later on. It shows the strength of the economic argument for retaining the child trust fund, and that a savings culture can be ingrained in people from the early years of their lives. It shows also how counter-productive it is to cut the fund now, because the funding that would have been available to our economy in later years will also be absent from the choices that children are able to make.

The strength of the scheme, and what I want to concentrate my final remarks on, is the evidence that a small amount of capital at the beginning of life had a significant advantage for children 10 years on in life, even when accounting for employment, higher earnings and better health. At the heart of the scheme, and the reason why the previous Government introduced it, is a concern for social mobility, something that Government Members say that they too care about. If they do care about it, however, they will understand that assets are the key to social mobility.

Labour Members understand that if a child is born with a silver spoon in their mouth, it means not just nice baby clothes or a wonderful pram but the money, resources, confidence and networks that help to turn potential into reality. If a child does not have those assets, at every stage in their life their choices will be limited, and the decisions they make will be that much harder, whether they are about where to live or the lifestyle their family can afford, or whether they can even take the chance to go on to further and higher education. That is why Labour Members fought for the scheme and had planned to extend it if Labour won the election. It encourages not just savings, but aspiration.

We might look at our debates, and those that the UK Youth Parliament will have on Friday, about the right to vote and citizenship, but surely a truly progressive society is one in which we ensure that people have access to the capital endowment that gives them the same social power and responsibility of all their peers. I know that some Government Members agree. Only one day has been allotted to this debate, and attendance is low, but I hope that the country takes note of the fact that this Bill reflects the real impact of the Liberal Democrats on the coalition.

I urge those Government Members who consider themselves to be compassionate Conservatives to hold true to their own manifesto and to protect against this onslaught of Liberal callousness. The Conservatives’ manifesto at least pledged to protect the child trust fund for some children, so I urge them not to listen to the siren voices of the Liberal Democrats who, by abolishing the child trust fund, want to see the poorest families decimated.

The Liberals cannot even decide why they do not want the fund. Their claims run from “We can’t afford it,” to “It’s not the best way to secure asset-based mobility.” But as the former Chief Secretary to the Treasury said—

[The Economic Secretary to the Treasury (Justine Greening)]

“There’s no money left”.

[Stella Creasy]

I accept that the hon. Lady may be confused, but let me be clear that I am talking about the former Chief Secretary to the Treasury who claimed that the Government could not afford to continue with the child trust fund because it would burden future generations with a bigger debt. Some Opposition Members think that burdening future generations with no opportunity in life at all is not a price worth paying.

If we are to continue looking at what Chief Secretaries to the Treasury have said, we will find it worth considering what the current one said back in 2008, when he agreed that asset-based welfare was the true path to social mobility. He argued that there needed to be an alternative to the child trust fund, but tonight we have not heard about any measures to replace the asset that people would have had. We have heard nothing from Government Members; the silence has been deafening. Opposition Members have clearly explained why an ISA is not the same as a child trust fund.

My private Member’s Bill next week will call for a levy on financial institutions to help to support debt counselling and advice services. That is why I welcome the Financial Secretary’s remarks that the Government would back a consumer financial education body to begin that process of supporting financial advice services. However, it is no good on the one hand offering help and support for families who get themselves into debt, and on the other taking away the savings vehicles that keep such families going.

Given my proposal, I hope that the Minister will agree to meet me and other campaigners to discuss what more can be done to address the causes of poverty and ensure that families have access to affordable credit. Whether we are talking about the child trust fund, the health in pregnancy grant or the saving gateway account, I urge the Government to rethink the Bill and recognise that it is not in the long-term interests of families throughout Britain to support such measures.

A nation which ensures that every young person and their family has financial assets at key stages in their lifetimes is one in which potential stands a much greater chance of being realised. If the Bill is overturned and the scheme kept, a world of possibility will open up to many of our young constituents. I urge the House to reject the Bill and to sustain these vital instruments of social progress.

[Several hon. Members]

rose—